what is distressed assignment sale

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10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)

— We take our content seriously. This article was written by a real person at BREL.

What’s an assignment?

An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract.  The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.

The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.

Do assignments only happen with pre-construction condos?

It’s possible to assign any type of property, pre-construction or resale, provided there aren’t restrictions against assignment in the original contract. An assignment allows a Buyer of a any kind of home to sell their interest in that property before they take possession of it.

Why would someone want to assign a condo?

Often with pre-construction sales, there’s a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

Another common reason why people want to assign a contract is financial. Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale.

Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.

What can be negotiated in an assignment sale?

Because the Assignee is taking over the original purchaser’s contract, they can’t renegotiate the price or terms of the contract with the Builder – they are simply taking over the contract as it already exists, and as you negotiated it.

In most cases, the Assignee will mirror the deposit that you made to the Builder…so if you made a 20% deposit, you can expect the new purchaser to do the same.

Most Sellers of assignments are looking to make a profit, and part of an assignment sale negotiation is agreeing on price. Your real estate agent can guide you on price, which will determine your profit (or loss).

Builder Approval and Fees

Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and actually read it.

Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we’ve seen everything from $750 to $7,000).

There may be additional requirements as well, the most common being that the Builder has to approve the assignment.

Marketing Restrictions

Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you from posting it to the MLS or advertising it online. This makes selling an assignment extremely difficult…if people don’t know it’s available for sale, how they can possibly buy it?

While it may be very tempting to flout the no-marketing rule, BE VERY CAREFUL. Buyers guilty of marketing an assignment against the rules can be considered to have breached the Agreement, and the Builder can cancel your contract and keep your deposit.

We don’t recommend advertising an assignment for sale if it’s against the rules in your contract.

So how the heck can I find a Buyer?

There are REALTORS who specialize in assignment sales and have a database of potential Buyers and investors looking for assignments. If you want to be connected with an agent who knows the ins and outs of assignment sales, get in touch…we know some of the best assignment agents in Toronto.

What are the tax implications of real estate assignment?

Always get tax advice from a certified accountant, not from the internet (lol).

But in general, any profit made from an assignment is taxable (and any loss can be written off). The new Buyer or Assignee will be responsible for paying land transfer taxes and any HST that might be due.

How much does it cost to assign a pre-construction condo?

In addition to the Builder assignment fees, you will likely have to pay a real estate commission (unless you find the Buyer yourself) and legal fees. Because assignments are more complicated, you can expect to pay higher legal fees than you would for a resale property.

How does the closing of an assignment work?

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. On the second closing (between the Builder and the Assignee), the Assignee pays the remaining amount to the Builder (usually with the help of a mortgage), and pays land transfer taxes. Title of the property transfers from the Builder to the Assignee at this point.

I suppose it could be said that there is a third closing too, when the Buyer takes possession of the property but doesn’t yet own it…this is known as the interim occupancy period. The interim occupancy occurs when the unit is ready to be occupied, but not ready to be registered with the city. Interim occupancy periods in Toronto range from a few months to a few years. During the interim occupancy period, the Buyer occupies the unit and pays the Builder an amount roughly equal to what their mortgage payment + condo fees + taxes would be. The timing of the assignment will dictate who completes the interim occupancy.

Assignments vs. Resale: Which is Better?

We often get calls from people who are debating whether they should assign a condo they bought, or wait for the building to register and then sell it as a typical resale condo.

Pros of Assigning vs. Waiting

• Get your deposit back and lock in your profit sooner
• Avoid paying land transfer taxes
• Avoid paying HST
• Maximize your return if prices are declining and you expect them to continue to decline
• Lifestyle – sometimes it just makes sense to move on

Cons of Assigning vs Waiting

• The pool of Buyers for assignment sales is much smaller than the pool of Buyers for resale properties, which could result in the sale taking a long time, getting a lower price than you would if you waited, or both.
• Marketing restrictions are annoying and reduce the chances of finding a Buyer
• Price – What is market value? If the condo building hasn’t registered and there haven’t been any resales yet, it can be difficult to determine how much the property is now worth. Assignment sales tend to sell for less than resale.
• Assignment sales can be complicated, so you want to make sure that you’re working with an agent who is experienced with assignment sales, and a good lawyer.

Still thinking of assignment your condo or house ? Get in touch and we’ll connect you with someone who specializes in assignment sales and can take you through the process.

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Raj Singh says:

What can be things to look for, especially determining market value for an assigned condo? I’m the assignee.

Sydonia Moton says:

Y would u need a lawyer when u buy a assignment property

Gideon Gyohannes says:

Good clear information!

Who pays the assignment fee to the developer? Assignor or Assignee?

Thanks Gideon 416 4591919

Melanie Piche says:

It’s almost always the Seller (though I suppose could be a point of negotiation).

Fiona Rourke says:

If there are 2 names on the agreement and 1 wants to leave and the other wants to remain… does the removing of 1 purchaser constitute an assignment

Brendan Powell says:

An assignment is one way to add or remove people from a contract, but not the only way…and not the simplest. Speak to your lawyer for advice on what makes the most sense for your specific situation. For a straightforward resale purchase you could probably just do an amendment signed by all parties. If it’s a preconstruction purchase with various deposits paid, etc it could be more complicated.

Katerina says:

Depends on the Developer. Some of them remove names via assignments only.

Haroon says:

Is there any difference in transaction process If assigner or seller of a pre constructio condo is a non resident ? Is seller required to get a clearance certificate from cRA to complete the transaction ?

Nathalie says:

Hello , i would like to know the exact steps for reassignment property please.

Amazing info. Thanks team. I may just touch base with you when my property in Stoney Creek is completed in. 2020. I may need to reassign it to someone Thanks

Victoria Bachlowa says:

If an assignor renegs on the deal and refuses to close because they figured out they could get more money and the assignment was already approved by the builder and all conditions fulfilled what can the Assignee do. I have $33,000 dollars in trust in the real estate’s trust fund. They sent me a mutual release which I have not signed. The interim occupancy is Feb. 1 and the closing is schedule for Mar. 1, 2019. I have financing in place, was ready to move in Feb. 1 and I have no where to live.

Definitely talk to your lawyer right away. They’ll want to look at your agreement of purchase and sale and will be able to advise you.

With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. Can I assume that these closing happen at the same time? I’m not sure how and when I would be paid as the Assignor.

What happens to the deposits or any profits already paid if the developer cancels the project after an assignment?

Hi, Did you get answer to this? I did an assignment sale last year and now the builder is not completing apparently and they are asking for their money back. Can they do that? After legal transactions, the lawyer simply said “the deal didn’t go through”. Apparently builder and the person who assumed the assignment agreed on taking out the deal. What do I have to pay back after it was done a year ago

This is definitely a question for your lawyer – as realtors we are not involved in that part of the transaction. I would expect that just as the builder would have to refund your deposits, you would likely need to do the same…but talk to your lawyer. As to whether the builder can cancel a project, yes they always reserve that right (but the details of how and under what circumstances would be in your original purchase agreement). It’s one of the annoying risks in buying preconstruction!

I completed the sale of my assignment in Dec 2015 however the CRA says I should be reporting the capital income in 2016 when the assignee closed his deal with the developer in July 2016. That makes no sense to me since I got all my money in Dec 2015. Can you supply any clarification on that CRA policy please?

You’d have to talk to the CRA or an accountant – we’re real estate agents,so we can’t give tax advice.

Hassan says:

Hello, You said that there are two closings. The first one between the assignor and the assignee and the second one between the builder and the new buyer (assignee). My question is that in the first closing does the assignee have to pay the assignor the deposit they have paid and any profit in cash or will the bank add this to the assignee’s mortgage?

The person doing the assigning usually gets their money at the first closing.

Kathy says:

What is the typical real estate free to assign your contract with the builder ?

Hi Kathy While we do few assignments (as they are rarely successful, and builders do not make it easy), in past we have charged more or less the same as we do for a typical resale listing. While there are elements to assignments that should be easier than a resale (eg staging), many other aspects of assignments are much MORE time-consuming, and the risk much higher since attempts to find a buyer for assignments are often unsuccessful. It’s also important to note that due to the extra complication, lawyer’s fees to assign are typically higher than resale as well–although more $ for the purchase side vs the sale side.

Mitul Patel says:

If assignee has paid small amount of deposit plus the original 25% deposit that the assignor has paid to the builder and gets the Keys to the unit since interim possession has been completed, when the condo registration is done and assignee is getting mortgage from the Bank or Pays the remaining balance to the Builder using his savings and decides not to pay the Balance of the Profit amount to Assignor, what are the possibilities in this kind of scenario?

You’d need to talk to a lawyer to find out the options.

David says:

How much exactly do brokers get paid at sale of Assignment? i.e. Would the broker’s fee be a % of your assignment selling price or your home’s selling price? I’m really looking for a clear answer.

I am using this website’s calculator associated with selling your home in Ontario. But there is no information on selling assignments. https://wowa.ca/calculators/commission-calculator-ontario

Realtors set their own commission, so there is no set fee- that website is likely the commission that that agent offers. We often see commissions of 4-5% for assignments. The fee is a % of the price of the assignment – for example, you originally bought for $500K; you’re now assigning for $600K – commission would be payable on the $600K.

Candace says:

Question: if i bought a pre construction condo, can i sell it as soon as it closes or do i have to live in it for 1 year after closing in order to avoid capital gains taxes?

Or does the 1 year start as soon as you move in?

I would suggest you talk to your accountant re: HST credit implications and capital gains, but if you sell it for more than you paid for it, capital gains usually apply.

You mention avoid paying HST when you assign your property. What is the HST based on? It’s not a commercial property that you would pay HST. Explain. Thanks.

HST and assignments are complex and this question is best answered specific to your situation by your accountant and real estate lawyer. In some cases HST is applicable on assignment profits – more details can be found on the CRA website here:

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html

If you are a podcast listener, the true condos podcast is also a great resource.

https://truecondos.com/cra-cracking-down-on-assignments/

heres one for your comment, purchase pre construction from builder beginning of 2021, to be finished end of 2021, (semi detached) here we are end of 2022, both units are now ready. Had one assigned but because builder didnt accept within certain time frame(they also had a 90 day clause wherein we couldnt assign prior to 90 less firm closing date (WHICH MOVED 4 TIMES). Anyrate now we have a new assinor but the builder says we are in default from the first one and wants 50k to do the assignment (the agreement lists the possibility of assigning for 12k) Also this deal would include us loosing our whole deposit and paying the 12k(plus fees) would be in addition too the 130k we are already loosing. The second property we are trying to close but interest rates are riducous, together with closing costs(currently mortgage company is asking that my wife be added to that one, afraid to even ask this builder. Any advice on how to deal with this asshole greedy builder? We are simply asking for assignment as per contract and a small extension for the new buyer(week or two) Appreciate any advice. Thank you

Dealing with builders/developers can be extremely painful, much worse than resale transactions in our experience. Their contracts are written to protect THEM. Unfortunately all I can say is follow the advice of your lawyer.

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Distressed property: What you should know

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If you’re looking to buy a new piece of property, the sky-high prices of today’s hot housing market might look a bit scary. However, those overwhelming price tags are typically attached to homes that are in good condition. To find a more budget-friendly deal, you might want to search for what’s known as a distressed property.

What is a distressed property?

A distressed property will cost less than other similar-sized homes in the area. But there is a reason for that discount: Typically, the home is either under foreclosure, or the lender is trying to sell it. The most common reason for a home to be classified as a distressed property is a homeowner who couldn’t pay the mortgage or the property taxes.

Distressed property sales make up a small portion of the overall housing market. According to data from the National Association of Realtors , distressed sales accounted for less than 1 percent of all transactions in each of the first two months of 2022.

Types of distressed properties

There are several types of distressed properties in real estate. Here’s a rundown of the most common kinds you might find in your search.

Foreclosures

A foreclosed property is the most commonly known type of distressed property. In this scenario, the homeowner has failed to make his or her monthly mortgage payments for many months in a row, and the lender has officially filed a default notice.

