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.
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