Buying an Assignment

Buying a pre-sale assignment means purchasing the rights to a contract for a property that has yet-to-be-built. Essentially, you are purchasing the rights to a purchase agreement and all the terms and conditions contained in said agreement. The benefits of an assignment purchase might include the ability to purchase in a building that has sold-out, purchasing a floor plan no longer available, and a shorter-than-usual wait time to completion. But, before you dive in and purchase an assignment, there are some important factors to consider.

Approvals
While you (the assignee) and the seller (the assignor) may have mutually agreed on the assignment details, the developer will still need to give final approval. Until and unless you receive such developer approval, the assignment cannot proceed. There are many reasons a developer may withhold permission. First, if the contract and disclosure statement prohibit assignments, the developer would not consent to an assignment. Second, if the developer has plenty of inventory remaining, they may withhold consent as any re-selling (assigning) of their project competes with what they still need to sell. Third, consent may be withheld if the original buyer has not yet paid all required deposits in full. And, finally, assignment requests made too close to the completion may not be approved.


Jane Chu

What you'll need to pay
There are four immediate costs to consider when looking to purchase an assignment.

First. In most cases, the original purchaser will have had to pay all required deposits to the developer before being permitted to assign their contract. As such, you, the assignee, will have to pay the assignor the total in full. Imagine the deposit agreement on a $300,000 purchase price is 20%, totaling $60,000 for the initial buyer. Where the assignee might have paid this amount over the course of one year, you would be required to pay it in full.

Second. Most assignees look to see some profit when assigning their contract, as such, you will likely agree to pay more than the original purchase price. In the example of a $300,000 purchase price, the assignment will likely have the same or greater price than the originally agreed price. If the assignor offers the assignment for $350,000, you also have to pay the difference between the originally agreed purchase price and the increase (or lift) in the purchase price.

Third. Legal fees may be incurred during the purchasing process as assignments can be quite complex. It may be advantageous to have a lawyer review the original purchase agreement including amendments and the disclosure with its related amendments.

Fourth. In the event you engage a Realtor to source a potential assignment or facilitate negotiations, a commission may be payable. Fifth. The developer usually charges an assignment fee that can range from $1,000 to 5% of either the original purchase price or the selling price. You and your assignor will need to decide who covers these costs to the developer.


Jessica Lozada

Developer options
Many developers offer customization choices early in the selling process – well in advance of the start of construction. As one example, the original buyer might have been given a choice of color palettes to choose from. Additional parking stalls and storage lockers might be available for purchase. And, in some cases, more robust customizations might have been possible. As the purchaser of an assignment includes the terms and conditions as they pertain to the original buyer, you will be assuming these choices made or waived by the original buyer.

When looking to purchase an assignment, ensure final approval is given by the developer, consider all potential fees to be paid, and keep in mind that everything the original buyer agreed to in the initial contract is simply transferred on to you.


If you’re feeling lost, one of our rennie Advisors can help guide you through the process. View our advisors or contact us at info@rennie.com.

Feature image: Brandan Price


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