Why The Assignment Market Is Hot Right Now
In the Greater Toronto Area (GTA), finding a pre-construction condo at a reasonable price might seem like an impossible task. If you’re a first-time buyer or investor, you might feel as though you’ve looked everywhere but the kitchen sink. The fact is, there are affordable condos out there, but in the current market, finding them may require the help of an experienced real estate agent.
The assignment market is one area a platinum agent can assist you in. This market is truly hidden, though. It represents profitable listings that aren’t frequently promoted to the general public but can be excellent real estate investments.
Let’s first define an assignment sale before moving on to the advantages of the assignment market. The sale of a contract to buy a condo unit before it is built is known as an “assignment sale.”. Typically, an assignment sale is used for condos that have not yet been registered with the city, are still being built, or are currently under construction. Because only the contract can be sold, no one can acquire ownership of the unit.
An assignment clause that gives you the option to transfer all rights and obligations of the Agreement of Purchase and Sale (APS) to a new buyer before construction is finished may be included in your contract when you buy a pre-construction condo unit. Assignment sales rely on realtors talking among themselves and can result in lucrative opportunities.
We spoke with Brigitte Obregon, the founder and broker of GTA-Homes with twenty years of experience, to learn the inside scoop on the current GTA assignment market.
Sellers Desperate to Sell Has Led to Low Pricing
According to Obregon, homebuyers occasionally put down a deposit on a unit but then receive a job in a different location before closing, or they have kids and realize the unit they bought will be too small for their expanding family, which is why some investors choose to sell their assignment. The course of life shifts. In other instances, investors may have purchased a pre-construction unit years ago and are now experiencing difficulties closing because of rising interest rates and more stringent mortgage approvals.
According to Obregon, investors occasionally purchase condos before they are built with the intent to resell them. Flipping a pre-construction condo entails buying and selling before the building is finished. This was done by buyers who believed they could time the market.
In the past, when pre-construction condo prices were rising, investors would buy and sell, earning $200,000 to $300,000 in profits. Obregon says that the market has changed recently. People who put a deposit on a pre-construction unit in the past when interest rates were lower but are currently ineligible for a mortgage must sell, and they may be doing so for less than they paid for it five or six years ago.
Pre-Construction Prices Increased, Creating a Significant Price Gap (and Gains).
The market is therefore hot, but how hot is it?
According to Obregon, assignment sales are enormous in the current market. Between an assignment sale and a pre-construction project or a resale unit, there used to be at least a 10% price difference. As a result, an assignment would cost 10% less than a unit that was already for sale or under construction. That was regarded as a profitable investment. However, since the pre-construction market changed in the middle of 2022, the assignment market has exploded. For investors, the situation is currently even better. Because savvy investors switched their investment portfolio to assignments rather than investing in the pre-construction market, pre-construction sales have slowed down.
Investors have profited greatly from this new environment, according to Obregon. In Toronto, the average price for pre-construction real estate is currently between $1,600 and $1,700 per square foot. But the average price per square foot on the assignment market is currently between $1,000 and $1,100. Buyers can invest in an assignment sale at a reduced cost and possibly resell the same condo at a later date for a healthy profit, which is a significant difference.
Important Information: The Developer Must Grant Permission.
Do investors need the developers’ permission to sell their assignment?
Obregon explains that even if your developer includes an assignment clause in their pre-construction agreement allowing you to assign your unit, you still need to get consent. You cannot list your unit for sale if the developer won’t allow you to assign. However, sellers are still able to take action.
Because they don’t want their current inventory to compete with assignment sales, some developers are currently refusing to permit assignment sales. Despite this, the scene is very lively. Therefore, how do assigners sell their units? How do you locate a buyer? Potential sellers locate a platinum agent and request that agent to make contact with a client up until assignment approvals are available. Platinum agents intervene at that point to help close the deal.
Obregon emphasizes that even if the developer declines, you can still get in touch with an agent to start marketing your apartment to potential buyers. Until the developer gives their approval for you to assign, you can put an agreement in place between the assignor and the assignee and get things moving. Always deal with a pre-construction agent who specializes in these transactions, keep in mind. Platinum agents have a clientele of investors because they specialize in the pre-construction market. These agents can frequently obtain assignment approvals earlier because of their connections with the developers.
When you receive the developer’s approval to assign, this kind of agent can find a client for you, and you’re then good to go.
And repeat the process if you want to invest in an assignment sale. Get in touch with a knowledgeable pre-construction agent. Let them know where you are looking and what kind of unit you are looking for. The price the buyer paid for the assignment five or six years ago will be a good starting point for platinum agents when searching for assignments. If your agent locates that unit, they will launch the offer, keep track of everything, and when the developer is prepared to approve the assignment, your agent will hand over all the paperwork and launch the transaction.
Good to Know: Sales of Assignments are More Complicated…but Safe.
Assignment sales may be slightly more challenging than traditional resale or pre-construction sales. This is so because there are three parties involved in these sales: the assignor, the assignee, and the developer. The careful handling of matters like occupancy and the return of the seller’s deposits is guaranteed by platinum agents.
Assignment deposits are safe and placed in either the brokerage’s or the attorney’s trust account; if the deal falls through for any reason, the assignee will receive a full refund. The purchase is secured.
You Can Avoid Bidding Wars and Potentially Save on Taxes
According to Obregon, one advantage of purchasing an assignment unit is that the buyer won’t have to wait many years to move into a brand-new condo. A few months prior to the scheduled occupancy date or even while the property is occupied, assignment sales occasionally take place.
- Purchase a new condo right away.
- Avoid price wars.
- potentially save money on GST/HST.
- Obtain VIP benefits, such as upgrades and capped development costs.
- choose your colors and finishes, if applicable.
Because only you are viewing the unit, you can avoid bidding wars and possibly avoid paying taxes like the GST and HST. Additionally, it’s likely that the developer will leave you other benefits, such as upgrades and capped development costs, in addition to VIP benefits like a seven-year New Home Warranty Program. Depending on how far along construction is, you might even get the chance to pick your own finishes, colors, and upgrades. You might compare purchasing an assignment to purchasing a brand-new condo, except that you don’t have to wait for it to be finished and it has a lower price tag.
Brigitte was questioned about the anticipated duration of the demand for assignment sales.
She says, “I’ve learned from decades of working in this business that we can never predict anything with certainty. But I anticipate that this will go on for a while. In the Greater Toronto Area, it’s a hot market. There is no sign of a slowdown in the assignment market, in my opinion. “.
Contact a Platinum Agent and We’ll Find You the Best Unit or Client.
Visit our Assignments page for more details on assignment sales and to find out how these special offers operate.
Contact a platinum agent if you are a buyer or a seller of assignments who is an investor. Our platinum agents are aware of the current deals, and we can assist you in locating the assignment or client that best suits your requirements. We at Pakhomenko -Homes are aware of the locations, contents, and bargains available at assignment sales. Register right away and connect in advance.