It’s a great time to buy a condo on assignment in Toronto!

Who wouldn’t take advantage of buying at 2018 prices?

Buying new construction today can be expensive!  There may be an excellent option for you to consider and secure tremendous discounts (buying at 2018 prices).

Over the last few months, we have observed a slowdown and balancing out the Toronto resale market due to rising interest rates. Preconstruction sales have also slowed down significantly, and as a result, developers are offering incentives that we have not seen before.

Think about a condo 'assignment'

Although we have noticed a significant reduction in new condo sales launches in 2022 compared to previous years, prices are remaining stable. Developers control their inventory. They take their time reacting to market shifts.   As a result, they will hold back on properties and release them in phases to avoid overwhelming the market. 

Given the current state of the real estate market, investments in condo assignment deals can be an excellent option for investors and buyers.   Therefore, we have been closely examining which condo assignment opportunities provide value.

To understand the pre-construction market, we’ve created the most commonly asked questions to educate our clients.

What is a condo assignment sale?

An assignment is a sales transaction between the original buyer of a condo (the assignor) and another buyer (the assignee) before the original buyer closes on the condo. Rather than buying the condo from the assignor, the assignee buys the “right” to acquire the condo from a builder or original seller. The assignee then agrees to perform all of the assignor's contractual obligations under the original agreement.

Why would someone want to assign a condo?

In pre-construction sales, the period before you can officially move in can be lengthy, ranging from two to eight-plus years. Various life events can happen, or the buyer’s financial situation may change during this period.  So instead of continuing to make payments or close on the condo, the buyer may decide that it makes more economic sense for them to sell.   However, we do not recommend buying a pre-construction condo with the intention of selling it (aka “flipping a pre-construction condo”) for various reasons.

What are the advantages of buying a condo assignment right now in Toronto?

There is no doubt that pre-construction condos are expensive right now. Builders structure their prices based on making their return on the site profitable. This may reflect something other than the actual value of the condo, which is based on the resale market. In pre-construction, you usually pay a premium on the asset, but in an assignment transaction, you purchase a brand-new asset at whatever the assignor is willing to charge. The price of a condo assignment probably will be more than what was initially paid but less than what you would pay for a pre-construction or brand-new resale unit. Someone selling their condo on assignment would be willing to let it go for less because they want to avoid closing costs.  

Other advantages of buying a condo assignment include the following: 

• Better Opportunities: If you miss your chance to purchase a preconstruction condo, you would have to wait years for a unit in the building to come to market. Buying on assignment allows you to get into your desired building earlier, sometimes just a few months before occupancy.

• Less Competition: Not everyone looks for assignments or is even familiar with what they are. Fewer buyers pursue this purchasing option, so they can usually avoid stressful multiple-offer situations and take advantage of a seller’s need to sell quickly.

• Brand New Unit: Aside from the many benefits of purchasing a new building, if the assignment buyer buys early in the construction, they can often select their finishes and any upgrades.

Take Advantage of Assignments Today

During the last few months, interest rates had risen significantly from the rates original purchasers were pre-approved for when they bought pre-construction.  We are seeing assignments coming to market from our boom years in 2016 and 2017 when the pre-construction market was hot, and there were plenty of high-quality launches. 

The rising interest rates and inventory in condo assignments provide an excellent opportunity. As a buyer or investor, you can purchase a brand-new condo in the most sought-after locations in Toronto at 2018 and 2019 pre-construction prices.

Why shouldn’t I buy a condo intending to sell on assignment?

Generally, for a seller to get their money out of an assignment transaction, the new purchaser must match the deposits that the buyer has paid to the builder plus any additional profit since the original purchase. Often the motivator for selling on assignment is that the assignor doesn't want to get a mortgage and go through the process of closing and renting out their unit for a year. Ergo, the assignments that are realistic to sell are price-advantageous. A buyer will only pay the full value of a built condo, so you often have to sell at a discount for a condo assignment. This is one of the reasons we do not advise our clients to sell on assignment. There are other hurdles of assignment, such as the builder not allowing you to have the unit on MLS, which can significantly decrease exposure. There are also tax disadvantages regarding HST and capital gains.

What to expect next.

In closing, economic experts are signalling that we are close to seeing the end of interest rate hikes; this opportunity might only last for a while.  Our team is always looking for amazing deals, and within the current market, there are assignment deals priced lower than we have seen in the last few years.

Please get in touch with us to get the best assignment deals on the market.