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10 Essential Things to Know About Real Estate Assignment Sales (for Sellers)
— We take our content seriously. This article was written by a real person at BREL.
What’s an assignment?
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.
Do assignments only happen with pre-construction condos?
It’s possible to assign any type of property, pre-construction or resale, provided there aren’t restrictions against assignment in the original contract. An assignment allows a Buyer of a any kind of home to sell their interest in that property before they take possession of it.
Why would someone want to assign a condo?
Often with pre-construction sales, there’s a long time lag between when the original contract is entered into, when the Buyer can move in (the interim occupancy period) and the final closing. It’s not uncommon for a Buyer’s circumstances to change during that time…new job out of the city, new husband or wife, new set of twins, etc. What worked for a Buyer’s lifestyle 4 years ago doesn’t always work come closing time.
Another common reason why people want to assign a contract is financial. Sometimes, the original purchaser doesn’t have the funds or can’t get the financing to complete the sale, and it’s cheaper to assign the contract to a new purchaser, than it is to renege on the sale.
Lastly, assignment sales are also common with speculative investors who buy pre-construction properties with no intention of closing on them. In these cases, the investors are banking on quick price appreciation and are eager to lock in a profit now, vs. waiting for the original closing date.
What can be negotiated in an assignment sale?
Because the Assignee is taking over the original purchaser’s contract, they can’t renegotiate the price or terms of the contract with the Builder – they are simply taking over the contract as it already exists, and as you negotiated it.
In most cases, the Assignee will mirror the deposit that you made to the Builder…so if you made a 20% deposit, you can expect the new purchaser to do the same.
Most Sellers of assignments are looking to make a profit, and part of an assignment sale negotiation is agreeing on price. Your real estate agent can guide you on price, which will determine your profit (or loss).
Builder Approval and Fees
Remember that huge legal document you signed when you made an offer to buy a pre-construction condo? It’s time to take it out and actually read it.
Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we’ve seen everything from $750 to $7,000).
There may be additional requirements as well, the most common being that the Builder has to approve the assignment.
Marketing Restrictions
Most pre-construction Agreements of Purchase & Sale from Toronto Builders do not allow the marketing of an assignment…so while the Builder may give you the right to assign your contract, they restrict you from posting it to the MLS or advertising it online. This makes selling an assignment extremely difficult…if people don’t know it’s available for sale, how they can possibly buy it?
While it may be very tempting to flout the no-marketing rule, BE VERY CAREFUL. Buyers guilty of marketing an assignment against the rules can be considered to have breached the Agreement, and the Builder can cancel your contract and keep your deposit.
We don’t recommend advertising an assignment for sale if it’s against the rules in your contract.
So how the heck can I find a Buyer?
There are REALTORS who specialize in assignment sales and have a database of potential Buyers and investors looking for assignments. If you want to be connected with an agent who knows the ins and outs of assignment sales, get in touch…we know some of the best assignment agents in Toronto.
What are the tax implications of real estate assignment?
Always get tax advice from a certified accountant, not from the internet (lol).
But in general, any profit made from an assignment is taxable (and any loss can be written off). The new Buyer or Assignee will be responsible for paying land transfer taxes and any HST that might be due.
How much does it cost to assign a pre-construction condo?
In addition to the Builder assignment fees, you will likely have to pay a real estate commission (unless you find the Buyer yourself) and legal fees. Because assignments are more complicated, you can expect to pay higher legal fees than you would for a resale property.
How does the closing of an assignment work?
With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. On the second closing (between the Builder and the Assignee), the Assignee pays the remaining amount to the Builder (usually with the help of a mortgage), and pays land transfer taxes. Title of the property transfers from the Builder to the Assignee at this point.
I suppose it could be said that there is a third closing too, when the Buyer takes possession of the property but doesn’t yet own it…this is known as the interim occupancy period. The interim occupancy occurs when the unit is ready to be occupied, but not ready to be registered with the city. Interim occupancy periods in Toronto range from a few months to a few years. During the interim occupancy period, the Buyer occupies the unit and pays the Builder an amount roughly equal to what their mortgage payment + condo fees + taxes would be. The timing of the assignment will dictate who completes the interim occupancy.
Assignments vs. Resale: Which is Better?
We often get calls from people who are debating whether they should assign a condo they bought, or wait for the building to register and then sell it as a typical resale condo.
