What is an assignment?

An “assignment” is when the contract of a new condo (which was bought as a pre-sale) is sold to a person (the “assignee”) before the building of the property has been completed. Assignments can be a great way to purchase a property in a Sold Out development, sometimes for a price lower than the current market value. Savvy investors can do very well with these opportunities in addition to buying pre-sales.

Here is a simple example:

Jan 2003 - Alan and Judy (original “Buyers”) entered into an agreement to purchase an apartment for $200,000 from the Developer (the “Vendor”) as a ‘Pre-Sale’. As part of the agreement, they pay a deposit now of 25% - $50,000 with a balance of $150,000 due on completion in two years.

Jan 2004 - Alan and Judy decide to separate and neither one wishes to move in as planned, they decide to sell the contract to Bob (the “Assignee”) for only $24,000 as the building is now Sold Out. The value has gone up considerably but they want a quick sale. Bob pays Alan and Judy $24,000 PLUS $50,000 for a total of $74,000 and takes over their contract.

Jan 2005 - completion Bob (the “Assignee”) completes the contract with the Developer (the “Vendor”) and owes the balance of the original purchase price which is $150,000. This adds up to a total cost of $224,000.

Here is the best part:
The current value is actually $250,000. Bob has realized a 35% return on his $74,000 investment in just one year!

Contact me anytime if you have any questions at all.

Larry@MrRealEstate.com