Assignment Sales Guide

As Toronto continues to develop and densify at a rapid pace, the demand for homes feels like it’s perpetually increasing. Despite recent COVID-related trends, Toronto’s population is still projected to grow and the demand for homes will follow suit.

With an ever-increasing need for homes across our city, it’s no wonder that residences are being bought and sold before they even physically exist yet, and that they can change hands between owners before construction even begins. In these scenarios, having good knowledge of assignment sales comes in handy, as they’re a valuable real estate tactic to know about.

To learn more about assignment sales and why they will play an important role in Toronto’s future real estate landscape, read our ultimate assignment sales guide below.

What is an Assignment Sale?

When plans for a new property are initially made available, homes can be bought and sold even before construction on that property begins. In fact, with pre-construction condo buildings, most units are sold years before the building has been built.

This is what is known as an assignment — essentially just the contract that signifies the possession of a particular pre-built piece of real estate. For whatever reason, if the original purchaser of an assignment wants to resell their assignment contract, this is what is known as an assignment sale.

In short, you can think of assignment sales as the transfer of ownership between buyers of a property that is still under construction.

Why Are They Popular?

The real estate market is constantly changing. With sudden swings in the economy affecting property values and mortgage rates, sometimes capitalizing on the best windows to invest in real estate means buying ahead of time.

However, when buyers invest in pre-construction properties, it can take years before construction is finished and they can actually move-in. During this time, life events happen and major changes to your future living plans can be affected. This is one of the biggest reasons why assignment sales are so common.

Alternatively, the original buyer of the pre-constructed property might look to make a quick profit on the home if they believe its value has appreciated while in their possession. With Toronto house prices currently on the rise, this makes sense from an investment perspective.

What Are The Advantages?

Value appreciation is definitely one of the advantages of completing an assignment sale. With communities and economies constantly changing, you could see the value of your pre-construction property increase drastically between buying the property and construction completion.

With a smaller group of buyers interested in purchasing pre-construction homes, it is also theoretically likely there will be more competition for the home once finished construction. If you have the patience and means to invest, assignment sales can be very profitable.

What Are The Disadvantages?

When investing in any type of property, it’s always important to consider the potential risks involved — especially when investing in an assignment sale.

As pre-construction properties are obviously uninhabitable until completion, owners may have to deal with overlaps in occupancy fees, mortgage rates, and any potential outstanding rent costs from previous living accommodations. Funding everything at one time could require considerable financial backing and may even result in a long-term loss if the value of their assignment property takes a dive once completed.

As with any investment, there are always risks and upsides to investing in assignment sales. That’s why it pays to have a knowledgeable, experienced real estate team to safely guide you through the buying process.

If you are interested in learning more about assignment sales, contact our team here for a consultation.

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