Pros of Assigning vs. Waiting
- Get your deposit back and lock in your profit sooner
- Avoid paying land transfer taxes
- Avoid paying HST
- Maximize your return if prices are declining and you expect them to continue to decline
- Lifestyle – sometimes it just makes sense to move on
Cons of Assigning vs Waiting
- The pool of Buyers for assignment sales is much smaller than the pool of Buyers for resale properties, which could result in the sale taking a long time, getting a lower price than you would if you waited, or both.
- Marketing restrictions are annoying and reduce the chances of finding a Buyer
- Price – What is market value? If the condo building hasn’t registered and there haven’t been any resales yet, it can be difficult to determine how much the property is now worth. Assignment sales tend to sell for less than resale.
- Assignment sales can be complicated, so you want to make sure that you’re working with an agent who is experienced with assignment sales, and a good lawyer.
Still thinking of assignment your condo or house ? Get in touch and we’ll connect you with someone who specializes in assignment sales and can take you through the process.
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Raj Singh says:
What can be things to look for, especially determining market value for an assigned condo? I’m the assignee.
Sydonia Moton says:
Y would u need a lawyer when u buy a assignment property
Gideon Gyohannes says:
Good clear information!
Who pays the assignment fee to the developer? Assignor or Assignee?
Thanks Gideon 416 4591919
Melanie Piche says:
It’s almost always the Seller (though I suppose could be a point of negotiation).
Fiona Rourke says:
If there are 2 names on the agreement and 1 wants to leave and the other wants to remain… does the removing of 1 purchaser constitute an assignment
Brendan Powell says:
An assignment is one way to add or remove people from a contract, but not the only way…and not the simplest. Speak to your lawyer for advice on what makes the most sense for your specific situation. For a straightforward resale purchase you could probably just do an amendment signed by all parties. If it’s a preconstruction purchase with various deposits paid, etc it could be more complicated.
Haroon says:
Is there any difference in transaction process If assigner or seller of a pre constructio condo is a non resident ? Is seller required to get a clearance certificate from cRA to complete the transaction ?
Nathalie says:
Hello , i would like to know the exact steps for reassignment property please.
Amazing info. Thanks team. I may just touch base with you when my property in Stoney Creek is completed in. 2020. I may need to reassign it to someone Thanks
Victoria Bachlowa says:
If an assignor renegs on the deal and refuses to close because they figured out they could get more money and the assignment was already approved by the builder and all conditions fulfilled what can the Assignee do. I have $33,000 dollars in trust in the real estate’s trust fund. They sent me a mutual release which I have not signed. The interim occupancy is Feb. 1 and the closing is schedule for Mar. 1, 2019. I have financing in place, was ready to move in Feb. 1 and I have no where to live.
Definitely talk to your lawyer right away. They’ll want to look at your agreement of purchase and sale and will be able to advise you.
With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee. Can I assume that these closing happen at the same time? I’m not sure how and when I would be paid as the Assignor.
What happens to the deposits or any profits already paid if the developer cancels the project after an assignment?
Hi, Did you get answer to this? I did an assignment sale last year and now the builder is not completing apparently and they are asking for their money back. Can they do that? After legal transactions, the lawyer simply said “the deal didn’t go through”. Apparently builder and the person who assumed the assignment agreed on taking out the deal. What do I have to pay back after it was done a year ago
This is definitely a question for your lawyer – as realtors we are not involved in that part of the transaction. I would expect that just as the builder would have to refund your deposits, you would likely need to do the same…but talk to your lawyer. As to whether the builder can cancel a project, yes they always reserve that right (but the details of how and under what circumstances would be in your original purchase agreement). It’s one of the annoying risks in buying preconstruction!
I completed the sale of my assignment in Dec 2015 however the CRA says I should be reporting the capital income in 2016 when the assignee closed his deal with the developer in July 2016. That makes no sense to me since I got all my money in Dec 2015. Can you supply any clarification on that CRA policy please?
You’d have to talk to the CRA or an accountant – we’re real estate agents,so we can’t give tax advice.
Hassan says:
Hello, You said that there are two closings. The first one between the assignor and the assignee and the second one between the builder and the new buyer (assignee). My question is that in the first closing does the assignee have to pay the assignor the deposit they have paid and any profit in cash or will the bank add this to the assignee’s mortgage?
The person doing the assigning usually gets their money at the first closing.
Kathy says:
What is the typical real estate free to assign your contract with the builder ?
