07.23.2021
Our Guide to Assignment Sales
Pre-Construction
In a city that continues to grow as rapidly as Toronto, new homes are being built left, right, and centre. Whether they’re condo buildings, townhouses, or even standalone single-family homes, the construction of new properties in this city never seems to stop.
However, sometimes the initial person buying the new construction is the person who moves into the space in the end. This might sound like an abstract concept, but it’s actually quite commonplace – especially in the world of pre-construction real estate.
These types of pre-construction transactions are referred to as “assignment sales” within the business, and regularly offer eager buyers opportunities to purchase homes that they otherwise wouldn’t have been able to.
To learn more about assignment sales and how they could benefit you, here’s our comprehensive guide to this fascinating real estate transaction process.
Understanding Pre-Construction Real Estate
Before we can take a deep dive into assignment sales, we must first establish a little bit of background on the subject of pre-construction real estate. As the term suggests, pre-construction real estate is the sub-section of the real estate industry that deals with the concept, creation, and selling of properties that are, quite literally, pre-construction.
You’ve likely seen ads and rendering of what a new construction is going to look like when it’s complete. While these ads are selling real properties, they’re not actually physically real just yet. They’re projections of legitimately sellable units that developers will (hopefully) bring to life one day soon.
Interested in learning more about the business of pre-construction condos in Toronto? These related blogs can help keep you informed.
- 5 Pre-Construction Projects To Keep Your Eye On Right Now
- Buying A Pre-Construction Property? Here’s How The HST Rebate And NRRP Rebate Work
- 4 Things To Know Before You BUuy A Pre-Construction Condo In Toronto
Who Are Developers?
Real estate developers are those responsible for this long-term pre-construction vision. These are the pioneers who see the potential in a plot of land and decide to risk their time, reputation, and money (mostly other people’s money) to purchase and develop into sellable homes.
Developers start pre-construction projects from the ground up — quite literally. They court financiers, source architects and build teams, hire marketers and advertisers, and make all the final decisions in order to bring their ideas into existence.
It’s also a real estate developer’s responsibility to sell the idea of a home that could be made into a real thing to buyers that must be willing to trust them and their idea. No easy task, but that’s why real estate developers reap the biggest rewards when their master plans come to fruition.
How Assignors Come Into Play
Before investors and financiers ever feel comfortable opening up their pocketbooks to begin construction on a new real estate development, it’s down to the developers to sell these non-existent ‘ghost’ homes to buyers. In general, pre-construction developments must be at about 70% sold before ground breaks on construction.
The original buyers of these ghost homes are called assignors. They’re the first individuals — or sometimes real estate investment groups — that buy into a pre-construction concept and are willing to put their own money down for a unit that won’t yet exist for a few years.
Assignors are taking somewhat of a risk in purchasing a property that either hasn’t started construction yet or is in its infancy.
Interested in kick-starting your real estate investment career? Learn all you need to know about making smart investments in prime Toronto real estate by following the links below:
Finally — What’s An Assignment Sale?
Now that we have enough background information to understand the pre-construction process up until this stage, we can begin to define what an assignment sale is. Should an assignor wish to sell the contract to their non-existent home before ever actually moving into it, this transaction would constitute an assignment sale.
When an assignor sells the contract to their pre-construction home, the party who buys the property title is called the assignee.
Love condos, but not sure if you’re ready to wait for a pre-construction property? These related pages will help clear things up for you.
- Resale Condos VS. Pre-Construction: Which Is Right For You?
- The Toronto Condo Market Is Hot Again: Here’s Why
- The Quick Guide To Condo Closing Costs
When Do They Happen?
Although multiple purchases and sales of a not-yet-made property might sound a little suspect, assignment sales are very common and, when completed with the help of a knowledgeable and experience Realtor®, are very safe.
There are a number of reasons why an assignor may wish to sell their pre-construction property before ever moving into it. In the case of an investor, they may feel they’ve reached an opportune time in the market where they can make a significant profit on their original investment by selling their pre-construction home.
Or, in the case of an individual buyer, their future living situation may have changed since the time they originally bought the home from the developer. Whatever reason an assignor may have to sell their pre-construction property to an assignee, so long as the transaction is safely conducted via a reputable Realtor®, there’s little to worry about for an assignee.
Looking for more insider insight into Toronto’s fast-paced real estate industry? See how you can stay in the know and get ahead of the market here.
