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Why No One is Buying Your Assignment

Around this time last year I predicted 2009 was going to be the year of the assignment. I was wrong. While assignments did begin to take a greater role in the overall Toronto condo market, they still have not gone ‘mainstream’. Quite frankly, this method of buying and selling real estate will probably never go mainstream, however, in 2010 it looks like assignments will be seen as a “Third Way” of buying condos in Toronto (the traditional two ways being pre-sale or resale).

People contact me just about every day and ask me about assignments - I want to buy an assignment! I want to sell my condo by assignment! The truth is, most people have no idea what is involved when buying and selling an assignment. When the Average Joe learns just a fraction of what there is to know about assignments, 95% of the time Average Joe ends up returning to the comparatively simple world of pre-sales and resales.

So for all the sellers of assignments, as well as those who may be thinking about buying a condo by assignment, I’d like to introduce to the the top-5 reasons why many assignment listings never sell:

1. No Market Exposure. You are not allowed to advertise assignments on the MLS. Many assignment listings don’t sell because no one knows about them!
2. Lawyers. Most lawyers hate assignment deals. They often look for reasons to kill the deal – and with assignments, you don’t have to look to hard.
3. Price. This is probably the #1 reason why many assignment listings don’t sell. You can’t price an assignment like a resale property. Investors buy assignments and investors don’t pay current market value for property!
4. Closing Day Too Far Away. Buying a pre-sale condo then trying to flip it a month later is a fool’s game. The unit must be at or very close to occupancy so that market value can be accurately predicted and the investor can safely determine if they are getting a deal.
5. Closing Costs. Did you get your closing costs capped by the developer when you first bought your condo? If not, there is no way to tell exactly what they might be. Buyers of assignments need some degree of certainty as to what closing costs they will incur, otherwise they will move on.

Bottom line, assignments are not for everyone, but for the right buyer and seller, working with a good Realtor and co-operative lawyers, they can be a fantastic way to transact in real estate. Questions about assignments? Contact me.

Buyers: Avoid Bidding Wars in the Assignment Market

Buyers looking to avoid multiple offer situations should consider the assignment market. With several condo buildings coming on-line in the downtown core this winter and spring, many sellers will be looking to sell before registration. Buying by assignment gives you the opportunity to avoid the bidding wars that are rampant in the resale market.

Nearly all listings on the resale market downtown priced under $350K are generating multiple offers. The lower the price, the more activity on the listing, the more showings, the more offers. Every day I have buyers calling me and emailing me who are looking to buy a condo downtown for under $250K. The market is hot, everyone wants a piece of it, and suddenly anyone with a few extra dollars in the bank considers themselves a real estate investor.

My advice is to consider buying an assignment at a building that is about to take occupancy or is in the occupancy period but not yet registered. For example, my colleague has a Junior 1 bedroom suite (525 sq ft) at West Harbour City with an asking price of $249,000. Occupancy is slated for March. A great starter condo or investment unit in what will likely be an excellent building. If this unit were on the resale market, it would likely be priced at something more like $269,000. Assignments like this give buyers the chance to save a little money and a little sanity.

Make sure you are working with a Realtor and a lawyer who understands assignments! Most do not and will only cause severe frustration for you. Questions? Contact me today.

Assignment Advantages For Sellers

In this installment of the Toronto Condo Assignment series, I want to talk about some assignment advantages from the seller’s perspective. It may seem that all the advantages in assignments are owned by the buyer, but this is not true. Some things to consider:

• Get your money back! Let’s face it, 20-25% of the average condo in Toronto is a lot of money. If you bought a new condo in the past few years in Toronto, that’s the amount in cash you would have had to put down to the developer. Your plans have changed and you want that money for something else. Selling by assignment is a way to get that deposit money back into your hands.
• Avoid occupancy fees. There has been a lot of talk about occupancy fees (or phantom mortgage) lately as horror stories have emerged of some buyers paying fees to the developer for up to 2 years to live in their condo without ever putting a single cent towards the principle on their mortgage. If you have no intention of living in the unit, why pay occupancy fees?
• Avoid closing costs. Closing costs on a new condo can be significantly more than the closing costs on a typical resale. Always consult your lawyer and your accountant for what you can expect in terms of closing costs, especially if you are purchasing a condo that will not be your primary residence. Selling by way of assignment means you pass all these closing costs on to the buyer.
• Take advantage of the market without getting greedy. The market has been great for the past few years. If you were fortunate enough to have bought a pre-sale condo in 2007 or before, then your investment has probably appreciated significantly. For some, selling their contract is a great way to take your profit and move on.

Questions? Leave a comment or contact me.

Assignment Advantages For Buyers

Continuing the Toronto Condo Assignment series, let’s take a look at the key advantages for buyers of assignment listings.

• Lower purchase price. Buying an assignment is sort of like having a time machine and being able to go back in time to purchase a condo today, at yesterday’s prices. Sellers know they have to price their units for less than what the developer would sell a similar unit at today. Savings can be in the tens of thousands compared to buying through the developer, and in some cases the price paid is even lower than what is available on the resale market.
• Lower taxes. If you buy an assignment contract that was originally signed prior to the new Toronto Land Transfer tax kicked in (January 1, 2008), you can save yourself a few thousand dollars in closing costs by not having to pay them even though the closing date is after Jan 1, 2008. Also, with the McGuinty government recently announcing a new Harmonized Sales Tax (HST), buying an ‘old’ contract is a great way to avoid the tax man!
• New condo without the wait. Usually when  you buy pre-sale you are looking at a very long wait to move into your new condo. When you buy an assignment, you don’t have the usual 3-4 year lag time, often occupancy is only months away.
• Tarion Warranty. Since you are buying a new condo, you do qualify for Tarion’s 7-year warranty that comes with all new homes and condos in Ontario.
• Inherit VIP incentives. Many sellers of assignments are investors who purchased during the initial ‘VIP’ stage of the sales process, when prices were lowest and often many upgrades were thrown in by the developer for free that if  you bought today from the developer directly you would have to pay extra for.
• Negotiate from a position of strength. Many sellers are selling because they cannot wait until occupancy or final closing -they need to get their money out now. Negotiating with someone in this position can be advantageous. 