Hi Kathy While we do few assignments (as they are rarely successful, and builders do not make it easy), in past we have charged more or less the same as we do for a typical resale listing. While there are elements to assignments that should be easier than a resale (eg staging), many other aspects of assignments are much MORE time-consuming, and the risk much higher since attempts to find a buyer for assignments are often unsuccessful. It’s also important to note that due to the extra complication, lawyer’s fees to assign are typically higher than resale as well–although more $ for the purchase side vs the sale side.
Mitul Patel says:
If assignee has paid small amount of deposit plus the original 25% deposit that the assignor has paid to the builder and gets the Keys to the unit since interim possession has been completed, when the condo registration is done and assignee is getting mortgage from the Bank or Pays the remaining balance to the Builder using his savings and decides not to pay the Balance of the Profit amount to Assignor, what are the possibilities in this kind of scenario?
You’d need to talk to a lawyer to find out the options.
David says:
How much exactly do brokers get paid at sale of Assignment? i.e. Would the broker’s fee be a % of your assignment selling price or your home’s selling price? I’m really looking for a clear answer.
I am using this website’s calculator associated with selling your home in Ontario. But there is no information on selling assignments. https://wowa.ca/calculators/commission-calculator-ontario
Realtors set their own commission, so there is no set fee- that website is likely the commission that that agent offers. We often see commissions of 4-5% for assignments. The fee is a % of the price of the assignment – for example, you originally bought for $500K; you’re now assigning for $600K – commission would be payable on the $600K.
Candace says:
Question: if i bought a pre construction condo, can i sell it as soon as it closes or do i have to live in it for 1 year after closing in order to avoid capital gains taxes?
Or does the 1 year start as soon as you move in?
I would suggest you talk to your accountant re: HST credit implications and capital gains, but if you sell it for more than you paid for it, capital gains usually apply.
You mention avoid paying HST when you assign your property. What is the HST based on? It’s not a commercial property that you would pay HST. Explain. Thanks.
HST and assignments are complex and this question is best answered specific to your situation by your accountant and real estate lawyer. In some cases HST is applicable on assignment profits – more details can be found on the CRA website here:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/gi-120/assignment-a-purchase-sale-agreement-a-new-house-condominium-unit.html
If you are a podcast listener, the true condos podcast is also a great resource.
https://truecondos.com/cra-cracking-down-on-assignments/
heres one for your comment, purchase pre construction from builder beginning of 2021, to be finished end of 2021, (semi detached) here we are end of 2022, both units are now ready. Had one assigned but because builder didnt accept within certain time frame(they also had a 90 day clause wherein we couldnt assign prior to 90 less firm closing date (WHICH MOVED 4 TIMES). Anyrate now we have a new assinor but the builder says we are in default from the first one and wants 50k to do the assignment (the agreement lists the possibility of assigning for 12k) Also this deal would include us loosing our whole deposit and paying the 12k(plus fees) would be in addition too the 130k we are already loosing. The second property we are trying to close but interest rates are riducous, together with closing costs(currently mortgage company is asking that my wife be added to that one, afraid to even ask this builder. Any advice on how to deal with this asshole greedy builder? We are simply asking for assignment as per contract and a small extension for the new buyer(week or two) Appreciate any advice. Thank you
Dealing with builders/developers can be extremely painful, much worse than resale transactions in our experience. Their contracts are written to protect THEM. Unfortunately all I can say is follow the advice of your lawyer.
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Contract Assignment Agreement
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This Contract Assignment Agreement document is used to transfer rights and responsibilities under an original contract from one Party, known as the Assignor, to another, known as the Assignee. The Assignor who was a Party to the original contract can use this document to assign their rights under the original contract to the Assignee, as well as delegating their duties under the original contract to that Assignee. For example, a nanny who as contracted with a family to watch their children but is no longer able to due to a move could assign their rights and responsibilities under the original service contract to a new childcare provider.
How to use this document
Prior to using this document, the original contract is consulted to be sure that an assignment is not prohibited and that any necessary permissions from the other Party to the original contract, known as the Obligor, have been obtained. Once this has been done, the document can be used. The Agreement contains important information such as the identities of all parties to the Agreement, the expiration date (if any) of the original contract, whether the original contract requires the Obligor's consent before assigning rights and, if so, the form of consent that the Assignor obtained and when, and which state's laws will govern the interpretation of the Agreement.
