Pre-Sale vs. Assignments
Buying an assignment may seem at first like something very similar to buying pre-sale (or buying new directly from the developer), but there are many key differences to consider.
Buying an assignment usually means you are getting a better price than if you just bought directly from the developer. However, instead of dealing directly with the developer – the entity that you are buying a condo from, you are negotiating and dealing with an individual. There is an element of risk by definition because you are inheriting someone else’s contract rather than negotiating your own from the start with the developer.
Most lenders are very familiar with pre-sale condos and they have programs set up for buyers to arrange the financing portion of the sale. When it comes to assignments, some lenders are not familiar with the process and buyers and sellers often encounter difficulties when dealing with the banks on assignment deals. This is another reminder why having a lawyer and a lender who are experienced with assignments is crucial for both the buyer and the seller in any assignment transaction.
looking at some of the key differences between buying or selling resale compared to buying or selling an assignment:
The biggest difference is that when you are buying resale you are buying real real estate. The property exists and it is registered in the land registry system of Ontario. When you buy an assignment, you are really just buying a piece of paper, the contract that in turn gives you right to own real real estate once the building is completed and is entered into the land registry system.
Practically speaking, dealing with resale is a much more tactile experience because you can see /feel /touch the property, where as dealing with assignments is more similar to buying pre-sale / buying from plans.
Resale requires a mortgage, and closing dates are usually 60-90 days. Assignments do not require a mortgage up front, but they usually require a hefty deposit (25%+), and closing dates can vary from months to years depending on how the agreement is structured and how far along the project is in construction.
In terms of growth, the assignment market is likely to grow substantially over the next couple years as many people who bought at the peak of our current market cycle will be looking to sell. This in contrast to the resale market where many sellers are taking a wait-and-see approach before putting their properties on the market.
Questions? Leave a comment or contact me.