Questions? Leave a comment or contact me.

Pre-Sale vs. Assignments

Buying an assignment may seem at first like something very similar to buying pre-sale (or buying new directly from the developer), but there are many key differences to consider.

Buying an assignment usually means you are getting a better price than if you just bought directly from the developer. However, instead of dealing directly with the developer – the entity that you are buying a condo from, you are negotiating and dealing with an individual. There is an element of risk by definition because you are inheriting someone else’s contract rather than negotiating your own from the start with the developer.

Most lenders are very familiar with pre-sale condos and they have programs set up for buyers to arrange the financing portion of the sale. When it comes to assignments, some lenders are not familiar with the process and buyers and sellers often encounter difficulties when dealing with the banks on assignment deals. This is another reminder why having a lawyer and a lender who are experienced with assignments is crucial for both the buyer and the seller in any assignment transaction.

Questions? Leave a comment or contact me.

Resale vs. Assignment

In this installment of the Toronto Condo Assignment series, we will be looking at some of the key differences between buying or selling resale compared to buying or selling an assignment.

The biggest difference is that when you are buying resale you are buying real real estate. The property exists and it is registered in the land registry system of Ontario. When you buy an assignment, you are really just buying a piece of paper, the contract that in turn gives you right to own real real estate once the building is completed and is entered into the land registry system.

Practically speaking, dealing with resale is a much more tactile experience because you can see /feel /touch the property, where as dealing with assignments is more similar to buying pre-sale / buying from plans. 

Resale requires a mortgage, and closing dates are usually 60-90 days. Assignments do not require a mortgage up front, but they usually require a hefty deposit (25%+), and closing dates can vary from months to years depending on how the agreement is structured and how far along the project is in construction.

In terms of growth, the assignment market is likely to grow substantially over the next couple years as many people who bought at the peak of our current market cycle will be looking to sell. This in contrast to the resale market where many sellers are taking a wait-and-see approach before putting their properties on the market.

Questions? Leave a comment or contact me.

Can I Assign My Condo?

Continuing my series on Toronto Condo Assignments, I want to address a common question that many people who have bought pre-construction condos in Toronto have, “Can I assign my Condo?”.

The answer is it depends. It depends what is in your contract, or your Agreement of Purchase and Sale that you have with the developer.

Every Agreement of Purchase and Sale will have a clause that deals with the handling of assignment sales when purchasing a new condo. By default, most contracts will forbid the assignment of units, but many developers have included the ability to assign as incentive for buyers to purchase. Also, many savvy buyers insist on having the ability to assign written into their contracts if it is not there by default. (Remember, it is not in the best interests for the developer to have individual sellers re-selling their product before the building is completed.)

If your contract allows you to sell by assignment, there usually is a fee to do so. The fee often is in the $3000-$5000 range. This is not negotiable.

In some cases, even if you do not have an assignment clause in your original contract, the developer may allow you to assign your unit as a one-off scenario, or they may be willing to add an assignment clause to your contract.

Final word of caution: Never assume anything. Always consult your Realtor, your lawyer, and the developer before proceeding with any effort to sell your condo by assignment.

Wondering if you can assign your condo? Contact me.

What is An Assignment?

Some of my readers have picked up on the fact that I am calling 2009 “The Year of the Assignment“.  Last year it was all about getting into the VIP sales events. This year, savvy investors and first time buyers alike are taking a serious look at assignment sales as possibly the best way to take advantage of the current market.

It is with this in mind that I will be doing a mini-series on the blog over the next few weeks outlining the ins and outs of assignment sales and why you should care about them if you planning on being either a buyer or a seller of a Toronto condo in the next 12-18 months.

First of all, What is an Assignment?

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New Assignment at Murano North Tower

I haven’t written too much about assignment sales, but my clients know that I am expecting/predicting 2009 to be “the year of the assignment”.  Many people who bought condos in the past two years will be looking to sell this year and get their deposit monies back.  Assignments can offer the savvy buyer with significant savings. More on that in future blog posts.

This post is about an assignment listing that came across my desk this week at Murano – North Tower. Murano is a project by Lanterra and is located on Bay Street, just north of College. The details:

• 17th floor-2 bedroom, 2 bathroom
• 752 Square feet, “Pezzati” floor plan, Murano condos – Pezzati floor plan
• Balcony – yes
• South-West exposure (corner unit)
• Includes 1 parking spot
• April 2009 Occupancy (Estimate)
• Assignment fee of $4000 to be paid by the seller
• Asking price is $399,999

The Truth is…

This is a good deal when you consider that the builder currently has a Pezzati unit for sale on the 42nd floor with North-West exposure for $449,900 with no parking spot. Assuming the parking spot is worth $35,000, the asking price per square foot is approximately $485-far below the area average (low to mid $600s. As for the floor plan itself, fitting in 2 bedrooms and 2 bathrooms into 752 square feet means that the living and dining area is quite narrow. Also, walking directly into the kitchen might be a turn off for some people. However, if you are looking for a 2 bedroom with a south view on a high floor, and you want to move in some time in the next few months, this unit offers good value.

If you are interested in this assignment, please contact me.

This listing is provided by Owais Sayed of Century 21 Leading Edge Realty 416-298-6000.