Some people buy homes that are in preforeclosure — typically when the owner has hit the 90-day past-due point in payments — and others buy them when they are fully foreclosed at public auctions .

REO stands for real estate–owned, which is synonymous with bank-owned . If a property is described as an REO, the lender is the seller. In this case, the home went into foreclosure, and it did not sell at auction. So now, the lender is working to recoup some of its losses.

Short sales

In a short sale , the lender has not yet taken the property back. Instead, it has worked out a deal with the current owner to sell it for less than it’s worth. In this scenario, the property is on the path to foreclosure, but a short sale can avoid that final piece of the credit-destroying puzzle. So, the property is technically distressed, but it’s likely on the earlier end of that stress.

Pros and cons of buying a distressed property

Buying any property is a major purchase with a long list of pros and cons. But buying a distressed property comes with a different set of advantages and drawbacks. While a low list price can be especially appealing, be sure to weigh these considerations before heading down a road that leads to a distressed property.

Benefits of buying distressed properties

Lower price.

The main appeal of a distressed property is money. If a lender isn’t receiving any mortgage payments, it’s going to want to accelerate the sale timeline to get the property off its books. Once a borrower defaults on the loan, the lender is looking to figure out a way to get cash for it and move on. You, as a buyer, might be able to enjoy a significant discount.

Potential for future profits

The adage of “buy low, sell high” rings true in real estate investing. Distressed properties are a prize for anyone who knows how to navigate the world of buying fixer-uppers and flipping them. You might be able to buy a property at a discount, accumulate some sweat equity and sell it for a big gain to boost your bank account.

Risks of buying distressed properties

Potential for serious repairs.

A lot of distressed properties are sold as-is , meaning the buyer doesn’t get to ask for any repairs prior to closing the deal. If the previous homeowner couldn’t afford to make mortgage payments, it’s safe to say that he or she also couldn’t afford to invest in the upkeep of the property. While you might be confident in your DIY skills , you could be acquiring a property that is going to require a serious amount of time — and money — to bring up to speed.

Title issues

The previous mortgage might be wiped away on a foreclosed property, but what about the property taxes ? If you wind up purchasing a house with unpaid taxes, it might fall on you to settle the bill. Be sure to think about additional financial issues you could inherit from a delinquent owner.

Long time to close

You might think that buying a distressed property reduces some of the transaction time, but it’s actually the opposite. Short sales, ironically, can take a long time — up to a full year in some cases. If you’re hoping to get started on the necessary work soon, so you can either move in or sell, be ready for some bad news: You’ll probably need to wait.

How to find distressed properties

If you’re interested in exploring distressed properties, it’s wise to find a real estate agent who has experience navigating this potentially rocky terrain. That way, you will have an expert on your side who can help you understand which listings — if any — are a smart investment.

You can browse for distressed real estate on your own, too. Popular sites like Redfin and Zillow include foreclosures in their databases. RealtyTrac is an online destination solely for distressed properties, where you can find information about recent activity in preforeclosures, REOs and auctions to gauge how much money distressed properties are selling for in certain markets.

In some cases, you can also browse REO listings directly from the lender. For example, big banks like Bank of America and Wells Fargo have dedicated bank-owned websites.

Bottom line

At first glance, foreclosures, REOs and short sales can look like incredible bargains. If you’re operating with a small budget, finding one of these lower-priced homes might seem like your best option to become a homeowner. Be careful, though. Distressed properties can create distressed owners who feel the worries of needing to invest loads of money to make the home livable.

Related Articles

Buying a foreclosed home: A 5-step guide

What property buyers should know about land loans

Selling a house in a recession: What you need to know

Buying a house for sale by owner

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A Comprehensive Guide To Selling Your Assignment Condo

Trying to resell your preconstruction condo before closing? This blog is for you. Assignment sales are more complicated compared to their resale counterparts, but with some guidance, the process is easy. 

An assignment sale is a sale where the original buyers of a condo or home resell their contract to another buyer before closing. The most common type of assignment is a preconstruction condo assignment. Preconstruction condo assignments are prevalent because of the time lag between purchasing the home and the move-in date. While condo assignments might be the most popular type of assignment, any real estate contract is assignable. This blog is going to discuss condo assignments since they are the most prevalent, but *most* of the details apply to assigning a home or commercial preconstruction property as well.

In the GTA, our preconstruction market is booming. Toronto alone sees around 30,000 new home completions a year. Around 70% of preconstruction purchasers are investors. The remaining 30% of buyers are end-users who plan to use the property themselves. However, many investors, and end-users, might decide to sell the property before the final closing. Since there is no title to transfer, these buyers have to assign their contract to the next buyer. 

What is a preconstruction condo assignment sale?

An assignment is when the original buyers of a preconstruction condo decide to sell their contract with the builder to another buyer before the home is complete. This differs from a regular real estate transaction because we are not buying or selling a home, rather we are buying or selling an interest in a contract to purchase a home once it’s complete. Essentially, the buyers are taking over the seller’s place in the contract with the builder. The new buyer pays the seller their deposits back, as well as any profit. In trying times, there might not be profit, and in extreme cases, the sellers might walk away from their deposits.

Assignments are like the wild-west equivalent of real estate. The buyers are called assignees, the sellers are called assignors, and there is no fixed closing date! You heard that right, the buyer purchases the contract not knowing whether it will close in 4 weeks, 6 weeks, or 8 weeks. In many cases, the buyers only have a rough estimate for the final closing of the property as well.

Every builder’s agreement of purchase and sale is different, so every assignment sale is different. You need legal and accounting advice before, during, and after an assignment sale. A real estate agent’s job in the transaction is to find a buyer, negotiate the contract, and coordinate the sale from start to finish. Your real estate agent might also connect you with accountants, and lawyers who can help make the necessary legal and tax declarations.

The Builder’s Role In Assignments:

Sellers often misinterpret their rights to assign in their purchase agreements with their builder. In the showroom, builders are quick to say their contract is assignable if you want to flip your contract before closing. However, builders can control when, how, and to whom you sell your contract.

It’s important to follow the rules set out by your builder when marketing your assignment. Deviating from the builder’s purchase contract can result in you losing your deposits!

Since all preconstruction home assignments require the builder’s consent, it’s important to prepare the file for their consent at your earliest convenience. The builder will want the same information they collected from you when you first purchased the home: full names, current address, sin, IDs (front and back), telephone number, emails, mortgage pre-approval letter,  lawyer information… they will also want the buyer to replace all your cheques. Those could be cheques for future deposits, or cheques for interim occupancy fees. It’s important to advise the buyers to prepare all of this information before submitting the file to the builder, so there is limited delay assigning the property.

How do you sell an assignment condo?

The first step to selling your assignment is to review your original purchase agreement. The builder’s purchase agreement outlines restrictions and fees associated with assignments. An experienced realtor or lawyer can also review the contract with you. Next, email your builder’s customer service account and ask for permission to advertise the property for sale.

It’s important to thoroughly understand your preconstruction agreement, because some incentives offered to you might not be transferable to the buyer. Builders often offer incentives to direct buyers to stimulate sales. However, they sometimes make these incentives non-transferable. That could mean the free design dollars, or the capped development levies might not be available to the next buyer. It’s important not to advertise incentives that aren’t transferable.

The second step is to hire a Realtor to advise you on current market conditions. Your realtor will discuss marketing options as well as help you decide on a market price. There is a strong chance the builder will prohibit MLS listings of their properties. However, many builders will allow online marketing in places like Facebook, Instagram, WhatsApp, and brokerage websites.

While Realtor.ca is the best marketing platform out there, buyers looking for assignments know to look elsewhere. Don’t worry if you cannot market on realtor.ca. One of the advantages of Sotheby’s International Realty Canada is our vast marketing platform outside of Realtor.ca

Important Dates:

The first date you need to consider is the assignment closing date. This is the date the assignee officially takes over the contract from the assignor. On average, assignment closing happens within 3-6 weeks after an offer is accepted. This is when the assignee becomes the new owner of the property, and the assignee receives some of their deposit/profit back.

The second date to consider is the interim occupancy date. When buying preconstruction condos, there is usually a period between when the unit is ready for occupancy and before the building has registered with the city. Since no title exists yet, you cannot get a mortgage. Instead, during this time, you move in and pay the builder rent until final closing. Interim occupancy can last from months to years. During interim occupancy, buyers have the chance to view the unit which could help sell the home. Interim occupancy is when most assignment sales take place.

The third date you need to know is the final closing date. This is the date that the building registers with the city and the assignee pays the builder the balance of the purchase price, land transfer taxes, closing costs etc. Sometimes, assignees will negotiate to pay some of the assignors profit on final closing date, so they can roll it into the mortgage.

What Is Negotiable During An Assignment Sale:

Since the contract with the builder is already firm and binding, there can be no changes to that contract. The buyer is merely stepping into the seller’s shoes, in exchange for their deposits and profits. The assignment contract negotiates the purchase price and the deposit structure. The purchase price will indicate how much profit (or loss) the assignor receives in the transaction.

The payment schedule of an assignment is dependent on whether there is a profit or not. If the seller is making a profit or breaking even, then the buyers are expected to refund the full deposit paid-to-date by the sellers. In many cases, that is 20% of the original purchase price. If the seller is losing money on the assignment, then the buyers will bring a deposit for less than the deposits already paid to the seller. The deposit is due upon acceptance of the offer.

If there is profit, the assignee and assignor will negotiate when that profit is paid out. Remember when we mentioned the three important dates? the assignment closing, the interim occupancy date, and the final closing date? well, when it comes to negotiating when to pay the assignor their profit, we usually pick one of these dates to pay out the assignor’s profit.

The expected final closing is an important consideration for buyers when negotiating when to pay the assignor’s profit. The longer the final closing date, the more risk for the buyer. The reason? there is always a small risk the condo developer cancels the project. If a condo developer cancels the project, the buyers are returned their deposits paid-to-date. However, if a buyer has paid an assignor $100,000 in profit, that money is gone. So if there is a long closing, expect buyers to protect their final deposits by delaying it till interim occupancy, or final closing.

Conditions In Assignment Sales

After finding a buyer, the first hurdle to overcome is negotiating a fair deal. Once both parties are satisfied with the terms of the contract, we make the deal conditional on the lawyer’s review. This gives both the buyer and seller a chance to have the assignment contract, as well as the original purchase agreement, reviewed by a lawyer. Once both parties have spoken to their lawyers and are happy to continue, we put the deal to the developer to approve the new buyer. This condition usually lasts around 30 days. If the developer does not approve the new buyer within 30 days, the deal will become null and void, unless the buyer and seller both agree to extend that condition.

Once the developer accepts the buyer, the assignment will happen within a few days. Most contracts outline an assignment closing within 5 business days after the developer gives their consent. Some buyers will also include financing conditions in their assignment offer, so they have time to run the deal past their mortgage broker. However, most assignments are purchased with only lawyer review and developer consent conditions.

Here’s an example of selling an assignment for profit vs selling an assignment for a loss:

Below are four examples of the deposit/profit payment schedule for assignments.

Example 1 is a fantastic example of a preconstruction condo that appreciated $100,000. In this typical example, the assignee and assignor agreed to a deposit big enough to return all of the assignor’s deposits, as well as some extra profit to cover Realtor commissions. This deposit is usually transferred to the listing brokerage within 1 day of the offer being accepted and is released to the assignor on assignment closing. In this example, the assignor and assignee also agreed to pay the seller the rest of their profit at the final closing.

Example 2 shows the same conditions for the sale, except the assignee agreed to pay the assignor their full deposit and all their profit on the assignment closing date, instead of the final closing date.

Example 3 looks at an assignment where the assignor is taking a $100,000 loss. Instead of being paid their whole deposit on assignment closing, they are paid their deposit minus the difference between the purchase price and the sale price.

Example 4 is a rare case, where the market has turned significantly and the assignor is looking to transfer their assignment for $0. This means the assignor is walking away from all their deposits and will take no money to transfer their contract to the assignee.

