Since the condo isn’t registered or “complete” you technically don’t own it yet you can’t something you don’t own. So really what you are “selling” is the contract to buy the contract from the developer through a transaction called an assignment. For more information about what is an assignment see ASSIGNMENTS 101: HOW DO ASSIGNMENTS WORK?
What are the restrictions?
Not every pre-construction condo purchase includes the right to assign and the first thing you need to check is what the restrictions and costs are involved. Developers don’t want their purchasers to compete with them so many have requirements about a percentage of the building sold (like 80% sold) or a construction milestone (like the roof being assembled). These clauses will be found either in the body of the agreement or in amendment especially if there were was an incentive like a free assignment at the time of purchase.
Another common restriction involves marketing and it is often prohibited from putting an assignment on MLS and often advertising of any kind is prohibited. Developers want to sell their condos to purchasers who intend to close the units not flip them.
What are the costs?
Assuming you have the right to assign the agreement will indicate the fees. Typically there is a fee paid to the developer often around $5,000 and fee paid to the lawyer in the range of $1,000. It can be more or less depending on the developer but this is stated in the original Agreement of Purchase and Sale.
How is it valued?
Like most real estate assignments are valued base on comparable units in the building and immediate area. So if new units that were just registering in the similar buildings were at $1,200 per square foot we would expect the assignment value to be discounted to that. There three main reasons an assignment would be discounted:
When is the best time to assign?
The closer a project is to completion typically the stronger the assignment market. Pre-construction condos are often purchased by investors looking to buy at a discount to earn a return over multiple years. End-users usually have a much shorter time horizon for when they want to be in their units.
What are the tax implications?
Assignment sales are often treated as income versus capital gains but we advise people to speak with their accountant about their specific situation.
How can One Day Assignment help?
If you are looking to sell your assignment quickly we can review your agreement and make you an offer within a day of receiving all of the information. We don’t market your unit risking your deposit but buy it for our own inventory giving you the peace of mind in knowing what your profit is and that you aren’t responsible for additional costs.
The value of pre-construction is typically determined by looking at the current pricing of assignment units trading the building, new construction sale prices of newer resale units in the surrounding area. Typically pre-construction condos closer to completion are more attractive to end-users who are prepared to pay a greater premium over the initial contract.
In order to get out of your pre-construction condo you can assign the unit to another buyer with the consent of the developer. In many cases there are restrictions on how you can market the property, In most cases you are not allowed to list it on MLS. You can sell it quickly to an assignment buy investors like One Day Assignment or you can try and find your own buyer. It is important to make sure that you are within the development guidelines set-out in the Agreement of Purchase and Sale or else you can void the agreement and lose your deposit.
Assigning a condo will typically have the Buyer (assignee) replace the Seller’s (assignor’s) deposit and have it credit to them as part of the deal. Profits may be realized at the time of assignment but most commonly the majority will come at final close.
Since the condo isn’t registered or “complete” you technically don’t own it yet you can’t something you don’t own. So really what you are “selling” is the contract to buy the contract from the developer through a transaction called an assignment.
An assignment is the sale of a contract of purchase and sale to a third party. The most common kind is condo assignment. A purchaser buys a condo that isn’t going to get built for 5 years from a developer.