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 (assignor) 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.
Realtors Assignment Contract
that is incorporated with a standard Contract of Purchase & Sale
|