What Does It Cost To Sell An Assignment condo:

The major fees when selling an assignment include the builder’s assignment fee, real estate commissions, and tax on the profit. Builder’s assignment fees usually range from $1500-$25,000 (in some extreme cases they go as high as $80,000). The assignor usually pays both the assignor and the assignee’s realtor commissions. The commission is something to negotiate with your agent. The total commission is usually 5% or less of the final sale price. There are likely taxes such as income tax, capital gains tax, or HST on the sale as well. Speak to your accountant about taxes due on the assignment sale.

Taxes due on an assignment sale:

The taxes on assignments are simple, however, buyers and sellers often confuse the HST taxes. That’s because there are two different HST taxes when talking about preconstruction assignments. Let’s clarify this! All new homes are subject to HST, however, end-users don’t notice the HST tax because the builder pays it and claims a $24,000 rebate on the end-user’s behalf. Alternatively, investors who purchase a pre-construction home are charged around $24,000 in HST, and are then able to claim a rebate for the HST they paid, if they rent the property out for one year. There are situations where an assignment will lose its eligibility for the HST rebate. If someone has lived in the home during interim occupancy, it will no longer be eligible for the end-user HST rebate.

The second HST tax we discuss when selling an assignment is the HST due on the profit. In many cases, the profit is subject to a 13% HST tax. In some cases, even the return of deposits is subject to HST.

The third tax is the income or capital gains tax on the profit. Any real estate property that is not your primary residence, as well as any business venture, is taxable as either a capital gain or as income. It’s really important to speak to an accountant before selling your assignment. Only an accountant can advise you whether you owe HST, capital taxes, or income taxes on your assignment sale.

Is it better to sell an assignment or wait till the condo is ready?

The pros to assigning a condo:

• Receive your deposits and profit sooner
• Avoid market risks. Savvy investors might look to assign their property if they sense the market might depreciate in the coming months/years.
• Avoid paying closing costs (land transfer taxes, development levies, utility hookups, and more). These usually come to a little more than 5.5% of the purchase price
• No mortgage or financing required
• Minimize holding costs (if you sell before interim occupancy or before final closing, there are no property taxes, maintenance fees, utility fees, insurance, mortgage, etc)

Cons to assigning a condo

• Developer restrictions (limiting the marketing of the property, limiting when they are accepting assignments)
• Market perception and buyer’s hesitancy when buying a property sight-unseen
• Market fluctuations suppressing buyer demand
• Limited buyer pool and most of the buyers are investors who want a good deal
• Usually sell for a lower price than comparable resale properties
• Financing challenges for the buyer if the property does not appraise at the new purchase price
• Potentially more taxes compared to closing and reselling

The most common mistakes when selling an assignment:

Hiring the wrong representation, or not relying on professional advice:.

As active realtors in the assignment market, we come across quite a few mistakes. But most of them could be avoided if the buyers and sellers were represented by experienced realtors and lawyers. The agreement of purchase and sale for an assignment is very different compared to an agreement of purchase and sale for a resale home. One of the most common mistakes we see from buyers and sellers is assuming the paperwork their realtors drafted is correct, and forgoeing their right to have their lawyer review the assignment paperwork.

Poor communication/understanding:

This happened to my assignment buyers recently. They purchased a home where the seller’s representative told us the finishes had not been chosen yet. We protected our buyers by including clauses to that degree. However, a few days after the assignment closing, we learned the sellers chose the finishes a few days before closing. Luckily, the developer allowed the buyer to make changes to the finishes at an additional fee.

Ignoring deadlines or dragging your feet:

Assignments come with a lot of moving deadlines, and there are a lot more parties involved compared to a resale property. Always return paperwork and signatures as soon as possible. Compared to a resale property where the only parties are the buyer, seller, and their agents and lawyers, an assignment involves the developer, the developer’s lawyers, the buyer and seller agents, and the buyer and seller lawyers. If everyone took 3 days to return paperwork, the conditional period would lapse and the deal would become null and void.

Incomplete Buyer Vetting:

Buying an assignment requires the assignee to have their mortgage preapproval, as well as their purchase funds available very shortly. If the assignee does not have a mortgage preapproval on hand, it could delay the developer accepting the assignment. If they do not have their funds available it could delay the quick closing as well.

It’s important to thoroughly vet buyers because some builders require the assignor to close in the rare chance the assignee cannot close.

Misunderstanding fees:

Builder’s contracts are not standard forms, and their deposit structures and closing fees can vary from site to site. There are a lot of potential fees when buying and selling assignments and they include, but are not limited to: deposits, seller’s profits, upgrades, lawyer’s fees, interim occupancy rent, utility set-up fees, development levies, realtor commissions, accountant fees, HST, and income taxes. These fees can vary from deal to deal, and when they are payable is different in every assignment. For example, some developers require the homeowner to pay for upgrades when they are chosen, and others charge for the upgrades at final closing.

If you have a preconstruction condo or home that you are thinking of assigning. Feel free to reach out to us for some advice and insight.

Related posts.

Everything you need to know to sell your preconstruction condo assignment

6 important facts to consider when selling a preconstruction condo.

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Basics of a Distress Sale, Why It Often Leads to Financial Loss

James Chen, CMT is an expert trader, investment adviser, and global market strategist.

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

What Is a Distress Sale?

A distress sale—also called a distressed sale—occurs when a property, stock , or other asset must be sold quickly. Distress sales often result in a financial loss for the seller who, for reasons of economic duress, must accept a lower price. The proceeds from these assets are most often used to pay debts or medical expenses or for other emergencies.

Key Takeaways

• Distress sales occur when the seller needs to sell an asset urgently, often to pay debts or medical expenses or for other emergencies.
• A short sale is a form of distressed sale in which the homeowner attempts to sell their property even though the current market value is below the amount owed to their lender.
• Distress sales often result in a financial loss for the seller because buyers realize that the seller is in a hurry to obtain funds and will offer a lower price.
• Buying a property through foreclosure or a distressed sale may mean that the property is in a poor state of repair.

How Distress Sales Work

Mortgage borrowers who can no longer meet the payments for their mortgaged property may opt to sell their property to pay off the mortgage. Examples of situations where distress sales occur include divorce, foreclosures , and relocations.

A short sale by a homeowner can be considered a distressed sale. Here, the homeowner is attempting to sell their property even though its current market value is below the amount owed to their lender. This can occur if the homeowner is forced to move from the home and cannot wait for the property's market value to recover. The homeowner may have a new job that requires immediate relocation, for example. A divorce could force a home to be sold in order to  liquidate assets that must be divided between the parties. A lender typically must agree to a short sale before it can proceed because such a transaction would remove the collateral that secured the mortgage.

How a distress sale can lead to a net loss

If a distress sale is conducted for a piece of property such as an antique or collectible art, the seller might choose to take offers that are lower than the value of the item. The seller might request offers by advertising the item or instead might offer the item to a pawnbroker .

When the seller of an item deals with a pawnbroker, they will likely receive offers below the value of the item. The pawnbroker bids low because they intend to resell the item for a higher price and turn a profit. Even if an item is appraised at a higher value, a pawnbroker will still look for a way to make a profit.

The tradeoff a seller gets from accepting an offer that is below market value is the immediate cash the sale provides.

There are times when potential buyers may take advantage of the circumstances that forced a seller into conducting a distress sale. The buyer may be aware of the seller’s immediate need to complete a transaction and receive payment. This could lead to bids that are substantially lower than the value of the property.

Special Considerations

If an asset is sold through a distress sale, the valuation of the asset is considered artificial because it was not sold under true competitive market conditions. In the case of real estate, for example, the sales price cannot be used as a comparator to establish the asset's true value.

Buying a distressed property

Buying a distressed property means that you stand a good chance of buying it at a price that is below market value. However, there are drawbacks. If the seller was in a hurry to sell, it is unlikely that they will have performed any repairs on the house to boost the sales price. The new owners may have to spend a substantial amount to bring the property up to the desired state.

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What Is an Assignment Sale? Understanding the Ins and Outs of This Real Estate Process

An assignment sale occurs when the original buyer of a property (the assignor) transfers their rights and obligations of the property contract to another buyer (the assignee) before the official closing of the sale.

This process allows the assignee to step into the original purchaser's shoes, taking on the commitments of the property purchase, which could be a pre-construction condo, house, or any other form of real estate.

Now, let's delve deeper into understanding how assignment sales work, their intricacies, and what they mean for buyers and sellers in the real estate market.

Demystifying the Elements of an Assignment Sale

Embarking on a real estate journey often introduces many terms and processes that may seem complex at first glance, with 'assignment sales' leading the pack in complexity and confusion.

Whether you're the original buyer looking to navigate away from closing costs or a savvy purchaser hunting for a valuable investment, understanding the nuts and bolts of assignment sales is an invaluable asset in the dynamic landscape of real estate.

How Assignment Sales Work

Assignment sales introduce a unique dynamic in real estate transactions, particularly in bustling markets like Vancouver Island and the Sunshine Coast .

When you buy a pre-construction unit, the property is yours, albeit not immediately ready for occupation. Life changes or financial circumstances sometimes evolve between the original purchase agreement and the final closing, necessitating a shift in plan.

Here's where assignment sales come into play. The original buyer can sell their interest in the property before the final sale, sidestepping typical hurdles like mortgage payments or land transfer taxes that come with a regular sale. This method provides a strategic avenue for purchasers to hand over their contractual obligations to another party without waiting for the property's completion.

The Assignment Clause: A Vital Cog in the Wheel

The assignment clause in the original contract is central to these types of transactions. This clause allows the transfer of the buyer's rights and responsibilities to another person.

It's crucial to understand that not all pre-construction sales agreements have an assignment clause, and most builders or developers might impose restrictions or require consent before any assignment deal can proceed.

Understanding the Financials: Costs and Fees

Engaging in assignment sales tends to involve several costs that both the buyer and seller must anticipate.

These include the assignment fee charged by the developer, legal fees for contract transfer, and possibly higher legal fees due to the complexity compared to a resale property. There could also be tax implications depending on the nature of the transaction and the parties involved.

Navigating Through the Interim Occupancy Period

A common scenario in assignment sales, especially in pre-construction condos, is dealing with the interim occupancy period.

This period arises when the assignee can take possession (though not ownership) of the unit while the property is not officially registered. During this phase, the assignee pays occupancy fees, akin to rent, which don't go towards mortgage payments.

Understanding this period helps both parties make an informed decision and prepare for the financial responsibilities it entails.

The Pros and Cons of Assignment Sales

Navigating assignment sales requires a balanced understanding of its advantages and drawbacks. While these transactions open avenues for lucrative deals and flexible arrangements, they also carry inherent risks and complexities that can impact buyers and sellers.

This exploration will provide clear insights, aiding your decision-making in the vibrant real estate market.

The Bright Side: Benefits of Assignment Sales

• Less Competition, More Opportunities: One advantage that makes assignment sales attractive, particularly in areas prone to bidding wars like Vancouver Island , is less competition. Fewer buyers are willing or informed about engaging in this kind of sales transaction, reducing the frenzy often seen in hot real estate markets. This situation can present a more favourable buying environment for those ready and willing to proceed with an assignment purchase.
• Potential for a Better Deal: For buyers, assignment sales sometimes offer the opportunity to get into a brand-new unit at a potentially lower cost. Since the assignee is stepping into an existing agreement, they might benefit from the original purchase price, which could be lower than current market rates, especially in fast-growing communities.
• Flexibility for the Original Buyer: For the original buyer, an assignment sale offers a way out, potentially recouping the deposit paid and avoiding financial penalties that might come with breaking a purchase agreement. This strategy can be particularly advantageous if the purchaser's circumstances change and needs to free up cash or avoid taking on a mortgage.

