Simply put, an assignment sale is a legal way to transfer your rights and obligations in an Agreement of Purchase and Sale to another buyer, before you get possession of the property.
Assignment sales can happen on resale properties, as well as newly built properties but they are more common on new construction.
Assignment sales can be an useful tool. An example is when the original purchaser’s financial or personal situation changes from the moment they signed the Agreement of Purchase and before the closing date. They have the right to find a new buyer and “assign” the contract unless it is specified otherwise in the original agreement. Many builders will charge and assignment fee that is outlined in the original APS and we have seen fees from a few hundred dollars to a few thousands. Also, there might be restrictions on advertising an assignment sale. Most builders do not allow you to publically advertise your assignment especially if they still have inventory available.
Assignment sales are mostly being sold through word of mouth and your Realtor’s networking pool of prospective buyers. The prospective assignees will need to have more cash upfront for an assignment sale compared with a resale property or a pre-construction purchase.
Sellers (or assignors) are typically looking to make a profit when assigning a property. Assignees will have to pay back all the deposits the assignor already made to the builder plus the profit (the difference from the initial purchase price to “today’s price”).
Assignment sales can be complex and there are tax implications. The best thing to do if you want to assign a sale or are looking to purchase an assignment is to seek the advice of a tax specialist. Generally, the assignor can expect to pay tax on any profits they realize from the assignment. Other costs involved in selling an assignment are real estate fees and legal fees.
If you are thinking of purchasing or selling an assignment, feel free to give me a call. I woukd be happy to help you out. 647-261-1405