Assignments
The Best Way to Invest in Real Estate: Comprehend Pre-Construction Assignments
What is an Assignment Sale?
An assignment sale is a type of new condominium sale which occurs between the original buyer, the Assignor, and a new buyer, the Assignee. The Assignor purchases a unit from the condo developer with the intention of selling before the project closes. From there, the Assignor works with a broker to market the unit to potential Assignees.
After reviewing offers from the potential Assignees, the Assignor will select their desired offer and go to the developer for approval. If the developer approves the assignment sale, the Assignor sells their interest, also known as their Agreement of Purchase and Sale (APS), in a preconstruction property and the Assignee becomes the new owner of the unit.
There are many reasons why an Assignor may choose to sell on assignment: perhaps they are an investor looking to profit from price appreciation, they may have experienced a change in lifestyle (e.g. having children, new job, etc.), or they are no longer able to close. On the other side, Assignees may choose to buy on assignment because they don’t have to wait as long for their unit to be built, or they are able to buy the unit at below market value.
Pain Points for Key Stakeholders
The present assignment sale procedure is convoluted and challenging to understand. Every assignment sale involves a number of stakeholders, many of which operate independently. As a result, during the assignment sale process, every stakeholder has a unique set of difficulties.
Assignor
The time and effort needed to finish an assignment sale presents Assignors with their largest obstacle. Attracting potential purchasers can be challenging for the Assignor due to marketing limitations and stringent finance requirements for the Assignee. Furthermore, every developer has different requirements for assignment sales (such as limitations on development costs, credits for shared expenses, and other benefits), and all assignment sales require approval before they can be completed. In the event that the sale is rejected, the assignor forfeits the sale and is still obligated to close on the unit as per their agreement with the developer.
Broker
When comparing assignment sales to real estate sales, brokers typically have less competence, especially in the area of marketing. It might be exceedingly challenging to locate possible assignees because MLS forbids brokers from advertising assignment sales on their site. There are brokers that focus on selling assignments, but there isn’t a single platform that is used to promote these deals. This makes it more difficult to establish a transaction price, ascertain market worth, and persuade clients to consider an assignment sale.