If the Agreement involves the transfer of land from one Party to another , the document will include information about where the property is located, as well as space for the document to be recorded in the county's official records, and a notary page customized for the land's location so that the document can be notarized.
Once the document has been completed, it is signed, dated, and copies are given to all concerned parties , including the Assignor, the Assignee, and the Obligor. If the Agreement concerns the transfer of land, the Agreement is then notarized and taken to be recorded so that there is an official record that the property was transferred.
Applicable law
The assignment of contracts that involve the provision of services is governed by common law in the " Second Restatement of Contracts " (the "Restatement"). The Restatement is a non-binding authority in all of U.S common law in the area of contracts and commercial transactions. Though the Restatement is non-binding, it is frequently cited by courts in explaining their reasoning in interpreting contractual disputes.
The assignment of contracts for sale of goods is governed by the Uniform Commercial Code (the "UCC") in § 2-209 Modification, Rescission and Waiver .
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Other names for the document: Assignment Agreement, Assignment of Contract Agreement, Contract Assignment, Transfer of Contract Agreement, Transfer of Agreement
Country: United States
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Legal Templates
Home Business Documents Sales Agreement
Make Your Own Sales Agreement
Use our Sales Agreement to record the sale of any item and protect both buyer and seller.
Updated July 19, 2022
A sales agreement, or sale of goods agreement, is a written document between a buyer who wants to purchase goods and a seller who owns those goods and wants to sell them. In general, goods are something that you can use or consume that are moveable at the time of the sale, including watches, clothing, books, toys, furniture, and cars.
What Is a Sales Agreement?
Rights and duties of buyer and seller, when to use a sales agreement, how to write a sales agreement, sales agreement sample, why is a sales agreement important, sales agreement frequently asked questions.
A sales agreement is a legally binding contract that outlines the terms of a sale where there is an exchange of goods and services. It involves two or more parties, including the seller and buyer, and identifies the items to be sold, the selling price, and all other relevant details of the transaction. Sales agreements may be limited to isolated transactions for specific goods or may be used to create an ongoing sales relationship between parties.
Without a sales agreement, you may not be able to enforce the deal you made with the other party. Courts prefer a written agreement when choosing whether to enforce it against a person or business. A written agreement also helps you know all your obligations and benefits as part of the transaction.
A sales agreement may also be called:
- An agreement for the sale of goods
- A sale of goods agreement
- An agreement to sell
- A sales contract
Types of Goods in a Contract of Sale
Goods are movable property that can be sold in a sales agreement. This includes things like crops or stocks, for example. Different categories of goods can significantly impact the nature of the contract:
Existing Goods
These goods physically exist when the seller and buyer sign the contract. They can be split into two subcategories:
- Specific goods – also known as ascertained goods, are specific items agreed by both parties at the time of the sale. For example, the buyer may agree to buy specific equipment with a serial number.
- Unascertained goods – goods with no specific distinction. For example, a company may buy goods of the same type, such as chairs, without defining the exact style or make of the chair in the contract.
Future goods don’t exist at the time the contract is signed. Instead, the goods must be manufactured or grown before they’re supplied to the buyer. A common example is crops that aren’t yet grown. If a company wishes to buy corn from a farmer, it can purchase the right to the future product.
Contingent goods are a type of future goods but are based on a contingency. If those conditions are met, the buyer must purchase the goods listed in the agreement. If the conditions aren’t met, the buyer isn’t required to pay for the goods.
Warranties in Sales Agreements
Warranties are legally enforceable guarantees assuring the buyer that specific facts or conditions about the goods are true. Without a sales agreement, warranties may either apply automatically or not apply at all. Under the Uniform Commercial Code (UCC) , there are two kinds of warranties — express and implied.
Express Warranties
A seller creates an express warranty when they agree to replace or repair an item if its quality or performance isn’t as promised [1] .
An example is an electronics manufacturer guaranteeing a television against defects for three years. The manufacturer must replace or repair the TV when a customer discovers and reports a defect.
Although a seller can create an express warranty, even when they didn’t intend to create one, if the sales agreement has a description of the goods, the customer expects the goods will match that description. In this case, an express warranty is automatically created.
Similarly, if the seller provides the buyer with a sample of the goods, an express warranty is created – the goods will conform to the sample.
Having a written agreement allows both the seller and buyer to clearly state what, if any, express warranties will apply to the goods.