The Flip Side: Challenges and Risks of Assignment Sales

• Complexity and Higher Legal Fees: Assignment sales are not your straightforward real estate transaction. They require additional steps, such as securing the developer's consent, and the legal process is more complex than purchasing resale properties. As a result, both parties might incur higher legal fees to facilitate the transaction.
• Financial Overheads and Closing Costs: For the assignee, the initial cost outlay can be substantial for the assignee. They must reimburse the original buyer's deposit, pay the assignment fee, cover land transfer taxes, and prepare for other closing costs. These expenses require careful consideration and financial planning.
• Uncertainties and Marketing Restrictions: In some cases, developers impose marketing restrictions, making it challenging to advertise the assignment sale. Additionally, the assignee, now the new buyer, takes on certain risks like development charges or changes in market conditions, which could affect the property's value upon final closing.

Making the Move: Deciding If an Assignment Sale Is Right for You

Deciding to engage in an assignment sale is a pivotal moment, requiring a blend of financial foresight and market understanding.

As we delve into this decision-making process, we'll consider critical personal and economic factors that ensure you're making a choice that aligns with your real estate ambitions and lifestyle aspirations.

Conduct Due Diligence: Know What You're Getting Into

Involving real estate agents experienced in assignment sales is a prudent step for guidance through the intricacies of these transactions.

Also, consulting with a real estate lawyer ensures you understand the legalities, your rights, and any potential liabilities you might be assuming.

Consider Your Financial Standing and Long-Term Goals

Reflect on your current financial health and future plans.

For original buyers, if life changes dictate a change in your real estate investments, an assignment sale could be a viable exit. For potential assignees, consider whether this buying pathway aligns with your investment strategy and if you're comfortable with the associated risks.

Stay Informed About Market Conditions

Market dynamics greatly influence real estate valuations. A clear picture of current trends, especially in your buying area (like Fort St John or cities in the Okanagan ), helps make an informed decision.

Understanding these trends could offer insights into whether you're setting yourself up for a profitable investment or a potential financial misstep.

Bringing It All Home with LoyalHomes.ca

Navigating the world of assignment sales can be a complex journey, laden with opportunities and pitfalls. Whether you're considering selling your contractual rights or stepping into an existing purchase agreement, the route is layered with legal, financial, and market considerations.

At Loyal Homes, we understand that your real estate journey is more than just a transaction; it's a pivotal chapter in your life story. We're here to guide you through each step, ensuring you're equipped with the local, accurate, and relevant information to make decisions confidently. Our team is committed to providing a service that stands a notch above the rest, focusing on relationships and community at its core.

Ready to take the next step in your real estate adventure in British Columbia? Whether it's finding the perfect neighbourhood, exploring investment opportunities, or seeking your dream home, we're here to assist.

For a personalized experience tailored to your unique needs, consider our Personalized Home Search . If you're on the selling side and need to understand your property's current market standing, request a Free Home Valuation . Or, for any other inquiries or guidance, feel free to contact us . Your journey to a successful real estate experience in British Columbia starts with LoyalHomes.ca, where your peace of mind is our highest priority.

Frequently Asked Questions

Is it good to buy an assignment sale.

Buying an assignment sale can be advantageous, offering lower purchase prices compared to current market rates for similar properties, especially in hot real estate markets. However, this venture also requires thorough due diligence to ensure that the agreement terms, property details, and financial implications align with your investment goals.

Can You Make Money on an Assignment Sale?

Yes, there is a potential to make money on an assignment sale, particularly if the property's value has increased since the original purchase date. This profit occurs due to appreciation over the period, especially in high-demand areas, but it's crucial to factor in any assignment fees, legal costs, and tax implications to understand the net gainfully.

What Are the Risks of Buying an Assignment Sale?

The risks include a lack of guarantees on the final product as specifications might change, potential delays in construction, and complexities in financing, often requiring a more substantial initial deposit. These elements underscore the importance of legal counsel to navigate contract specifics and to prepare for any contingencies or additional costs.

How Do I Sell My Pre-Construction Assignment?

Selling a pre-construction assignment involves marketing to potential buyers, typically requiring the developer's consent and possibly entailing a fee. Engaging with a real estate professional who understands the local market nuances and legalities of assignment sales is essential to ensure a smooth, compliant transaction.

Do I Pay Tax on Assignment Sale?

Tax implications on assignment sales can be multifaceted, potentially involving income tax on profits and GST/HST on the purchase, depending on factors like the property type and the seller's tax status. It's advisable to consult with a tax professional to accurately determine specific obligations and strategize for tax efficiency based on your circumstances.

What Is the Difference Between a Transfer and an Assignment?

A transfer and an assignment differ significantly; a transfer involves changing property ownership after a project's completion, whereas an assignment sells one's interest in a property before it's finished. Understanding this distinction is crucial as it affects the contractual obligations, rights transferred to the new buyer, and the legal and financial processes involved in the transaction.

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101 Guide to Navigating Distressed Property Sales

Reviewed by: Brandon Brown

Updated December 21, 2023

When it comes to leaving a home, the process can be stressful enough without dealing with the added headache of figuring out how to sell a distressed property.

Perhaps you bought a fixer-upper with the intention to fix and flip, but life got in the way, and now you need to unload the investment property quickly. Or maybe you’ve inherited a problematic or distant property, or you’re facing foreclosure and are looking for any way possible to keep your home from going straight to foreclosure auction.

Whatever the reason, it’s important to understand how distressed property sales differ from traditional home sales before you jump in.

Is My Home a Distressed Property?

Distressed property is any real estate that is in need of repair, renovation, or other rehabilitation, including financial.

If you’re wondering, “ what is a distressed property ?,” here are a few signs to look for:

You’ve received a notice of default or pre-foreclosure from your lender

Your mortgage payment or payments are delinquent

You are behind on your property taxes

Your home is in need of major repairs

Your home’s been listed on the housing market for more than 90 days, but others in the area are selling quickly 1

Your home’s market value has decreased significantly

Your home or investment property is worth less than you paid for it or less than you owe

If one or more of these conditions exists and you don’t have the resources to correct them quickly, your property is likely distressed.

Who Buys Distressed Property?

Distressed properties do present an opportunity to save or make money. However, these buys can be risky, as the cost of repairs can sometimes exceed the value of the property itself.

So who exactly is looking at buying distressed property?

These investors look for properties that they can buy with a good deal cheaply based on the homeowner being in financial trouble. They’re seeking opportunities to identify profit based on purchasing assets at a lower-than-market-value price and then reselling or otherwise making use of them.

House flippers are interested in locating homes that need work—either minor updates and repairs or major construction and remodeling. They either have construction team members or a professional network that allows them to fix up homes more efficiently and for less cost than an individual homeowner would have to pay before reselling them.

The type of property owner who takes on “do-it-yourself” projects makes up the final category. This may include those with the skills and patience to work on a problematic home or the flexibility in their timeline and comfort with risk to seek distressed homes that are in blatant financial peril.

The Benefits of Selling Distressed Property

While it’s true that you may not get top dollar for your home, selling distressed property now can provide much-needed relief from debts, expenses, and future financial hardship. Here are four benefits of selling:

Make a profit now – While a distressed property sale will net you less than a traditional sale, it can help expedite the sales process while still allowing the distressed seller to walk away with some money in the bank. Even if it doesn’t yield profit, the sale will incur less loss than if you wait until the bank takes ownership of your home.

Avoid the foreclosure process – If you’re already behind on mortgage payments, acting now can save you from the damage foreclosure will do to your credit rating and ability to buy a home in the future. If you are searching for ways on how to avoid foreclosure on your home , it’s important to remember that you do have options but time is of the essence.

Reduce financial distress – Selling your home now can help by reducing your total monthly housing cost and allowing you to settle your debts.

Move on with your life – Put this difficult chapter of your life behind you and move on to a new home. You’ll be able to start fresh without the burden of debt or a falling-down house weighing you down.

The Challenges of Selling Distressed Property

Any motivated sellers looking to sell a home that is in default or in poor condition—or even just outdated—will face some unique challenges. Here are a few things to keep in mind when selling a distressed property:

You’ll have fewer potential buyers—most homeowners look for move-in-ready property

It can be difficult to accept that your property value has lost significant ground

Real estate investors may have the time and power to negotiate harshly

The closing process may be complicated by being in default

The foreclosure process may include liens that must be paid off before the sale can close

If the featured property is severely damaged, there may be multiple inspections and negotiations

Emotions run high when accepting the need to sell at a loss after investing in your home

Tips for Selling Distressed Property

We’ve gathered ten tips on how to sell distressed property to help with the unique aspects of distressed property sales.

#1: Be Realistic About Property Value

A distressed home that needs significant repairs is not likely to sell for top dollar; rather, the buyer will expect a substantial discount.

Discuss a comparative analysis-based market value with your realtor and consider a pre-sale inspection and appraisal. Price your home carefully—too high, and it will sit on the market for a long time; too low, and you may not have room for negotiation with vigorous buyers.

#2: Don’t Skip Pre-Sale Preparation

Even if you opt to sell as-is or need to close a distressed sale ASAP, consider what you can do to improve the home’s appearance and condition based on your available resources and timeline.

Simply packing away clutter, cleaning as much as possible, and ensuring the lawn is mowed can help improve a home valuation.

#3: Communicate With Your Lender

If your property is distressed due to mortgage default or foreclosure notifications, don’t close your eyes and hope for the best.

Reach out to your lender to discuss your options and plans and keep them informed of your progress. Make notes of each communication, including customer service agent names, and request follow-up of any decisions or actions in writing.

#4: Find a Professional With the Right Experience

Work with a real estate professional who specializes in selling distressed properties. The right person or group can help with pricing, effective marketing, connecting to a network of investors, and negotiating, as well as knowing what to expect in the closing process.

#5: Decide Whether to Sell As-Is

State laws related to as-is property sales may come into play, so check with state regulations.

Selling a house as is often translates to the perception of automatic high risk for a potential buyer, including the possibility of foregoing a home inspection or repairs negotiation, versus a traditional listing with language such as “fixer-upper” or “handyman’s special.”

#6: Pay Attention to Marketing

Promoting a distressed real estate property can be difficult, from writing the listing description to providing photos that highlight benefits without focusing on negatives.

Many buyers will not even consider homes that need work, so be sure to identify property upsides such as location, low property taxes, and neighborhood atmosphere—anything that helps balance the negatives.

Actively target investors and iBuyers and list your home to ensure you capture as many potential buyers as possible.

#7: Plan Negotiations Carefully

Talk candidly with your lender so you can calculate your true bottom-line figures and avoid reacting emotionally to aggressive negotiators. Consider what you have to gain and lose—and what you can afford—before refusing offers or requests.

#8: Be Transparent With Disclosures

Asking yourself, what do you have to disclose when selling a house ? In most states, you’re legally obligated to disclose known defects and issues with a distressed house and can be sued for neglecting to do so, even if you sell a house “as-is.”

Check on your state’s seller disclosure obligations before entering the sale process, particularly if you live in a highly regulated state like California or handle the sale without a real estate agent.

#9: Check for Outstanding Taxes or Liens

Be sure you’re up to date on what is currently owed or in default on your property. This may need to be included in a disclosure statement or addressed prior to closing.

#10: Adjust Your Timeline Expectations

The closing process for a distressed home can be lengthy and complicated. Be prepared for multiple inspections, critical repair requests, or paying off pre-sale liens.

Streamline Your Distressed Property Sale

Selling a house in disrepair is often a choice between investing a bundle of up-front time and money or losing potential profit. Unfortunately, for too many homeowners, that sounds like a no-win calculation.

But you can turn it into a win-win solution. By partnering with FlipSplit , you can walk away from a distressed asset and leave the work in our hands while still keeping the money-making potential of a future sale on the upgraded property.

We buy homes in all conditions and handle the repairs and clean-up to get them move-in ready. With a team of skilled real estate, construction, and investment professionals, we know exactly how to make the most of the renovation and staging process to maximize the flipped house sale price.

You’ll avoid the time, work, and hassle of fixing up the property, as well as the costs of labor, construction materials, and fees for real estate agents and appraisers. And when the resale is finalized, we will split the extra profit with you!

