Are you someone who’s looking for an investment property in Toronto or the GTA but don’t know where to start? If yes, why not consider purchasing a pre-construction property on assignment. Purchasing a pre-construction property on assignment comes with a fair share of advantages such as: buying a property for less, buyer’s advantage, built-in equity, and guaranteed warranty. To learn more about these pros, check out our blog, “Pre-Construction Property on Assignment: Helpful Reasons Why It’s Beneficial To You”
Now that you know the advantages of buying a pre-construction property on assignment, you’re probably wondering “what’s next?”. Don’t you worry because we got you covered! In this blog, we’ll be talking about things to keep in mind when buying a pre-construction property on assignment. We’ll be addressing topics like agreement of purchase and sales, payment structure, closing costs, using a broker, and customizing your unit.
Table of Contents
What is a Pre-Construction Property on Assignment
To recap, suppose someone purchases a pre-construction and decides to sell their contract with the builder before officially taking full ownership of the property. Since this person doesn’t yet own the condo itself, they’ll be selling their Agreement of Purchase and Sale with the builder to a new buyer. As a result, this type of transaction is called an assignment sale.
Agreement of Purchase & Sale
When purchasing a property on assignment, you’ll essentially be inheriting the Agreement of Purchase & Sale contract from the original purchaser. Before purchasing a property on assignment, ensure you have a lawyer review the contract because the terms of the agreement are non-negotiable.
Payment Structure
A traditional deposit structure for a pre-construction property is 15% – 20%, spread out over a few years during the building stage. Keep in mind this varies from developer to developer. Depending on the property’s phase, you are obligated to pay the Assignor the deposits they’ve already paid to date when you purchase the assignment. Additionally, you must pay the remaining balance to the builder. Thus, this could be a 15% – 20% upfront payment.
However, on rare occasions, you can purchase an assignment with as little as 5% down, depending on the Assignor’s terms. If you’re putting less money down, the Assignor must wait until the registration date to receive their profits.
Closing Costs
Purchasing a property on assignment means you’ll be covering the closing costs when the property is registered with the city. Closing costs consist of: Land Transfer Tax, Development Charges, Utility Connection Fees, HST and any legal fees. Additionally, upon registration is when your mortgage will officially begin.
You’ll be free from HST if you plan to use the property as your primary residence. On the other hand, if you’re leasing the property to renters, you’ll need to pay the HST upfront. An alternative to paying the HST upfront is having your lawyers file for a total HST rebate, which will refund the full cost 4 – 6 weeks later. However, you must have a one-year lease in place to be eligible for an HST rebate.
Using a Broker
A standard real estate transaction is quite different from an assignment sale because the paperwork is more complex. For this reason, it’s beneficial to have an experienced broker who’s familiar with assignment sales to go over the paperwork with you. Luckily, at Birks Asset Management, we have a team of experienced brokers who have years worth of experience with assignment sales, who can help you throughout your transaction. Learn more about how we can help you by visiting our services page.
Customizing Your Unit
When you purchase the assignment property, you may be eligible to submit customization requests to the builder. Typically the builder contacts the buyer one year before completion to confirm customization details. Meaning if you purchase a property on assignment a year before the finish, then you’re likely to give in your customizations.
Overall, purchasing a pre-construction property on assignment comes with plenty of benefits like a brand new property, possible customizations, and a short closing wait. Thus, don’t shy away from assignment sales because it might be what you’re looking for!
5 Resourceful Reminders When Buying a Pre-Construction Property on Assignment in Toronto and the GTA
Are you someone who’s looking for an investment property in Toronto or the GTA but don’t know where to start? If yes, why not consider purchasing a pre-construction property on assignment. Purchasing a pre-construction property on assignment comes with a fair share of advantages such as: buying a property for less, buyer’s advantage, built-in equity, and guaranteed warranty. To learn more about these pros, check out our blog, “Pre-Construction Property on Assignment: Helpful Reasons Why It’s Beneficial To You”
Now that you know the advantages of buying a pre-construction property on assignment, you’re probably wondering “what’s next?”. Don’t you worry because we got you covered! In this blog, we’ll be talking about things to keep in mind when buying a pre-construction property on assignment. We’ll be addressing topics like agreement of purchase and sales, payment structure, closing costs, using a broker, and customizing your unit.
Table of Contents
What is a Pre-Construction Property on Assignment
To recap, suppose someone purchases a pre-construction and decides to sell their contract with the builder before officially taking full ownership of the property. Since this person doesn’t yet own the condo itself, they’ll be selling their Agreement of Purchase and Sale with the builder to a new buyer. As a result, this type of transaction is called an assignment sale.
Agreement of Purchase & Sale
When purchasing a property on assignment, you’ll essentially be inheriting the Agreement of Purchase & Sale contract from the original purchaser. Before purchasing a property on assignment, ensure you have a lawyer review the contract because the terms of the agreement are non-negotiable.
Payment Structure
A traditional deposit structure for a pre-construction property is 15% – 20%, spread out over a few years during the building stage. Keep in mind this varies from developer to developer. Depending on the property’s phase, you are obligated to pay the Assignor the deposits they’ve already paid to date when you purchase the assignment. Additionally, you must pay the remaining balance to the builder. Thus, this could be a 15% – 20% upfront payment.
However, on rare occasions, you can purchase an assignment with as little as 5% down, depending on the Assignor’s terms. If you’re putting less money down, the Assignor must wait until the registration date to receive their profits.
Closing Costs
Purchasing a property on assignment means you’ll be covering the closing costs when the property is registered with the city. Closing costs consist of: Land Transfer Tax, Development Charges, Utility Connection Fees, HST and any legal fees. Additionally, upon registration is when your mortgage will officially begin.
You’ll be free from HST if you plan to use the property as your primary residence. On the other hand, if you’re leasing the property to renters, you’ll need to pay the HST upfront. An alternative to paying the HST upfront is having your lawyers file for a total HST rebate, which will refund the full cost 4 – 6 weeks later. However, you must have a one-year lease in place to be eligible for an HST rebate.
Using a Broker
A standard real estate transaction is quite different from an assignment sale because the paperwork is more complex. For this reason, it’s beneficial to have an experienced broker who’s familiar with assignment sales to go over the paperwork with you.
Luckily, at Birks Asset Management, we have a team of experienced brokers who have years worth of experience with assignment sales, who can help you throughout your transaction. Learn more about how we can help you by visiting our services page.
Customizing Your Unit
When you purchase the assignment property, you may be eligible to submit customization requests to the builder. Typically the builder contacts the buyer one year before completion to confirm customization details. Meaning if you purchase a property on assignment a year before the finish, then you’re likely to give in your customizations.
Overall, purchasing a pre-construction property on assignment comes with plenty of benefits like a brand new property, possible customizations, and a short closing wait. Thus, don’t shy away from assignment sales because it might be what you’re looking for!