Assignment deals are real my friends and a lot of people have no idea what they even are. If you are amongst that group never fear, I am here and will explain everything to you.
What are assignments?
Assignments are a very specific type of deal where the buyer is purchasing an agreement of purchase and sale for a new construction development from the original purchaser who bought from the developer originally.
Why would you buy one?
Typically assignment deals are attractive price wise. The new buyer is taking on a purchase of a property for less than market value.
Sounds good, right? I mean, who doesn’t love a good deal? I wish it was that simple but nothing in life ever is. To best explain assignments to you I am going to show you the pros and cons of doing a deal like this. Assignments are not the kinds of deals that everyone is going to be into, however there is almost always huge upside. You can decide for yourself.
- Ability to buy in a project that is no longer for sale
- Ability to negotiate- all terms, closings, caps, costs, deposits
- Buying lower than market value
- You may still get to pick finishes
- Less risk- development has usually started
- Harder to finance- not all banks will lend on this type of deal
- Need a large deposit- sellers usually want what they have paid plus their profit right away
- Taking on the contract may have problems if all terms have not been negotiated in the buyers favour ex. Closing cost caps
- You do not have the ability to see the property
- Dealing with occupancy- paying fees plus living through completion
Assignments are a great way to acquire real estate. The condo I live in now was an assignment. I knew the building I wanted to be in and my floorplan was sold out. I would have had to wait another 2+ years to purchase the condo I have on the resale market. I was able to secure the unit I wanted but most importantly secure a unit in a building I really wanted to be in. It was not an easy deal but 5 years later I can tell you I have done extremely well on this purchase. All the headaches I went through were just that something I had to deal with. I would definitely do it again. It does not need to be a scary process if you are working with someone who deals with this type of deal. Most agents do not. The paperwork is different, you need various approvals from lenders to the developer. Financing gets complicated. There are tax implications.
Each person’s goals and needs are unique. If you have not heard of this type of deal before I hope I taught you something.