Although assignment sales are not the most common type of real estate transaction, they do happen relatively often. They are especially common in cities with a lot of new developments, like Etobicoke. Assignment sales have many benefits for both buyers and sellers.
Although they can sometimes be complex, working with an experienced agent is the best way to ensure an assignment sales goes smoothly.
Since these transactions are more complex than a traditional real estate sale, we run into many client questions about assignment sales and how they work.
Here’s a guide to everything you need to know about assignment sales.
What Is An Assignment Sale?
An assignment sale is when the original buyer of a home sells their property before closing on it.
When would this ever happen? In the world of pre-construction real estate, many new development homes are bought up before they even physically exist. For example, in many new condo building developments, the construction doesn’t even break ground until about 70% of the units are already sold.
There are many different roles in this type of assignment sale including the developer, assignor, and assignee. Let’s break down each role:
Who Is The Developer?
When it comes to pre-construction real estate projects, developers pretty much run the show. From identifying the site of new developments and brokering financing deals, to hiring the architects and builders to oversee the entire process, developers are the masterminds behind every new construction project. They often play an important role in an assignment sale.
Who Is The Assignor?
The assignor is the original buyer of the pre-construction property. The ‘assignor’ could be an individual or a business entity. For example, a real estate investment company, a private investor, or a regular home buyer. Pre-construction real estate developments usually attract a lot of interest from a diverse cast of buyers—even if the properties aren’t move-in ready.
It might be hard to consider buying a home that doesn’t actually exist yet. You’re basically buying an idea. However, there are advantages of ‘getting in early.” Some of the biggest benefits of buying pre-construction include:
- Price: Pre-construction units usually cost less. There are greater risks involved and the units haven’t changed hands through re-sale yet.
- Appreciation: The unit may increase in value between the time it’s purchased to when it’s move-in ready through normal market growth.
Who Is The Assignee?
If an assignor wants to sell their interest (read: ownership) of their property unit before construction is complete, this would result in an assignment sale. The assignee is the new buyer of the assignor’s property. This is the person who will ultimately take the sale the whole way through to closing.
Do Assignment Sales Benefit Buyers or Sellers?
Assignment sales can be beneficial for both parties in a real estate transaction. Although the assignor takes on some risk in buying before the project breaks ground, they reap other benefits. For example, if the value of the property goes up in the interim, they can usually sell it for more than they paid.
For an assignee, they might spend a little more than the original price, but they are taking on less risk while still moving into a brand-new home.
Why Do Assignment Sales Happen?
An assignor might sell their property to an assignee for many reasons.
Their plans might have changed for one reason or another, making them unable to move into their pre-construction property. Or, they may feel it’s the right time to cash in on their investment should the value of their property have increased.
Whether you’re interested in learning more about assignment sales or just need some general advice about buying real estate, our team is here to help you. Book your personal home buying consultation here, or simply contact us here to get started.