Visit FlipSplit to learn more about partnering with us on a distressed property sale.

• Forbes. The Do’s And Don’ts Of Investing In Distressed Properties. https://www.forbes.com/sites/forbesbusinesscouncil/2021/04/05/the-dos-and-donts-of-investing-in-distressed-properties/?sh=679f9bf6628f

As a long-time Asset Manager, Investor, Real Estate Agent, and Broker/Owner of BayBrook Realty in Orange County, Brandon Brown is one of FlipSplit’s lead Real Estate experts. Having worked on over 2,000+ real estate transactions, Brandon brings a depth of knowledge that ensures clients are appropriately treated with honesty and integrity. His insights and advice have been published in numerous blogs beyond FlipSplit, and he keeps a close eye on market trends and statistics, which are updated weekly on his social media pages. Outside work, you can find him participating and serving at church, cycling, mountain biking, surfing around Orange County and beyond, and enjoying time with his wife and two daughters.

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What Is a Distressed Sale and How Does It Work?

What is a distressed sale  .

A distressed sale occurs when someone sells property, securities, or other assets in an urgent manner ─ usually at a loss ─ to cover substantial debts as quickly as possible. In this article, we’ll be focusing specifically on distressed real estate sales.  

The most common example of a distressed sale is when a property owner sells a piece of real estate to satisfy their mortgage requirements and avoid foreclosure. In most cases, the seller will take a loss on the property, but they meet their goal of resolving their debt rapidly. Other common situations that lead to distressed sales include divorce and relocation.

Advantages and Contingencies  

Individuals rushing to sell their property will likely achieve their short-term objectives: Sell the property, satisfy the debt, and avoid foreclosure without decimating their credit. In most cases, these distressed sales will take the form of “short sales” ─ transactions in which lenders allow owners to sell their properties for less than what they owe while also canceling the remaining loan balance.   

The amount of the cancelled balance may be taxable if the owner’s mortgage agreement holds them liable for the full loan amount. If the lender chooses  not  to pursue a personal judgment to recover the debt that remains after the short sale (which they will usually try to accomplish through  wage garnishments or bank levies ), then they submit a 1099-C to the IRS to report the cancellation of the debt.   

(If you receive a 1099-C cancellation of debt for an amount over $600, there is a way to minimize your debt. The home must be your primary residence, and the loan must have been to purchase the home or for home improvements. If done correctly, you could potentially zero out the tax. Contact our office to learn more!)  

In these instances, capital gains taxes don’t apply to the cancelled amount because the value of the home is less than the outstanding balance on the mortgage. However, the cancelled debt will be considered taxable income unless you:  

• Are eligible for the  Mortgage Forgiveness Debt Relief Act of 2007  
• Have discharged your debts through bankruptcy  
• Are insolvent at the time of the debt cancellation  

Disadvantages  of a Distressed  Sale  

The most obvious disadvantage of a distressed sale is that you are selling off property for less than its full value. Not only that, but you’re also missing out on potential future gains if the property’s value goes up.  

In addition, a distressed sale will probably have a negative effect on your credit score, although not nearly as much as a foreclosure. Your lender will most likely mark you as “satisfied” or “paid” vs. “paid in full,” which looks more favorable on a credit report. Foreclosures can damage your credit by more than 250 points, while a short sale will likely only cause about a 100-point reduction — not great, but definitely something you can overcome with time.  

RELATED: Discharging Tax Debts In a Bankruptcy

And in most cases, individuals who opt for a short sale can apply for a reasonable mortgage rate within 18-24 months. Meanwhile, people who go into foreclosure usually have to wait several years.  

Requirements to Execute a Short Sale  

In general, your lender will only consider you eligible for a short sale if you have experienced at least one of the following hardships that may prevent you from meeting your mortgage obligations:  

• Bankruptcy  
• Medical bills  
• Unemployment  
• Depreciating real estate value  
• Business failure  
• Health problems that prevent you from maintaining gainful employment  
• Death of your spouse  

In most instances, you won’t have to pay any out-of-pocket fees to conduct a short sale ─ the lender will cover the cost of any real estate or attorney fees rendered.  

Executing a distressed sale obviously isn’t an ideal situation, but it’s also not the end of the world either (and it’s certainly better than a foreclosure). However, be sure to research your options and evaluate the tax consequences of performing a short sale before signing on the dotted line.  

Contact S.H. Block Tax Services for a Free Consultation  

If you’re considering a distressed sale of your property or other assets, please contact S.H. Block Tax Services today. In addition to the information in the primer above, we can provide specific input and guidance regarding your unique situation during a free consultation with one of our skilled attorneys. Our lawyers and support staff have been supporting Maryland taxpayers for decades, and we strive to deliver effective and empathetic tax representation for every client we serve.  

When confronted with a tax crisis, the worst thing you can do is act impulsively. Before you panic, take a deep breath, give us a call, and we’ll work on getting things figured out together. Please contact us today at (410) 872-8376 or  complete the brief form on this page  to schedule your free consultation. We look forward to hearing from you soon.   

The content provided here is for informational purposes only and should not be construed as  l egal advice on any subject.   Please read our full disclaimer  here .    

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March 22, 2024

Real Estate Definition: Assignment Sale

When a buyer enters into a purchase agreement for a pre-constructed or newly built property, they may find themselves in a situation where they no longer wish to proceed with the purchase. In such cases, the buyer can assign their rights and obligations under the agreement to a new buyer – and this is where an assignment sale comes in.

What is an Assignment Sale?

An assignment sale refers to a sales transaction in which the original buyer of a property (“assignor”) transfers their rights and obligations of the Agreement of Purchase and Sale to another buyer (“assignee”) before the original buyer takes possession of the property. The assignee then becomes responsible for completing the deal with the seller. Essentially, an assignment clause allows the buyer to sell the property before they move in. While assignment sales can occur with both homes and condos , they are more common among buyers of pre-construction condos.

Factors to Consider Before Entering an Assignment Sale

While assignment sales can be advantageous, it is crucial for both the original buyer and the new buyer to consider certain factors before entering into such transactions.

Developer’s Consent

Before proceeding with an assignment sale, you must obtain the developer’s consent. Some developers may have strict rules or restrictions, and failure to comply can lead to legal complications.

Assignment Fees

The assignor may charge an assignment fee to the new buyer for transferring their rights and obligations. This fee can vary depending on the market conditions and the specific terms of the Assignor-Assignee Agreement.

Legal Advice

Both parties should seek legal advice before entering into an assignment sale. This ensures that all parties understand their rights, obligations, and potential risks associated with the transaction.

How Does an Assignment Sale Work?

Before proceeding with an assignment sale, the original buyer must obtain the consent of the developer or builder. This step is crucial as some developers may have specific rules or restrictions regarding assignment sales. When the developer consents, the original buyer can look for a new buyer to take over the purchase agreement.

Once there’s a new buyer, both the original buyer and the new buyer (assignee) enter into an agreement known as the Assignor-Assignee Agreement. This agreement outlines the terms and conditions of the assignment sale, including the assignment fee, if any. Then, the developer will review the Assignor-Assignee agreement and may require additional documentation or fees.

Once the developer approves the assignment sale, the closing process begins. At this stage, the new buyer is responsible for completing the purchase, including paying any remaining balance to the developer.

Why Do Assignment Sales Happen?

One primary reason why assignment sales happen is a change of plans. People may decide to leave the area due to personal circumstances such as starting a family, getting married, or looking for job opportunities elsewhere. Additionally, some individuals may face financial challenges that prevent them from completing the purchase.

Alternatively, a common scenario involves investors who never intended to close on the property acquisition. A popular investment strategy is to purchase a property during its early release to take advantage of the emerging market and low pricing and sell it before incurring land transfer taxes, HST, or becoming tied to a mortgage.

Benefits of Assignment Sales

Assignment sales can offer several benefits to both the assignor and the assignee. Some of these benefits include:

Profit Potential

For the original buyer, an assignment sale provides an opportunity to make a profit without completing the purchase. If the market value has increased since the initial purchase agreement, the assignor can sell their rights at a higher price.

Opportunity for Early Ownership

The assignee can benefit from an assignment sale to gain early ownership of a pre-construction property. This can be particularly appealing for individuals looking to invest in real estate or those with specific requirements for a new home.

Flexibility

Assignment sales offer flexibility to both parties involved. The original buyer can exit the purchase agreement without incurring significant penalties, while the new buyer can secure a property without going through the entire pre-construction process.

How a Real Estate Agent Can Help You Navigate this Process

Assignment sales are a complicated process; working with an experienced real estate agent who can help you navigate and understand the ins and outs of this transaction is crucial. These professionals can not only assist you in marketing your assignment, but they can also overcome any limitations imposed by the builder. Moreover, agents have a vast network and can easily connect you with an interested buyer. Although assignment sales may seem daunting, having a skilled lawyer and an experienced realtor is a smart financial move!

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The Condo Assignment Process: Everything You Should Know

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September 15, 2018 | Selling

Condo assignment sales are different from typical pre-construction transactions. Whether you’re on the buyer or seller side, the condo assignment process is unique—which is why you should take the time to learn about the costs, timelines, and other specifics involved.

If you’re thinking about buying or selling a condo on assignment, here’s what you should know…

What is a condo assignment sale.

An assignment sale occurs when a pre-construction condo buyer decides to sell before closing. Since they don’t technically own their unit (which may not be completed yet), what they’re really selling is their purchase agreement with the builder.

The concept sounds simple. However, there are some ins and outs that both sellers and buyers should know to ensure that their transaction is legally above board—and in their best interests.

Seller FAQs

Thinking of selling your pre-construction condo on assignment? Here are some answers to the most commonly asked questions sellers have about the process.

Should I sell my condo on assignment?

Pre-construction buyers often sell condos on assignment as part of an investment strategy. That said, there are other instances where going this route makes sense.

Maybe your lifestyle has changed, and the unit you were excited about a year ago is no longer ideal. Perhaps you’re facing some financial challenges, and you need some cash in the short term. Whatever your circumstances, a real estate agent with condo expertise can help you decide if selling on assignment is right for you.

What are the tax implications of selling on assignment?

While there’s nothing wrong with assignment sales, some Canadian investors have gotten themselves in hot water for making them without paying taxes on their profits. Regulators have been cracking down on these transactions, which is why knowing your taxation responsibilities is crucial.

The bottom line? If you’re making an assignment sale, it’s best to speak with a financial expert before moving forward.

Does the builder need to be involved?

Your Agreement of Purchase and Sale will specify whether selling your condo on assignment is permitted. Either way, you should obtain consent beforehand. There’s a very good chance that builder approval of an assignment sale is a condition in your contract—so read it carefully.

How much will it cost to sell on assignment?

If the builder signs off on your sale, you’ll probably still have to pay a fee. This sum could range from a few hundred dollars to several thousand, and in some instances it is waived by the developer. You should also be aware that, along with the regular costs associated with selling, your legal fees may be higher than they would be for a simpler transaction.

Will I get my deposit back?

A purchaser who is buying on assignment (also known as an “assignee”) usually pays the assignor their full deposit. As part of a typical deal, you should receive the amount you’ve paid to date, sometimes along with your profit, on closing day.

How can I find a buyer?

Be aware that there are marketing restrictions placed on most assignment sales. While it depends on the terms of your agreement with the builder, you probably won’t be able to post on the MLS or online.

If you market your assignment in violation of your contract, the builder may be able to cancel your agreement—and hold onto your deposit. For this reason, working with an agent who knows the local condo market is your best bet for finding a buyer.

Are you thinking of purchasing a pre-construction condo on assignment? Read answers to some of the most common questions buyers have first.

When is buying a condo on assignment a good idea?

If you’re excited about a particular condo development that has no remaining inventory, buying on assignment could be your way into the building. In many cases, the price for a unit is lower when it’s sold this way than it would be if it were on the market as a resale unit.

