Below is a brief explanation & summary of purchasing a property by way of
an assignment. It is different from a "typical" real estate transaction.
In an assignment purchase you are buying the contract from the original purchaser
and do not own the property until the unit is physically ready to be occupied.
Summary of what transpires
in an assignment
The original purchaser buys a condo from the
Developer in 2006 for $400,000 with a total down payment of 25% ($100,000), completion
is scheduled for 2008.
In 2007 the original purchaser (assignor)
re-sells or assigns the property to another party (assignee) for a sale price
of $500,000.
To purchase the assignment the new buyer
(assignee) must pay the following in order to assume the assignment contract:
Original Deposit By Buyer One (assignor) On Signing Contract with developer $100,000
Plus: Difference in Assignment Price from
Original Price
$100,000
Total Cost by assignee to Purchase the Assignment
$200,000
When the property is ready for occupancy in
2008 the new buyer (assignee) shall complete the sale with the Developer under
the same terms and conditions per the original purchase and sale agreement. Please
Note: In the event buyer two (assignee) does not complete the said transaction,
the developer may go after buyer one (assignor). In this case buyer one should
seek Legal Advice.
In 2008 when property is complete and ready
to occupy, the following breakdown occurs
Original Sale Price $400,000
Original Deposit Paid by assignor & transferred
to assignee
$100,000
Funds required by assignee to Complete Sale
in 2008 (payable to Developer)
$300,000
Therefore the total cost for the property
is $500,000 with $200,000 due immediately (payable to Original Purchaser or assignor)
and $300,000 (payable to the Developer) due at completion. Assignment contracts
can either complete within 1 month of writing a contract or when the developer
finishes the building and the suite is ready for occupancy (it is negotiable).
Please discuss this with the Listing Agent.
Please note, the above information is simply a guideline. Any buyer who enters
into an assignment contract is highly recommended to seek independent Legal Advice.
Please also take note: A buyer should be qualified by a Mortgage Broker before
writing an assignment contract - these contracts are firm & binding. There
can be serious consequences and loses to buyer #2 (assignee) if he cannot complete
on the contract.
