With so many presale developments popping up, it’s important that you know your options with your presale and how to handle them safely.
What is an assignment?
An assignment of contract in real estate is a transaction of a home in which the buyer of the property “assigns” or transfers their rights and obligations of the Agreement of Purchase and Sale previously agreed to another buyer before the original buyer closes on the property. In this case, because completion has not occurred, they are not the legal owner for the property yet, thus they require consent from either the seller or the developer(often times the developer).
This can occur in both resale and presale homes; however, assignments are most commonly found in presales where there is a longer closing, often 5 years away.
When can I assign a home? Are there any restrictions?
You will have to refer back to the original contract of purchase and sale to determine whether or not you are able to assign the home. Some terms you may encounter, specifically for presales, are:
- The developer or seller’s approval
- Resale profits must be split with the seller unless otherwise agreed to in the contract
- Marketing can be very tricky. MLS (multiple listing service) restrictions for online marketing may be prohibited, many developers do not allow the advertising and sale of assignments until the building is sold out.
- A time frame when you cannot assign the contract
- An assignment fee to be paid to the developer in the presale scenario, usually 2-5% of the sale price.
Why do assignments occur?
Assignments often occur when a presale has appreciated significantly in value prior to completion. The current buyer would like to take the appreciation (often called a “lift”) while it’s up, and assign it to another buyer.
Are assignments legal?
Yes. Real estate contracts are assignable under the law unless the contract expressly forbids it.
Fees associated with an assignment?
If this is a resale home that you are assigning, you will most likely have to split the profits of the assignment with the seller unless otherwise agreed to. Typically there are extra legal fees and there is an assignment fee to the builder if it is a presale assignment.
Most assignments have the new buyer taking full responsibility for the contract; however, it may be the case where the new buyer and the original buyer have agreed to split some adjustment costs.
If you haven’t check out our pre-sale blog yet click here! I hope this helps you negavate an assignment of contract. If you have any specify questions or want to know more about this process contact me at [email protected] or 604-341-9937