Selling an assignment condo is not the same as dealing with a resale condo sale. You have to navigate many potential challenges and regardless of present market conditions it can take time and skill to complete a deal. Depending on the contract you signed with the builder you may not even be allowed to sell the condo on assignment. If they do allow it, see below for a guide on everything you need to know about selling an assignment condo.
What is an assignment sale?
An assignment sale is a transaction in which a buyer (the “Assignor”) has purchased a property and then sells their interest in that property to another buyer (the “Assignee”) prior to the property closing. Essentially, as the Assignor you are not actually selling the property; you are selling their contract along with the rights and obligations of the original agreement with the Builder or original seller. While it is possible to have and assignment sale of a pre-construction house or a resale property, assignment sales in Toronto are most common in pre-construction condos.
If you are looking to sell your condo prior to the buildings closing date you are the Assignor. In other words the original buyer of the condo unit in the pre-construction phase. In an assignment sale, the assignor is the seller.
The assignee is the buyer of the assignment condo and takes over all rights and responsibilities of the original contract.
Make sure that the agent you are working with is familiar with the process of selling an assignment condo. Most agents have no experience in assignment sales, so be careful who you choose to reprent your best interests.
Cons of selling your condo on assignment
- The builder may have restrictions on how you can market your assignment condo. Your first step should be checking with the builder or reviewing your APS (agreement of purchase and sale) on what is allowed.
- The pool of buyers is limited due to the substantial amount of cash required.
- Due to the complex nature of an assignment condo sale, the legal fees will be higher than resale condos.
Pros of selling your condo on assignment
- Pre-con condos take years to complete and if your lifestyle changes it allows you to walk away, often times with a profit.
- You avoid costs such as land transfer tax, occupancy fees, HST, etc.
- You can get your deposit out earlier and you may even be able to negotiate the profits sooner than the building closing.
Capital gains tax and HST
If you are selling your condo on assignment, the assignee (buyer of the assignment condo) will assume all HST responsibilities as they will be the ones doing the final closing on the unit. Generally, you will be responsible for paying capital gains tax on any profits, but I’d strongly advise to speak to an experienced accountant for details. CRA link
When is the closing date?
In an assignment sale there are two closing dates. The first closing date is when the sale has been approved by both lawyers and the builder. The second closing date is when the building is registered.
Who pays for the builder assignment fees?
Generally, the assignment fees are due to the builder on the first closing date and paid for by the assignor.
When will I recieve my profit?
Typically, you’ll get the profits once the building closes (2nd closing) but it is negotiable.
All assignment sales should be conditional upon your lawyer reviewing the entire assignment agreement. Part of that will be all of the contents and disclosures of the original agreement of purchase and sale between the Assignor and the builder.
Other must reads for seller’s are:
- 6 tips on how to get more for your home
- How to prepare your home for photography
- Why is home staging important?