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Maximize Your Real Estate Investments: Understanding Pre-Construction Assignments
Discover a unique opportunity to maximize your real estate investments with pre-construction assignments. A pre-construction assignment is a process of assigning a contract to purchase a property that is still in the pre-construction phase. Our guide will help you understand the benefits of pre-construction assignments, including discounted prices, potential appreciation in property value, and the ability to sell the property for a profit before completion. Learn how to make the most of this investment strategy and get ahead in the competitive real estate market.
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 current assignment sale process is complicated and difficult to navigate. Each assignment sale involves several stakeholders often working in silos. As a result, each stakeholder is faced with their own set of challenges in the assignment sale journey.
Assignor
The biggest challenge for Assignors is the time and effort required to complete an assignment sale. Marketing restrictions and strict financing requirements for the Assignee can make it difficult for the Assignor to attract potential buyers. On top of that, each developer has a unique set of conditions for assignment sales (e.g., caps on development charges, common expense credits, and other incentives) and must approve all assignment sales before they are finalized. Should the sale not be approved, the Assignor not only loses the sale, but they also have an ongoing obligation with the developer to close on the unit.
Broker
For Brokers, there is usually a knowledge gap with assignment sales when compared to a real property sale – particularly around marketing. MLS restricts brokers from marketing assignment sales through their platform which can make it very difficult to find potential Assignees. While there are brokers who specialize in assignment sales, there is no standardized platform for marketing assignment sales. This makes it harder to convince clients to consider an assignment sale, determine market value, and set a transaction price.
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