What an Assignment Sale Is
An assignment sale happens when the original purchaser of a pre-construction unit sells their rights to the purchase agreement to a new buyer before the building closes. The new buyer effectively steps into the original contract and completes the purchase directly with the builder.
Why Sellers Choose to Assign
Sellers might assign a contract because their circumstances changed, they want to realize a gain before final closing, or they no longer want or can afford to close on the unit. Builder consent is typically required, and some builders charge an assignment fee or restrict when assignments are allowed.
Financing Considerations for Buyers
Buyers of an assignment need financing for both the eventual closing with the builder and, in many cases, reimbursement to the original purchaser for deposits already paid. Not all lenders handle assignment financing the same way, so early conversations with a broker are important.
Tax and Legal Considerations
Assignment sales can trigger tax implications for the seller, including potential HST considerations depending on the seller's intent when they originally purchased the unit. A real estate lawyer experienced in assignments should review the transaction for both buyer and seller.
- Builder consent typically required
- Possible assignment fee
- Tax implications for the assignor
Risks to Watch For
Because the buyer is relying on a contract negotiated by someone else, it is important to review the original purchase agreement carefully, understand the closing timeline, and confirm what deposits and adjustments are actually owed before finalizing the deal.
Frequently asked questions
- Do I need a bigger down payment for this type of property?
- In most cases yes, since lenders view these properties as carrying more risk than a standard owner-occupied home. The exact amount depends on the property type, the lender, and your overall financial picture, so it is worth getting a clear answer before you start shopping.
- Can I use projected rental income before I have a tenant?
- Some lenders will accept a market rent appraisal or lease commitment for this, while others want to see an existing lease in place. Rules vary quite a bit between lenders, which is one reason it helps to work with a broker who can compare options.
- How long does approval usually take?
- Timelines vary based on the complexity of the file and whether extra documentation like appraisals or building permits are needed. Starting the conversation early, before you are under a tight closing deadline, generally leads to a smoother process.