4 situations where it makes sense to sell your condo by assignment
In part 2 of this 3-part series on condo assignments, you will discover the 4 situations where it does make sense for you to sell your condo by assignment. If you are in one of these categories then you should probably assign your condo.
Links to the other parts of this podcast series:
1:42 If you can’t close the property, selling your condo by assignment makes sense.
4:05 If you need the money now, certainly you should look at selling by assignment.
5:22 Opportunity for a quick win.
7:40 If you have found your own buyer.
CRA Cracking Down on Assignments: https://truecondos.com/cra-cracking-down-on-assignments/
Canada Revenue Agency Cracking Down on Presale Condo Flippers: https://globalnews.ca/news/3630014/canada-revenue-agency-cracking-down-on-presale-condo-flippers/
Cracking Down on Presale Condo Flipping: https://www.pressreader.com/canada/the-globe-and-mail-bc-edition/20171104/282845076283529
Andrew la Fleur: In this episode, we’re going to talk about four situations where it does make sense for you to sell your condo by assignment. Stayed tuned.
Speaker 2: Welcome to the True Condos podcast with Andrew la Fleur. The place to get the truth on the Toronto condo market and condo investing in Toronto.
Andrew la Fleur: And welcome back to the show. It’s Andrew la Fleur here. Thanks for listening. We are in part two now. This is part two of a three part miniseries about assignment. Selling your condo by assignment. If you haven’t, make sure you go back and listen to part one, which was the episode before this one in the podcast, and if you have, then let’s jump right in and here are four situations for instances where it does make sense to sell your condo by assignment.
As I said in the first part of the series here that generally my philosophy has always been you want to be a buy and hold investor. You don’t want to get into doing assignments. There should always be a plan B. Plan A should always be to grow your net worth over the long term by buying and holding cashflow producing properties, whether they’re condos or other types of properties. That’s my overarching philosophy. That’s what I do. That’s my plan and that’s how I’m bringing my retirement forward so that I can retire in comfort much earlier than otherwise. But again, there are some situations where it can make sense to sell your condo by assignment.
The first is … four of them. The first one I want to touch on is if you can’t close. This may seem obvious, but if you can’t close on the property, for whatever reason, if you can’t get a mortgage, if you can’t close, if you’re not financially able to complete the transaction, then obviously it makes sense to look at selling your condo by assignment, because otherwise you’re going to be in default of your contract, and you don’t want to be that.
You could have major legal repercussions. You could be sued by the builder. You could certainly lose your deposits or a lot more than your deposits in some situations, which deposits on most condos in Toronto are very substantial. You obviously want to avoid that situation. If you can’t close on your condo, then certainly selling by assignment is what you want to do, is what you want to pursue, because you don’t want to be in that situation where you’re left holding the bag and you haven’t closed on the property.
Side note, some people ask what happens if you don’t close on the property? You bought pre-construction. Closing day comes. The builder is waiting for your funds to come through from your bank. They don’t come. What happens in those situations? Can you just ask for an extension? Will builders just move the closing date for you? The answer is no. Builders will take a hard line on this, and most builders are going to charge you a massive penalty for every day that you miss your closing date. It’s usually hundreds and hundreds of dollars per day. Believe it or not, I recently heard … not my client … but I heard from another agent, their client had not closed on this particular property they bought pre-construction and it was four months after the building had already completed and all the other units had closed and the transfer had been complete.
I was just shocked to hear this because I said, how can this be? And they were now looking to sell this by assignment. I said this is crazy. It’s been months since the building has closed. Aren’t they receiving massive penalties every single day? And the agent said yes, they are. They’re paying massive penalties every single day. That’s a horrible situation to be in. I don’t know how that’s going to end up for them, but you definitely don’t want to ever be in that sort of a scenario.
Number two, the number two situation where it may make sense for you to sell your condo by assignment. Number two is if you need the money. You need the money now. Maybe you’re facing some financial hardship. Maybe you lost your job. Maybe you bought too many properties and you need cash now to close on some other bigger, more expensive property or harder to sell property. If you need the money right now, then certainly you should look at selling by assignment, because that’s the only way to get the money right now. Otherwise, you’re going to have close on the property. You’re going to have to rent the property out for a minimum of one year before you can sell in order to avoid having to lose the HST also on the property.
If you need the money right now, it’s one of the questions I always people when they come to me, and they say, “Andrew, I’m thinking about selling my unit by assignment,” the first question I always ask can you close? Are you able to close? The second question is do you need this money right now? Is there some financial reason why you need to sell right now? You need this money back right now. In 95% of the cases, the answer is no. Most people don’t need it right now. But if you’re in that situation, then certainly assignment makes sense.
Number three situation is if you have an opportunity for a quick, what I call a quick win … there may be, there’s occasionally some situations where if you get lucky with timing or maybe a builder has some crazy promotion that you’re able to get in on before they shut it down. Maybe you bought right before a price spike happened. Maybe you bought with a very low deposit. Maybe you bought with a 5% deposit or something and you have an opportunity for a quick win, where you can make a quick significant profit, ROI on your money, so maybe you put down 5% in January, a deposit, and somebody’s willing to buy the property from you at $100,000 jump from what you paid just months after you bought it, then yeah, that might be a situation where you’re thinking, you know what? I could probably make more money later, but bird in the hand kind of a thing, if that situation is presented right in front of you. It’s right there for the taking. Then it might make sense for you to jump on that and take that scenario.
Maybe you bought as the building was coming to its completion towards the end of the project and was already well under construction, and then a few months or maybe a year later when the building is now just about to be finished, somebody wants to come in and buy that from you for significantly more than what you paid for it, and you’ve only held the property for a matter of months and you can make a profit, then that might sense.
But most cases, you’re looking at buying something pre-construction and holding it for three or four years. At that point, you’ve already been waiting for three or four years. It doesn’t really make sense in those cases to sell it by assignment. You’re not going to get full market value. You’ve already waited three or four years. You might as well just wait another one or two years and then realize the full potential of that property as opposed to selling it too early for less than what it’s worth.
And finally, number four situation where it might make sense for you to sell by assignment is if you have found your own buyer. You found your own buyer and they want to give you full market value. Some people have connections or some people are out there hustling on Kijiji or other online sites, and they’re able to find their own qualified buyer without having to pay a real estate agent to do the leg work and running around, this is extremely rare. I’ve rarely ever heard of these situations actually coming together.
But if that’s you and if that’s in your situation where a buyer has fallen into your lap and you’re able to actually do the transaction without having to pay a real estate agent, and somebody’s willing to actually give you full market value as opposed to a discounted value because it’s an assignment. So if all these pieces have fallen into your lap and you’re able to pull a deal together like that, then yeah. It might make sense for you to look at actually selling by assignment, as much as it obviously it may be counterintuitive for a real estate agent to tell you that advice, certainly if you’re in that position as an investor, then obviously that’s a case there where you may look at doing that assignment, because just all those things have fallen into your lap like that.
Okay, there you have it. There are four situations where it does make sense to sell your condo by assignment. This is part two of my mini assignment series. As we are now going to transition over to part three, I’ll see you at part three, where we’re going to talk about four situations where it does not make sense to sell your condo by assignment, so stay tuned for that.
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