On the flip side, assignment sales tend to be more complicated than traditional condo transactions. They often entail costs, risks, and legal minutiae that aren’t part of conventional resale and pre-construction purchases.

An agent with condo market expertise can help you weigh the pros and cons of including assignment sales in your condo search.

Can I renegotiate the terms of the agreement in place?

No. When you buy a condo on assignment, you’ll be expected to fulfill the terms and conditions that the original buyer agreed to (and take on any potential risks associated with them). For this reason, it’s very important that you protect your interests by working with an experienced real estate lawyer.

Fortunately, you may be able to negotiate with the seller (or “assignor”) regarding the specifics of your purchase with them. Assignors are often in the midst of a life transition, and they may be eager to make a deal and move on.

Which costs will I pay?

Along with the sum you’ve agreed to, you will almost certainly be expected to pay the assignor the amount they’ve put towards their deposit to date. Unless your contract specifies otherwise, you will be responsible for final closing costs including (but not limited to) land transfer taxes, development fees, Tarion fees, and HST if applicable.

As part of the assignor’s original agreement, development charges may be capped. If this is the case, you could wind up spending significantly less money—so it’s worth looking into.

How will closing work?

Closing on an assignment sale can be complicated for the assignee. You’ll have to go through the process twice: once when your deal is finalized with the assignor, and again when you close with the builder. During the first closing, you’ll pay the assignor their deposit and sometimes the profit. The profit portion could be renegotiated and paid on the second closing. During the second, you’ll pay the developer the remainder of what’s owed.

Don’t forget about the occupancy period! Once your unit is fit to be occupied, you will pay a sum that’s approximately equal to your monthly mortgage payments and condo fees until the building is registered.

What else should I know?

In addition to understanding the assignment process, you should be aware of the pros and cons that go along with buying a pre-construction condo. Your purchase will come with certain risks that the original buyer was willing to take on—such as delays to closing. On the flip side, there’s nothing quite like moving into a beautiful, brand new condo.

When handled correctly, condo assignment sales can be beneficial to buyers, sellers, and developers. Just remember that understanding the process is the key to success—which is why working with the right real estate and legal professionals is so important!

Interested in buying or selling a pre-construction condo? Let’s discuss it! Call or shoot me a text at 416-500-5360, or email me at [email protected].

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GTA-Homes » Real Estate Info » Assignments

• Assignments

An Assignment Sale in the Pre-Construction Market

Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.

When you purchase a pre-construction condominium unit, you will be given an assignment clause/right in the form of a contract. You can choose to sell your assignment before the condominium is even built.

• Assignee/Buyer is not buying a property from Assignor – Assignee is buying the “right” to acquire property from a 3rd party (usually a builder)
• Assignor assigns its interest and rights in the Original Agreement with the Builder (or original seller)
• Assignor assigns to the Assignee its interest in the original “deposit”
• Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement

Once the building has been constructed and registered by the city, the ownership will be transferred to the buyer. Until then, it’s just the sale of a contract, but as you will see, there are many advantages to these kinds of sales for both the buyer and seller.

In this article, you will learn more about assignment sales, why they are used, the process of this transaction and how it can be transferred.

This way, you will be able to determine if an assignment sale is right for you. We at GTA-Homes strive to provide our clients with the knowledge of the pre-construction market, so that they can make a more informed choice when it comes to investing in their future.

An assignment sale can be mutually beneficial for both the buyer and the seller.

See all assignment listings, what you'll learn....

• What Is an Assignment Sale?

An Example of an Assignment Sale

• Buying an Assignment

Selling an Assignment

Assignments faq.

The Details of an Assignment Sale

What Is an Assignment Sale? Why Do These Kinds of Sales Happen?

There are many reasons why someone might want to sell the rights to their unit before it’s been built. For example, someone may have bought a suite that’s three years away from being completed, but recently had to relocate for a job. This buyer may need to sell their agreement to afford a property in their new city. Another common reason is that a buyer began the purchase process when they were single but during the pre-construction process they married or are now expecting a child. Suddenly they’ve discovered that the pre-construction one-bedroom suite they bought is not big enough for a growing family.

The “ assignment clause ” in the purchase agreement comes in handy when these things happen. It allows the original buyer to pass the contract onto somebody else without accruing financial penalties.

These types of transactions are common and fully legal, but whether you are the buyer or the seller, it’s important to work with both an experienced realtor and lawyer who know how to protect your interests.

These deals are more complex than a conventional resale and involve three parties: the developer, the assignor and the assignee. It’s a two-stage process that involves both interim occupancy and the final closing.

This is just the basics of an assignment deal. There are more details regarding mortgage rules, and other contract details. Keep reading to learn more! Or you can always reach out to talk with one of our agents. We love to talk condos! This is just a general overview, but each arrangement is unique with its own rules, terms, and conditions.

We advise everybody who is thinking of buying or selling a pre-construction assignment to seek advice from a real estate agent, lawyer and tax accountant. Contacting an agent is important because assignors may have to pay a fair amount of tax on any profits they received from the completed sale

Most builders allow assignment sales and you will often see these listings on REALTOR.ca. However, there are some rules in the original purchase agreement that must be followed. They are also more complicated than a regular sale because a mortgage cannot be obtained on the closing of the transaction, only once the building has been registered. Other issues such as occupancy, reimbursement of the seller’s deposits and more must be taken into account.

In 2017, John Smith buys a pre-construction condominium suite from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. The project is set to be completed in 2022.

In 2021, John discovered he will be relocated to a new city. He can’t afford to buy a new home while holding onto his pre-construction condo.

Fortunately for John, the assignment clause allows him to sell the contract for his unit before the building is completed and registered!

John has decided to sell the contract to his unit to Jane Doe. Due to the changes in the market, he was able to sell the contract for $500,000.

Assignment Purchase:

• Assignment Agreement: $500,000
• Original Purchaser (Assignor) = John Smith
• New Purchaser (Assignee) = Jane Doe
• Vendor (Builder) = ABC Developments

Assignment Purchase Price by John Smith to Jane Doe = $180,000, due immediately. This includes a deposit of $80,000 + profit $100,000. The amount and timeframe for this payment can also be negotiated.

• In 2022 when the building is complete and ready for interim occupancy, Jane Doe will move into the unit during the occupancy period. At this point she will begin paying occupancy fees to the developer. These fees take the place of mortgage payments and condo fees until the building can be registered.
• Interim occupancy happens when the city has designated the property as safe to live in. The building will be officially registered once the municipality does a final inspection. Jane Doe can occupy her suite in the meantime until the building is officially registered.

Assignment Details:

• When the building is officially registered by the city, the official title transfer takes place between the developer and the new purchaser. Jane Doe can finally register a mortgage and start paying her mortgage payments and condominium fees.
• Funds required to complete the sale by Jane Doe to the builder = $320,000
• Jane Doe now has all the rights to the property, just like any homeowner. Any future re-sale of the property will consist of a regular real estate transaction.

Is It Worth It to Buy an Assignment?

Assignment purchases can actually give you some of the best deals in the GTA condo market because fewer people typically seek out these types of sales. In addition to fewer buyers, many real estate agents aren’t familiar with the structure of an assignment sale and often won’t bother to advertise these listings. Even lawyers may not know the ins and outs of an assignment sale.

The high demand in the resale market can potentially force buyers into bidding wars, which can cause people to overpay for their suite. Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay much less than you would for a resale unit.

The assignment condo market can be mutually beneficial for both the buyer and the seller. The seller can list their unit without having to wait until the building is completed, and the buyer can save time and potentially thousands of dollars.

Another advantage to buying an assignment agreement is that you will get a brand-new unit that automatically comes with the seven-year Tarion Warranty Program. Let’s not forget that you’ll likely move into the unit sooner instead of waiting the usual 3 to 4 years for the building to be completed!

Let’s Recap Some of the Advantages for Buyers:

• Options: More choices when there’s a shortage of listings in the market.
• Less Competition: Fewer people look at these types of listings.
• Peace of Mind: Fewer people looking at these sales means there’s less of a chance for a bidding war. You can avoid bidding wars and paying more than you can afford just to outbid another buyer.
• You Become A VIP: You will likely inherit VIP incentives like the seven-year Tarion Warranty Program and other incentives from the builder such as credits, upgrades, capped developing charges and much more.
• More Choices: Depending on how far along construction is, you may still be able to select your own finishes, colors and upgrades.
• Negotiate: Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.
• Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract. Oftentimes the occupancy date is just a couple of months away.
• Taxes: You may also benefit from saving on taxes like GST and HST.

We love to chat about the assignment sale market, so don’t wait, give us a call and let’s find you a great deal.

Traditionally, owners who wanted to sell their pre-construction units had to wait months or years for the final closing date to officially put their suite up for sale. By this time, they could have already put significant funds into occupancy fees and closing costs.

Assignments sales is not a new strategy in Canada, but compared to other countries where condos have been around much longer, the process is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by saving time and maximizing their profits.

These transactions are becoming increasingly popular. Think of it as a sort of condo flipping. Sellers can transfer their property rights during or before interim occupancy and avoid paying hefty carrying and closing costs, which helps them get their deposits back.

Most builders allow assignment sales, although they often have certain rules that must be followed. Even with strict rules in place, however, there are options available for you.

Let’s Take a Look at the Advantages for Sellers:

• Insurance Policy: In the event that your situation changes and you no longer need your unit, you are able to sell your assignment and pull out your equity.
• No Carrying Costs: You can avoid paying monthly fees like occupancy fees that can sometimes last for up to two years.
• No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.

What is an Assignment Sale?

It is the sale of a contract to purchase a pre-construction unit. This means, instead of selling an already built unit, what’s being sold is the contract or right to acquire the property upon completion. The original purchaser (the "assignor") of a property sells their obligations under the original contract to a new purchaser (the "assignee").

The assignee will generally assume all of the assignor's duties and obligations, such as interest payments, taxes, and maintenance fees during interim occupancy. Upon completion, the assignee is granted the title to the real property and will incur all final closing costs.

Can any kind of purchase agreement involving a real estate transaction be assigned?

Under normal circumstances, any purchase agreement can be assigned, providing the agreement doesn’t prohibit it.

Is an Assignment legal?

It is legally permitted unless prohibited in writing in the original agreement of purchase and sale. In some cases, the developer may charge the assignor a fee for this kind of sale.

Is it necessary to get permission from the developer to assign the contract?

That depends. You need to consult your purchase agreement to get the specifics. Generally developers will not permit an assignment sale without their consent, which means you’ll need to consult with them and a legal representative. There have been incidents where an unauthorized assignment sale has resulted in the original agreement being terminated, and the deposit withheld!

Is there a standard legal form for these types of sales?

Yes, there are two: OREA Form 150 Assignment of Agreement of Purchase and Sale Condominium and OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules.) In most cases, the developer will have their own form as well.

Will either the assignor or assignee’s lawyer services be adequate?

It is essential that the assignor and assignee each retain a lawyer with expertise in this area of real estate.

Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?

Sometimes. Double check with your builder, as it depends on whether they permit advertising.

What happens if the construction, occupancy, closing, or unit transfer date is delayed?

In the event of a delay, the agreement is still valid. This means the assignee has agreed to take on the agreement and all responsibilities associated with it, including delayed construction or occupancy.

What if the assignee doesn't close?

This is no different than any other property sale, meaning the assignor, in most cases, is not released from the obligations under their original purchase agreement. In this situation, both the assignor and assignee will be liable.

What is the cost of assigning an Agreement of Purchase and Sale?

If the developer consents to the arrangement, there will generally be an administration fee and legal fees. These fees will vary. Consult the original purchase agreement and the developer for specific information.

When does the assignor get their money?

This generally depends on the closing date and the terms of the agreement that the assignor and assignee agreed on. Usually the assignor is paid when:

• the assignee takes possession or,
• when the developer approves the process, if applicable or,
• when the assignee obtains legal title

Who gets the interest, if any, payable by the builder on the original deposits?

Unless otherwise specified, the interest is likely to be paid to the assignor.

