The transfer of a pre-construction contract from the original purchaser to a new buyer before possession of the unit is taken is called an assignment sale.
John Smith decides to buy a new home in the pre-construction phase in Toronto. The Agreement of Purchase and Sale is for the purchase of the contract for his new home, not the physical unit, since it hasn’t been built or registered yet.
John Smith purchases a one-bedroom condo unit within a 25 storey pre-construction condo building that is estimated to be completed in 4 years.
The developer has included a clause within the Agreement of Purchase and Sale allowing John to sell and transfer the contract for the pre-construction one-bedroom unit to a new buyer before he has to take occupancy if need be.
During those 4 years John Smith meets the love of his life and decides to get married, have a child and start a whole new life together. All of a sudden, he no longer has a need for that one-bedroom unit in the condo building that is now under construction. What can he do?
One option is to transfer the contract for his condo unit to a new buyer before occupancy occurs. This is called a pre-construction assignment sale. The assignor, (John Smith) who is the original pre-construction purchaser and now looking to sell, will find a new buyer, the assignee, (Jane Doe) to purchase the pre-construction contract. Jane Doe will now become the legal owner of the aforementioned one-bedroom condo and all legal responsibilities and costs pertaining to the pre-construction unit are now her responsibility.
It is strongly advisable that both John Smith and Jane Doe seek the advice of a realtor and lawyer that specialize in these types of sales to help guide them both through the process.
John Smith can now avoid paying final closing costs, helping him to potentially save thousands of dollars and maybe even walking away earning a profit off the sale. However, John Smith will have to pay a small fee back to the developer, according to whatever costs are outlined in the Agreement of Purchase and Sale in order for this transaction to occur.
And Jane Doe is now the proud owner of a brand new, never lived in one-bedroom condo unit of her dreams, taking over all costs and obligations related to the contract and the pre-construction condo unit in question.
As Toronto, the GTA, and the communities surrounding these areas continue to increase in population, the production of more high-rise residential developments have also increased right alongside.
Buying real estate in the pre-construction phase has helped propel local real estate markets. Lower price points and the possibility of building up equity before even setting foot in your new home is appealing to most homebuyers looking to invest in real estate.
CondoNow and our Certified Experts can help you find the home of your dreams through an assignment sale. We are here to help you every step of the way and answer any more questions you may have.
