When it comes to assignment agreements, first-time condo sellers often have many questions regarding the process. The following article is a Q&A that I conducted with Yossi Kaplan to help better understand what it is to sell by assignment.
Q: What is the cost of my unit and how is it broken down?
A: The asking price of the unit is whatever the assignor is trying to get. This is comprised of the original price the assignor agreed to pay in the Agreement of Purchase of Sale plus, the difference (premium) between the original price of the unit and the assignment price. For example, the assignor agreed to pay $345,000 for the unit and is currently asking $375,000 the margin is therefore $30,000.
Q: How long will my unit take to sell?
A: The length of time it takes to sell a unit depends on two main factors:
Price: How does your price compete with the builder if they still have units for sale and how is it competitive to other sellers within that building?
Stage of construction of the building: Assignments typically take longer if the building is in the stages of pre-construction. The level of interest increases as the public gets a better sense of what the building will look like once completed i.e: sales centre is ready, model suites to view.
We have seen assignments that have sold overnight, and we have done assignments that took us a year and a half to sell; it requires a lot of patience. If you start selling your assignment in the very early stages of construction, you can expect that even if you apply at the wrong market price it will still be a long cycle. Depending on how attractive your price is, your sale cycle will become shorter and shorter the closer you come to the completion of the building.
Q: What are the fees and taxes attached to the sale of my unit?
A: The assignor must pay a fee to the builder which is called an assignment fee. An assignment fee is determined by the builder and is in every assignor’s contract. Sometimes they are $0 but we have seen them as high as $3000 and $5000 and with speciality (luxury) buildings it can be even higher. In most condo buildings that we see, the assignment fees are between $1000 and $5000 and some are higher. The second fee is the lawyer free which is usually $1000 – $2000. Lastly is your real estate fee which would be stated in your agreement with your real estate brokerage. A government tax applies to all services. Further, every assignor’s lawyer should check with TARION to verify if the unit needs to be re-registered.
Q: Who will be paying the assignment fee?
A: For 9 cases out of 10 in assignment agreements, the assignor pays the assignment fee. The other option is that the assignee pays the assignment fee but it’s very rare.
Q: When do I receive my payment?
A: The payment schedule from an assignee to an assignor is not fixed, it can vary from sale to sale. Some people set expectations that there will be a deposit structure just like when they first bought the unit from the builder, however this is incorrect. The assignment is completely negotiated by contract between the assignor and the assignee with the help of the real estate agent and their lawyers who decide the schedule of payment. In most cases, the assignee will match the deposit that the assignor paid originally to the developer. For example, if the assignor first purchased the unit for $350,000 and the down payment was 10%, the assignee will match and deposit $35,000 into a trust account for the assignor’s broker. The remaining amount, which we call the premium or the margin, will be paid during the time of occupancy or most likely at time of registration which is final closing.
Q: What documents are required from me?
A: We send every assignor a list called The Assignment Information Form which the assignee completes and returns to us. The purpose of this form is to provide us with all the necessary information we need to know about the unit such as: When the unit was purchased, what was the purchase price, what was the deposit structure, what stage of payment is the assignor currently at, what rebates and incentives were included if any, etc…. We gather this information together with the original agreement to purchase.
Q: What happens to the rebates and incentives that originally came with my unit?
A: Excellent question, let’s say you (the assignor) wrote a contract to buy a condo for $400,000 and in the contract there were a few incentives. For example one incentive was a free television, another was a rebate on closing ‘pay 8% of the price’ and the third was free condo maintenance for 12 months. If the incentive is a physical object (like a television) it would be delivered to the unit at the time of closing. In the case of rebates and discounts, most of them would be discounted off the price at closing. So if the unit was valued at $400,000 and there is a $10,000 discount, you will not be receiving a $10,000 check. Instead the amount is reduced at the end and your final price would be $390,000 instead of $400,000. Now the other interesting question is if these rebates and incentives transfer with the assignment. Usually, but not always. The vendor must agree to pass on these incentives from assignor to assignee. The assignee would refer to his/her lawyer to ensure that the vendor agrees to those terms.
Q: What is the role of the lawyer in this process?
A: To answer any legal questions and to review the contracts drafted by the agents. They also act as the final barrier between a piece of paper and the final transaction. Once the agreement is drafted and everyone agrees, the parties go to a lawyer and the lawyer can give their professional opinion and sign off on the agreement.
You will also find step-by-step guides about the process of selling and buying an assignment by following the links below: