What are Property Assignments?
A Pre-sale is a property sold before the property is even built, sight unseen. This is a new development in the real estate market and has been flourishing for years now. Developers sell off the properties years in advance to get extra money for the development phase. This is an opportunity in a rising market for buyers because the purchaser locks the price when the pre-sale is bought and does not need to approve for a mortgage until the property is finished. Then when they finally move in to the property, it could be worth much more than they paid for it.
If the owner of the Pre-sale would like to sell the pre-sale before the completion date, then the pre-sale property is sold off to a new buyer as an assignment.
An Assignment is a legal sales transaction whereby the Original Purchaser (the "Assignor") of a property sells, and thereby transfers, their rights and obligations under the original contract to a new Purchaser (the "Assignee"). An Assignment takes place from the time an original Agreement For Sale has occurred between the Developer (the "Vendor") and the Original Purchaser, and PRIOR to Completion of the Property.
Imagine that one is stepping into the shoes of the Original Purchaser for a fee in order to purchase the desired property.
The "Assignee" assumes all of the "Assignor's" duties and obligations under the original Agreement of Sale. These rights and obligations are stated in the original Agreement of Sale and include terms such as deposits, included items, Completion date and required disclosure statements. Upon Completion, the "Assignee" is granted the Title to the real property.
An Assignment is legally permitted unless otherwise expressed in writing. An Assignment fee may be charged by the Developer and is normally a cost borne by the "Assignor" (the Original Purchaser).
Remember, the Developer is the legal owner of the interest in the real property until a legal transfer of Title has occurred upon Completion. In all cases, written consent from the Developer (the "Vendor") will be required for an Assignment transaction.
Example of a Property Assignment
To simplify, an example of an Assignment transaction is provided below:
Jacquie (the "Assignor") is entering into an agreement to purchase a condo for $200,000 from a Developer (the "Vendor") as a 'Pre-Sale'.
As part of the Agreement For Sale, she paid a total deposit of 25% = $50,000.
Six months later and prior to Completion of the apartment, Jacquie decides to sell, and thereby transfer, her contractual rights and obligations to purchase the condo to Jaret for $28,000.
Jaret (the "Assignee") had missed his chance to purchase one of the condos when the Developer was 'pre-selling'. The building is now sold out and he wants to purchase Jacquie's rights and obligations for her asking price of $28,000.
Jaret pays to Jacquie $28,000 PLUS replacement of her deposit of $50,000 which equals a total of $78,000.
When the building is Complete, Jaret owes the "Vendor" (the Developer) the balance of the Agreement For Sale which is $150,000 (being the original price less the original deposit).