Who pays the interim occupancy costs?

Once the assignment is finalized, the assignee will typically pay occupancy costs.

What closing fees are payable?

After the condominium is registered, the builder transfers the ownership title to the assignee. The assignee pays the balance to the builder and any amount still owed to the assignor. Some of the costs the assignor may pay include:

• Estimated property taxes for up to 2 years
• Hydro/water/gas meter installation and connection charges (approx. $500–$700 per meter)
• Development charges/levies (potentially thousands of dollars)
• Tarion New Home Warranty (ranging from $600–$1,900. See Tarion website for fee structure)
• Discharge of builder’s mortgages (approx. $200–$300 per mortgage)
• Builder’s lawyer’s Law Society charge (approx. $70)
• Two months of occupancy fees for reserve fund
• Other amounts set out in the Agreement of Purchase and Sale

These costs are typically not financed with a mortgage. The assignee is responsible for the following additional fees:

• Legal fees and disbursements
• Land transfer tax (provincial and municipal)
• GST/HST rebate
• Municipal levies

If you’re interested in either buying or selling an assignment, you need a realtor who is experienced in finding, negotiating and drawing up the offer for these types of sales. This means you’ve come to the right place! We have a wealth of expertise, knowledge and resources when it comes to assignment sales and we would be more than happy to discuss the idea with you.

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What You Need to Know About Assignment Sales

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What is an assignment sale? We get this question quite often from both investors and end-users when it comes to the Toronto condo market, especially with the dramatic rise in condo buildings and pre-construction sales. Assignment sales can be a great opportunity for everyone involved, from the seller to the buyer. But working with a seasoned real estate broker is one of the most important things you can do. An assignment sale isn’t a typical transaction and there are many things you need to know before moving forward.

What Does an Assignment Sale Mean?

An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller. In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it. Although an assignment sale is possible for both home and condos, it’s much more popular among condo pre-construction buyers.

Why Would Someone Want to Sell Their Condo on Assignment?

With pre-construction condo purchases, the sale of suites typically takes place several years before the building is built. It’s a long time in between buying the suite and actually taking occupancy of it. And with this lag time comes life changes – a new job outside of the city or in a different province, a new family that’s expanding with children, etc. What worked for a particular buyer years ago may not be the current case at closing time.

Financial reasons is also another reason to sell on assignment. Perhaps the purchaser can no longer be able to close on the condo, or perhaps it’s an investor who bought pre-construction with no intention of closing on them, therefore using an assignment sale strategy to profit, based on quick appreciation in the area.

Often with pre-construction sales, there’s a long lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

How Do Assignment Sales Work?

We completed an assignment sale for a client at 87 Peter Street which was a new building that has occupied, but not registered yet. Our client purchased a 1-bedroom, 1-bathroom condo pre-construction for $320,000.00. He was looking to sell the unit on assignment and listed it at $525,000.00. We received an offer of $500,000 which the seller was comfortable accepting.

Typically, when assignment sales takes place, the seller is looking for a buyer who can provide him with a purchase deposit that equals what he had to put down – usually 20% of the original purchase price. After providing the seller with this sum, the deposit paid to the builder now becomes the new purchasers deposit. Any upside to the seller can be paid based on the negotiated terms – sometimes when the seller gets a mortgage for the condo, or even earlier – it’s all based on terms of the assignment deal.

Overall, assignments sales are not to be overlooked – there can be some fantastic opportunities to get into a highly desirable building that you may have missed out on or purchase a condo that you may otherwise not have had access to. But the importance of working with a realtor and lawyer who know the ins and outs of these deals is the key to making them work for you.

If you’re interested in learning more about Assignment Sale and some of the great opportunities currently available, simply fill out the form below – we’ll get in touch right away.

What is a Condo Assignment Sale? — Everything You Need to Know

What is a condo assignment sale, when does it occur.

Condo assignment sales occur before the final occupancy or closing date of a new construction property. An assignment sale occurs before the final closing of the property between the original purchaser (Assignor)  and the builder. 

As a new purchaser of an agreement, you are going to assume everything that the original purchaser agreed to in their original contract. For this reason, it is important to appoint a lawyer by your side to go over two important set of agreements. The first one is the agreement between the original purchaser and the builder. Lawyer will walk you over red flags or things like closing costs associated to the unit – remember you have to assume these terms. The second piece of agreement the lawyer will look at is the new agreement between the original purchaser (Assignor) and the new purchaser (Assignee) 

Reason for a Condo Assignment Sale

Assignment sales take place with all sort of new construction product such as townhomes, detached homes, condos, stacked townhomes & more. Why do these kinds of sales happen? The most common reason is the original buyer’s circumstances might change and present a reason to list their condo for assignment sale transactions. 

There are many reasons why one would decide to sell their unit on assignment since the gap of purchase time to occupancy is wide and can take 2-7 years depending on what type of property it is. Perhaps they will welcome a new member of their family soon and the condo just isn’t big enough for everyone. Whatever the reason, it isn’t always negative. It is important to work with professionals that can guide you throughout the process of an assignment sale.

Costs of Condo Assignment Sales​

Is selling an assignment better than a regular real estate transaction? Yes. Being the seller (assignor) is known to contain more tax fees than a unit that is already built and you’ve taken title of. As a buyer of an assignment, you do not need to observe such fees and a professional can walk you over your closing costs associated to the transaction. 

Now that you know what is a condo  assignment sale, you can therefore make an informed decision. We get a lot of questions about new condos and whether it’s better to wait or to list them for assignments right away. 

An assignment is better if you’re looking to get your money back sooner rather than later. Assignments will also see that the assignee pays the land transfer taxes and other taxes. Sometimes you can even make a profit on the market value if condo assignments are listed during a real estate boom.

It all sounds great, but selling condo assignments also has its drawbacks. For example, experienced real estate agents know it’s more difficult to sell an assignment property due to a much smaller buyer pool. Most assignment sales cannot be advertised online on platforms such as MLS. 

In most cases,, there are  marketing limitations when it comes to selling an assignment which can hurt your chances of finding a potential buyer

If you are looking for a new home sooner rather than later, an assignment sale offers closer occupancy dates, unlike purchasing something new that will only be ready in 5 years. In some cases, you may still have a chance to choose your own colours and finishes of the unit

Pros and Cons of Condo Assignment Sales for Buyers​

As a  buyers, you can expect to see advantages such as more options when choices are low. Since assignments are more complex, you typically face less competition on deals whereas in a hot market you may be in a bidding war scenario.

Pros and Cons of Condo Assignment Sales for Sellers​

The pros for assignment sellers are a shorter list compared to the ones for buyers. First of all, sellers can get their money faster and put that amount to good use such as reinvestment. Sellers will not be responsible for carrying costs such as occupancy fees or go ahead with the mortgage payments or other closing fees.

At times, the seller can also play the market and list the unit for higher than the original purchase price and make a profit. However, more often than not, sellers will have a harder time seeing offers due to marketing restrictions and a smaller buyer pool.

Since the process for assignments is also much more intricate, it will be difficult to find a  real estate professional out there that is familiar with this type of sale. For this reason, an assignment transaction can come with more complexity and would require additional knowledge. 

Now that you know what is a condo assignment sale, you can decide if it’s the route you want to take as a buyer or seller. There are more advantages from a buyer’s standpoint, but there are undeniable pros for sellers such as getting your money back faster and avoiding closing costs.

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Distressed businesses on sale: Consider opportunities and risks, Crain's Chicago Business

This article originally appeared in Crain’s Chicago Business on  November 7, 2022

While the United States has experienced a strong economy for most of the past decade, companies and investors that purchased businesses have been focused on improving upon already successful businesses. As the economy slows and businesses suffer from persistent inflation, higher interest rates, supply chain issues, labor shortages, and the end of pandemic-related assistance (among other factors), many companies facing distress are going to be looking for buyers or new investors.  Private equity firms and businesses with access to capital are able to purchase distressed businesses at a discount with the opportunity to restructure their targets into successful businesses as a new platform or to enhance their current operations (as an add-on, bold-on, or tuck-in acquisition). But these situations also pose unique challenges that must be considered.

With a good understanding of how to approach due diligence, the right strategies and tactics to effectuate the transaction, and experienced advisors engaged throughout the process, purchasing a distressed business can be a very successful endeavor.

The challenge of due diligence

There are reasons that the target company is distressed, and some of them create challenges with performing due diligence. One cause — or a symptom — of distress is the target's poor financial, business, and legal records. Many buyers that evaluate distressed situations become frustrated and decide not to bid when they cannot verify every number or contract as they would in a traditional, exhaustive diligence process. To avoid this problem, potential investors (whether a private equity firm or otherwise) should seek to capitalize on their extensive network by engaging industry experts, financial advisors, and legal counsel that know the market and can help assess the financial and legal risks associated with purchasing the distressed business. Successful buyers of distressed assets focus on identifying risks, pricing the identified risks, and working with specialists to reimagine the business after stripping away the liabilities and other obstacles holding the business back from being successful.

Assessing the situation and executing with the right strategies and tactics

In addition to becoming comfortable with its understanding of the business, a potential buyer focuses on ensuring that its new investment is not saddled with the distressed business's liabilities and other problems. There are a number of different formal and informal processes that the buyer can employ to address this. Distressed assets may be purchased without any formal process, or they could be purchased through an Article 9 foreclosure process, a receivership, an assignment for the benefit of creditors or other state-law process, or a federal bankruptcy process. Think of these as tools to effectuate the purchase of a distressed business, each with their own advantages and disadvantages. The right tool for the job depends on the situation. After analyzing the situation and working with advisors to consider the different legal processes available, the investor can then determine which is best to acquire the business at the best price. With proper planning, the distressed business can be acquired free and clear of most creditors' liens, claims, and other encumbrances on the assets.

There are operational and other business risks to consider before purchasing a distressed business.  Distressed companies may have tenuous supplier relationships resulting from delayed payments or other issues. Likewise, customer relationships may suffer if the distressed business has not delivered as promised. Also, management and employees are likely feeling their own stress as a result of having to work for an employer in financial or operational distress. It is important for potential buyers and investors to be sensitive to these concerns. At the same time, there are opportunities to prepare an operational plan and communications strategy that proactively addresses these issues and positions the buyer or investor as the savior.

The importance of working with knowledgeable advisors

While every acquisition requires knowledgeable advisors, purchasing a distressed company requires a team of lawyers and financial advisors that understand how to navigate the legal and business issues that are specific to the world of distress, which includes confusing state laws and the federal bankruptcy code. Among the most important advice that a private equity firm or other buyer can receive from its advisors is whether the purchase of distressed assets can be accomplished without a formal process or, if not, which of the different processes is best. Most sales of distressed businesses include limited representations and warranties and no post-closing indemnification for the buyer. Additionally, the consent process for the assignment of contracts and leases with distressed acquisitions is very different from a typical, non-distressed transaction, and there are even differences among the different legal frameworks. Working with knowledgeable and experienced advisors to understand the advantages and disadvantages of each available alternative is key to a buyer maximizing the value of distressed opportunities.

Private equity firms or businesses looking to purchase businesses that are impaired can benefit from a faltering economy by considering alternative acquisition strategies, such as purchasing distressed assets through a bankruptcy or other process at a discount. Such acquisitions are not without risk, but buyers that are able to successfully navigate the process and turn around a troubled business are able to drive significant value for their investors.

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Assignment Sales in Canada: What You Need to Know as a Buyer

• Closing cost in Ontario

What is an assignment sale?                                                                                                                                                                                                                                                                            We get this question quite often from both investors and end-users when it comes to the Toronto condo market, especially with the dramatic rise in condo buildings and pre-construction sales. Assignment sales can be a great opportunity for everyone involved, from the seller to the buyer. But working with a seasoned real estate broker is one of the most important things you can do. An assignment sale isn’t a typical transaction and there are many things you need to know before moving forward. Additionally here some useful facts about to Maximizing Your Investment in the  role of Amenities in Real Estate Purchases and Investments in Canada

What Does an Assignment Sale Mean? An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller. In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it. Although an assignment sale is possible for both home and condos, it’s much more popular among condo pre-construction buyers. here some important Frequently asked questions about Inspection.

