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We’ll explain the ins and outs of assigment sales.
An assignment is when a Seller sells their interest in a property before they take possession – in other words, they sell the contract they have with the Builder to a new purchaser. When a Seller assigns a property, they aren’t actually selling the property (because they don’t own it yet) – they are selling their promise to purchase it, along with the rights and obligations of their Agreement of Purchase and Sale contract. The Buyer of an assignment is essentially stepping into the shoes of the original purchaser.
The original purchaser is considered to be the Assignor; the new Buyer is the Assignee. The Assignee is the one who will complete the final sale with the Builder.
An assignment is a sales transaction where the original buyer of a property (the “assignor”) allows another buyer (the “assignee”) to take over the buyer’s rights and obligations of the Agreement of Purchase and Sale, before the original buyer closes on the property (that is, where they take possession of the property). The assignee is the one who ultimately completes the deal with the seller.
In other words, an assignment clause allows the buyer of a home to sell the place before they take possession of it. In Ontario, assignments are more common in pre-built homes and condos than on resale properties, but they are possible on any type of trade.
When done properly, assignments are legal and can be a useful tool for buyers and sellers. An example of this would be a situation where a buyer’s financial or personal situation changes before closing. Assigning allows them to pass along the contract to another buyer, without backing out of the deal with the seller.
For instance, someone could buy a house or condo that is still under construction and might not be ready for a couple of years. The buyer’s work or family situation could change during that time, causing them to change their mind about living in the condo they purchased. Another example may be where a buyer runs into financial difficulties to close on an existing house and wants to find another buyer rather than risk the financial penalties that might come with having to try to back out of the deal.
RECO is continuing to monitor this issue, and if a registered real estate professional breaches the rules, they would be pursued to the full extent of the law. In addition, RECO has asked its inspection team to watch for anything unusual related to assignments.
If you work with a registered real estate professional and feel like they did not look out for your best interests, you can file a complaint with RECO and we will investigate the situation.
As with any contract, it’s crucial for buyers and sellers to know what they’re signing. Real estate contracts are legally-binding, so getting legal advice can be a smart idea. It’s important to know what each clause means and how it will affect you. Buyers and sellers are encouraged to ask their real estate professional to explain the clauses in the contract.
Beyond contracts, RECO encourages buyers and sellers to do their homework. That means interviewing their salesperson, getting a comparative market analysis to understand what their home might be worth at the original time of purchase,today and future market expectations and having realistic expectations about timelines, pricing and how the process will work. For more details, visit www.reco.on.ca (https://www.reco.on.ca/).