Buying An Assignment

There are many advantages when buying a pre-sale home, so it’s no wonder they can often sell out quickly. However, even if the project you’ve had your eye on may have sold out, the window of opportunity hasn’t fully closed with the option of buying an assignment.

Buying an assignment is essentially purchasing the rights to the original buyer’s purchase agreement — and all of the terms and conditions in said agreement. It is the equivalent of buying concert tickets from the ticket holder rather than Ticketmaster. Purchasing a pre-sale assignment is an appealing alternative, but before you commit to buying an assignment, there are some important factors to consider.

 

When purchasing an assignment, you (the assignee) and the seller (the assignor) will agree upon the assignment details. However, the developer will still need to give the final approval—and nothing can happen until they do.

There are several reasons a developer may withhold permission. Firstly, the contract and disclosure statement might prohibit assignments, making the assignment of a contract impossible in the first place. Additionally, if the developer still has a substantial amount of inventory remaining, they may withhold consent for reselling (assigning) any homes in the project, as it would compete with what they still need to sell. Assignments are also likely to be disapproved if the original buyer has not yet paid all required deposits in full. Lastly, if the assignment request is made too close to completion, it may not receive approval.

 

There are four immediate costs to consider when looking to purchase an assignment:

 

1. In most cases, the original purchaser will have paid all required deposits to the developer before being allowed to assign their contract. As such, you--the assignee--will need to pay the assignor the total amount in full. Imagine the deposit agreement on a $300,000 purchase price is 20%, totalling $60,000 for the original buyer. While they could pay this deposit in installments over a year, you would be required to pay it in full.
   
   
2. Most assignors hope to make a profit when assigning their contracts, so you will likely agree to pay more than the original purchase price. In the example of a $300,000 purchase price, the assignor will probably ask for the same or a higher price than initially agreed. If the assignor offers the assignment for $350,000, you will also have to pay the difference between the original price and their asking price, known as the "lift."
   
   
3. Assignments are quite complex, so you will likely want a lawyer to review the original purchase agreement, including amendments and the disclosure along with its related amendments. Consequently, you will need to cover any associated legal fees for the lawyer you choose to hire.
   
   
4. If you engage a Realtor to source a potential assignment or facilitate its negotiations, a commission may be payable.
   
   
5. The developer typically charges an assignment fee that can range from $1,000 to 5% of either the original price or the selling price. You and your assignor will need to decide who pays these costs to the developer.
   
   

Many developers offer options to customize the home early in the selling process, often well in advance of the construction start date. The original buyer might have had the opportunity to choose from various colour palettes or purchase additional parking stalls and storage lockers. In some cases, more extensive customizations might have been possible. As the purchase of an assignment includes the terms and conditions of the original buyer, you will assume the customization choices that were made or waived by them.

Similar to buying resale Taylor Swift tickets if you weren't able to get them direct from the box office, purchasing an assignment gives you a second chance to buy into the building you truly love. However, it’s essential to consider the necessary steps and additional fees to make it feasible.

If you’re feeling lost, one of our Rennie Advisors can help guide you through the process. View our advisors to find one who specializes in the home or region where you’re looking to buy.