What is an assignment?
An assignment is a transaction of a home where the buyer of the property (the assignor) allows another buyer (the assignee) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale before the original buyer closes on the property. Where most resale real estate deals close in 30 to 60 days, assignments are most commonly found in pre-sales, where there’s a long closing.
How do you know if you can assign a home?
The Agreement of Purchase and Sale of a home, either pre-sale or resale, will outline whether you can or cannot assign the home. If you can assign the Agreement of Purchase and Sale: It’s typical to find the assignment will come with certain terms. Typical terms include:
- A time frame of when you can and/or cannot assign the contract
- An assignment fee applied by the seller, usually for administrative costs
- Marketing restrictions on when and where you can market the Agreement of Purchase and sale for assignment
Are there tax implications on assignments?
Generally, the assignor pays a tax on the profit of the assignment as part of income tax. As the assignee takes responsibility of all terms in the Agreement of Purchase and Sale, the assignee pays the taxes associated with the sale of the home, such as Goods and Services Tax (GST) and Property Transfer Tax (PTT). As each scenario differs, before making a decision, be sure to speak to a licensed Realtor.
Are there risks involved?
It’s important to know that if a contract is assigned, and the assignee does not follow through on completing on the sale of the home, the responsibility to close on the Agreement of Purchase and Sale usually defaults back to the assignor.
Looking for more information on assignments? Our rennie advisors specialize in every neighbourhood across the Lower Mainland and can help you find the home best suited to your needs.