Assignment Sales

Why Would Someone Want to Sell Their condos on Assignment? With pre-construction condo purchases, the sale of suites typically takes place several years before the building is built. It’s a long time in between buying the suite and actually taking occupancy of it. And with this lag time comes life changes – a new job outside of the city or in a different province, a new family that’s expanding with children, etc. What worked for a particular buyer years ago may not be the current case at closing time.

Financial reasons is also another reason to sell on assignment. Perhaps the purchaser can no longer be able to close on the condo, or perhaps it’s an investor who bought pre-construction with no intention of closing on them, therefore using an assignment sale strategy to profit, based on quick appreciation in the area.

Often with pre-construction sales, there’s a long lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.

How Do Assignment Sales Work? We completed an assignment sale for a client at 87 Peter Street which was a new building that has occupied, but not registered yet. Our client purchased a 1-bedroom, 1-bathroom condo pre-construction for $320,000.00. He was looking to sell the unit on assignment and listed it at $525,000.00. We received an offer of $500,000 which the seller was comfortable accepting. Additionally Click here for know about Tax Exposure.

Typically, when assignment sales takes place, the seller is looking for a buyer who can provide him with a purchase deposit that equals what he had to put down – usually 20% of the original purchase price. After providing the seller with this sum, the deposit paid to the builder now becomes the new purchasers deposit . Any upside to the seller can be paid based on the negotiated terms – sometimes when the seller gets a mortgage for the condo, or even earlier – it’s all based on terms of the assignment deal.

Overall, assignments sales are not to be overlooked – there can be some fantastic opportunities to get into a highly desirable building that you may have missed out on or purchase a condo that you may otherwise not have had access to. But the importance of working with a realtor and lawyer who know the ins and outs of these deals is the key to making them work for you. Additionally here is the some more details about assignments sales.suggested by RECO

If you’re interested in learning more about Assignment Sale and some of the great opportunities currently available, Contact us  if you’re looking for a  Pre-construction condo  in the  GTA .

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Selling Distressed Assets: The Assignment for the Benefit of Creditors Alternative

• April 10, 2023
• / Business Bankruptcy  •  Investing in Distressed Businesses
• / Steven A. San Filippo
• Tags: Article 9 , Assignment for the Benefit of Creditors , Automatic Stay ,

An Alternative to Chapter 11 and Chapter 7 Liquidations

Financially distressed companies faced with unlikely prospects for reorganization – and the creditors who can influence their decisions – often take advantage of the chapter 11 liquidation option, where the debtor’s assets can be sold free and clear of all liens, claims, and encumbrances. This leaves the created net value available for distribution to creditors.

In chapter 7 liquidations , a trustee is appointed to liquidate assets. In chapter 11 liquidations , by contrast, management typically continues operating the business throughout the bankruptcy process.

A state-law alternative 1 to a federal bankruptcy liquidation (whether through chapter 11 or chapter 7), known as an assignment for the benefit of creditors (ABC) , can facilitate a business liquidation without many of the time-consuming delays, complications, or added costs associated with the federal bankruptcy process.

What is (and what is not ) an Assignment for the Benefit of Creditors?

An assignment for the benefit of creditors (ABC) is not an appropriate vehicle for a company looking to reorganize. By contrast to a bankruptcy case, no automatic stay is imposed to limit creditor action upon the commencement of an ABC.

An ABC also will not discharge any debt or liability that is not repaid in full. What the ABC can do for the debtor and insiders, if properly managed by the assignee, is diminish creditors’ concerns that the board or management is standing in the way of recovering value for creditors, while the assignee sets about doing just that. Additionally, an ABC is often a good option for distressed companies with debt that is largely unsecured.

A simple and accurate way to think of an ABC is as a trust agreement whereby the owner of a distressed company irrevocably transfers title, custody, and control of its assets to an impartial third party, the assignee. The assignee is entrusted with the assets and has duties to liquidate the assets in an efficient, orderly manner and distribute net proceeds to creditors on a pro rata basis. Note that the distribution of net proceeds will still be subject to court approval.

Assignee Responsibilities

To authorize an ABC properly, the debtor must abide by the requirements of its articles of incorporation and bylaws, as well as those of its state of incorporation, which typically require a resolution of the board of directors and shareholder consent.

The choice of the assignee is not legally subject to approval by creditors, but the creditors may be able to challenge the choice if the assignee fails to properly fulfill its fiduciary duties. ABCs generally commence at the time of the assignee’s acceptance of the debtor’s assignment of its distressed assets, which must be evidenced by a written document.

The assignee is required to give notice of the assignment to all of the debtor-assignee’s creditors, equity holders, and other parties of interest, including taxing authorities. The ABC trust is legally distinct from the pre-assignment debtor. Therefore, judgments or garnishments obtained or liens filed against the debtor-assignor after the assignment has occurred generally do not attach to the assets held in trust by the assignee.

To maximize the value of assets distributed to creditors, the assignee may operate the business for a period of time prior to selling the assets. Operating the business makes sense if the expected increase in recovery outweighs the additional costs of operating the business; however this option is subject to the availability of sufficient liquidity. An “operating” ABC can make sense where, for example, there is:

• A need to complete work in process or confirmed customer orders;
• An ability to hold going-out-of-business sales, as is often the case with retailers; or
• A going-concern buyer on the scene

When operations have ceased before the assignment is made, or they are stopped by the assignee, assets can be liquidated through various means, including an auction or a negotiated sale. If the assignee decides to hold an auction, the assignee must provide notice of the auction to the debtor-assignee’s creditors. Regardless, potential buyers will typically buy only if they can do so “free and clear” of liens on the assets being bought. For this reason, an assignment for the benefit of creditors is often done in compliance with personal property foreclosure procedures set forth in Article 9 of the Uniform Commercial Code.

Before accepting the assignment, the prospective assignee will review certain aspects of the debtor, including:

• The accuracy and completeness of debtor’s information to be used to document the inventory of assets and liabilities, and analysis of viability, liquidity, and prospects for recovery of value under various scenarios
• Potential environmental risks, if real estate assets are involved;
• A determination of whether the assignee will need specific approvals or licenses to operate the business or liquidate its assets; and
• The existence of liens and the status of their perfection. If one or more properly perfected liens on the substantial assets of the debtor are found, the prospective assignee will likely agree to become the assignee only with approval of the secured creditors of the company.

Inventory of Assets and Liabilities

Documenting the inventory of assets and liabilities early in the case is an important milestone in the administration of every assignment. At the time the assignment is made, the debtor-assignor must turn over to the assignee all of its books and records, including a complete list of its assets and liabilities as of the date of the assignment, as well as a list of all creditors, their addresses, and the indebtedness owed to each.

The assignee typically is required to provide an accounting of the debtor-assignor’s assets. Such accounting will be submitted to a court or to creditors, depending upon what the law of the state requires. It also can reassure creditors, as one might imagine.

As part of this process, the assignee may identify each asset class, as well as its known or estimated value. In addition, the assignee should seek to establish a bar date for filing claims with the assignee to help the assignee administer the distribution of any net proceeds generated from liquidation or sale of the debtor’s assets . The assignee should also provide notice of the bar date to all creditors, equity holders, and other parties of interest, including taxing authorities.

We think you’ll also like:

• Assignee Unknown: The Curious Cases of SmartLabs, Shine Bathroom Technologies, Liftopia, GlassPoint, SolarReserve, Maker Media, & Toymail
• The Road to an Assignment for the Benefit of Creditors (ABC): A Case Study
• When to Request Relief from the Automatic Stay
• Opportunity Amidst Crisis – Buying Distressed Assets, Claims, and Securities for Fun & Profit
• Help, My Business is In Trouble!

©2023. DailyDAC TM , LLC d/b/a/ Financial Poise TM . This article is subject to the disclaimers found here .

• All viable alternatives to maximize value are worthy of consideration when financially distressed companies are on the verge of insolvency. Options other than assignments for the benefit of creditors lie outside of the purview of this article, but are discussed at length in Strategic Alternatives for Distressed Businesses (Thompson Reuters 2023 ed.).

About Steven A. San Filippo

Steve San Filippo is the founder and principal of San Filippo & Associates. He has over 30 years of management experience providing restructuring, rebuilding, remaking, and transformational leadership to privately owned companies. Steve has assisted middle-market clients on a global basis across a wide range of industries and in a variety of leadership roles. He…

Read Full Bio »   •   View all articles by Steven »

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Offices near o'hare with little vacancy hit the market.

Danny Ecker is a reporter covering commercial real estate for Crain's Chicago Business, with a focus on offices, hotels and megaprojects shaping the local property sector. He joined Crain’s in 2010 and previously covered the business of sports, as well as the city's convention and tourism sector.

An office building near O'Hare International Airport that is almost entirely leased has gone up for sale, testing what investors will pay for a top-performing office building in the suburbs despite dark days in the business of owning workspace.

A joint venture of Calgary, Alberta-based MDC Realty Advisors and Vancouver, British Columbia-based Nicola Wealth Management has hired brokerage Cushman & Wakefield to sell the One O'Hare office building at 6250 N. River Road, according to a marketing flyer. The offering comes more than eight years after the pair of investors bought the 12-story building for $83 million.

Amid weak demand for offices and higher interest rates weighing down property values, One O'Hare is almost certainly worth less than that today. There is no asking price listed for the 380,360-square-foot building, but a source familiar with the listing said bids are expected to come in close to $70 million, or $184 per square foot.

While a sale at that price would mean a loss of equity for the building's owners, it would be a far better outcome than many office landlords have recently experienced. Office owners with maturing debt have been hard-pressed to refinance their properties, setting off a historic wave of distress.

Many office buildings are worth less than the debt tied to them, pushing some owners to surrender their properties to their lenders or face foreclosure. The Oak Brook 22 office buildings near Oakbrook Center mall and the Triangle Plaza complex just more than a mile from One O'Hare are among the suburban office properties recently handed over to lenders.

MDC and Nicola are hoping for a much better outcome, though they also face an imminent mortgage deadline. A $41.5 million loan from Munich-based life insurance giant Allianz tied to the One O'Hare property is slated to mature on Oct. 10, according to Cook County property records.

Working in the owners' favor is that One O'Hare has long-term tenants that will prop up its rent roll for several years. The building is just under 93% leased, according to Cushman — far better than the 79% average for top-tier, or Class A, office buildings in the O'Hare submarket — and has a weighted average lease term of seven years, a measure of tenants' remaining lease commitments to the property.

Its two largest tenants, beverage distribution company Reyes Holdings and real estate services firm Colliers, have a combined weighted average lease term of 8.3 years, the Cushman flyer said. Reyes has been an anchor tenant in the building since 2009 and has also expanded its footprint by 19% over the past two years to nearly 168,000 square feet, according to the flyer, belying the broader trend of companies shrinking office space.

MDC and Nicola are also hoping their investments in new tenant amenities will help lift up the 38-year-old building's value, given companies' increased focus over the past few years on leasing workspace that makes employees want to show up. The owners have spent $5.5 million on capital improvements at One O'Hare since 2017, including on a new tenant lounge with a media wall and fitness center upgrades, according to Cushman.

The offering includes a five-story parking garage that is attached to the building by a walkway and has more than 1,000 spaces, the flyer said.

One O'Hare is adjacent to another Class A office building in Pointe O'Hare, which sold for about $147 per square foot in late 2022. That building was roughly one-third vacant at the time, far more empty space than One O'Hare has today. But borrowing costs have also jumped since then, likely pushing down value.

Spokesmen for MDC, Nicola and Allianz did not respond to requests for comment. CoStar News previously reported that One O'Hare was for sale.

Cushman brokers Cody Hundertmark, Tom Sitz and Dan Deuter are marketing One O'Hare on behalf of the MDC-Nicola joint venture.

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