In essence, buying an assignment means you – a third party – are purchasing an existing contract for a pre-construction home or condo from the original buyer who purchased the unit directly form the developer. The unit is transferred or “assigned” to the new buyer, and all negotiations occur between the new buyer and the original buyer.
It’s important to note that the developer generally has to consent to the assignment in order for it to take place.
Purchasing an assignment seems quite similar to buying a pre-construction property directly from the developer, but an assignment has notable differences from a straight-forward pre-construction unit.
First of all, there are a number of reasons why people assign/sell their home or condo before the closing date approaches, including:
▪ Inability to come up with closing costs
▪ Change in circumstances forcing them to be unable to hold on to the investment
▪ Requirement of funds to put towards other investments
▪ Avoidance of the inconvenience of closing, including the costs associated with it
If an investor includes an assignment clause in their purchase agreement when buying a pre-construction property directly from the developer, they essentially have the freedom to sell or “assign” the place to another willing buyer who is looking to purchase in that development.
Buyers are awarded some benefits of buying an assignment, including:
▪ The condo or house will be completed much sooner as opposed to when purchasing when the developer opens up initial registration
▪ The purchase price is generally lower as opposed to buying directly from the developer
▪ There are many perks that come with buying a brand-new property, such as warranties, new construction, and often choice of finishes
There is a slight risk to buying an assignment, since you’re basically inheriting another person’s original contract instead of your own from the beginning with the developer. However, many times, the benefits outweigh the risks, both for the new buyer or “Assignee” and the original buyer or “Assignor”.
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