What are Property Assignments?
An Assignment is a legal sales transaction whereby the Original Purchaser (the “Assignor”) of a property sells, and thereby transfers, their rights and obligations under the original contract to a new Purchaser (the “Assignee”). An Assignment takes place from the time an original Agreement For Sale has occurred between the Developer (the “Vendor”) and the Original Purchaser, and PRIOR to Completion of the Property.
Imagine that one is stepping into the shoes of the Original Purchaser for a fee in order to purchase the desired property.
The “Assignee” assumes all of the “Assignor’s” duties and obligations under the original Agreement of Sale. These rights and obligations are stated in the original Agreement of Sale and include terms such as deposits, included items, Completion date and required disclosure statements. Upon Completion, the “Assignee” is granted the Title to the real property.
An Assignment is legally permitted unless otherwise expressed in writing. An Assignment fee may be charged by the Developer and is normally a cost borne by the “Assignor” (the Original Purchaser).
Remember, the Developer is the legal owner of the interest in the real property until a legal transfer of Title has occurred upon Completion. In all cases, written consent from the Developer (the “Vendor”) will be required for an Assignment transaction.
Example of a Property Assignment
To simplify, an example of an Assignment transaction is provided below:
Mary (the “Assignor”) entered into an agreement to purchase an apartment for $200,000 from the Developer (the “Vendor”) as a ‘Pre-Sale’.
As part of the Agreement For Sale, she paid a total deposit of 25% = $50,000.
Six months later and prior to Completion of the apartment, Mary decides to sell, and thereby transfer, her contractual rights and obligations to purchase the apartment for $28,000.
Fred (the “Assignee”) missed his chance to purchase an apartment when the Developer was ‘pre-selling’. The building is now sold out. He wants to purchase Mary’s rights and obligations for her asking price of $28,000.
Fred pays to Mary $28,000 PLUS replacement of her deposit of $50,000 which equals a total of $78,000.
When the building is Complete, Fred owes the “Vendor” (the Developer) the balance of the Agreement For Sale which is $150,000 (being the original price less the original deposit).
What are Pre-Sales / Off-Plan Sales?
More commonly referred to as an Off-Plan sale in Europe, a Pre-Sale represents a pre-construction sale program carried out by a condominium Developer who is required to sell a certain percentage of units before a lender will commit to finance construction of the project.
With an Assignment sale, the Purchaser is buying the rights and obligations to the yet-to-be-built property from the Original Purchaser, but with a Pre-Sale, the Purchaser is buying directly from the Developer, ie. nobody has bought it first.
People generally buy off-plan as an investment. There is an element of risk involved and you get a better price to reflect this.
In times of high demand, it may be the only way to get your hands on a hot property in a sought after area.
Historically, investors have fared well from buying property off-plan. Good quality new homes can often get re-valued shortly after completion with surprisingly high gains for the original buyers.
In times of a rising property market, it is perfectly possible to achieve a significant profit even before a brick has been laid, through an Assignment sale.
Buying off-plan means that the purchaser often does not have to pay the balance for quite some time after signing the contracts. For all this time the value of ‘their’ property could be rising, and they still have not had to sell their existing home, meaning extra benefit if they can sell later at a higher price.