Implied Warranties
An implied warranty is an unwritten promise that the goods will meet a minimum level of quality [2] . Buyers receive automatic warranties when they buy goods from a merchant. There are two implied warranties arising under the UCC:
Warranty of merchantability
A warranty of merchantability is created based on the agreement that the goods will work as expected.
For example, when a buyer purchases a bicycle for road cycling, there’s an implied warranty that the bicycle is suitable for road cycling.
But if the buyer uses it for mountain biking, they aren’t using the bicycle for its intended purpose, and there’s no warranty of merchantability.
Warranty of fitness for a particular purpose
This particular warranty is created when:
- The seller knows what the buyer intends to use the goods for
- The buyer depends on the seller to select an appropriate item.
An example is a homeowner buying paint to paint a house. Suppose a seller recommends a specific type of paint. But it turns out that paint isn’t suited for houses. In this case, the seller breached the implied fitness warranty for a particular purpose.
Implied warranties don’t automatically apply if sellers exclude or modify them in a sales agreement.
What Is Risk of Loss?
Risk of loss describes which party should carry the risk for damage to the goods after the completed sale but before delivery. If the seller carries the risk of loss, they’ll have to send the buyer another shipment of goods. Or they can pay the buyer damages if the goods are damaged before delivery.
If the buyer carries the risk of loss, they will have to pay for the goods even if they’re damaged during shipment.
Under Article 2 of the UCC, there is four risk-of-loss rules you should be aware of:
- The agreement terms between the parties will control the risk of loss.
- If there’s a breach or wrongdoing by a party, that party is liable for the risk of loss.
- A FOB shipping contract transfers the risk of loss from the seller to the buyer once the seller drops the goods off with the common carrier.
- A FOB destination contract transfers the risk of loss from the seller to the buyer only when the goods arrive at the buyer’s destination.
- Where the seller is a merchant [3] , the risk of loss will shift to the buyer only when the buyer receives the goods. If the buyer never receives the goods, the seller still carries the risk of loss.
If you know you want to buy or sell certain goods but haven’t agreed on all the details or aren’t ready to sign a sales agreement, you can first sign a letter of intent to outline the terms and your agreement to negotiate.
It’s essential to know the rights and duties of the buyer and seller when creating a sales agreement.
Buyer Rights and Duties
The buyer’s rights and duties include the following:
- Duty to pay for goods when properly tendered by the seller
- Duty to follow the terms of the contract
- Right to on-time tender of the goods
- Right to applicable warranties that weren’t disclaimed
- Right to the goods identified in the sales agreement
Seller Rights and Duties
The seller’s rights and duties include:
- Duty to tender correct goods identified in the contract
- Duty to tender goods at the correct time
- Duty to tender goods in appropriate condition
- Right to timely payment for goods tendered to buyer
- Right to payment in the proper amount
You need a sales agreement if your business sells goods or services to other parties or businesses. A professional sales agreement will help keep things clear and understood by both parties by detailing the terms of the sale.
You’ll want a written agreement to ensure smooth sailing until the exchange of money and goods. You and the other party will want to know what to do if there are any issues. This agreement can be used for various sales types, from small-scale purchases to large-scale contracts.
For specific sales contracts, the buyer has a statutory right to cancel the contract until midnight of the third business day after the sale. But this can only apply if the sale location is NOT the seller’s permanent place of business [4] .
Here are some examples of potential sellers and buyers who would need to use this agreement.
What Happens if I Don’t Use a Sales Agreement?
If you don’t have a sales agreement, you risk failing to understand:
- Your contractual rights and obligations
- The economic consequences of the risks
- The legal remedies and protections available to you at law.
This agreement lays a strong foundation and framework for a sale and details how to address and remedy them should something go wrong.
Suppose you’re a successful individual or business. You want to maximize profits by anticipating large sales periods and purchasing the inventory needed to meet the demand. Without a sales agreement, you or your business may be unable to sell or secure inventory at the best prices, failing to maximize profits.
Your buyer may suddenly decide not to buy from you, leaving you with unexpected inventory and no recourse. Or your seller may find a buyer willing to pay more, leaving you with no inventory — and angry customers.
A simple sale of goods agreement can help guarantee the following:
When writing a sales agreement, you can follow these steps to help you create an enforceable contract:
Step 1 – Identify Party Information
Include the full name of the seller and buyer, their addresses, and other contact information. For businesses, this should include service of process information and the contact information of the officers or agents who will sign the contract. Be sure to include any additional buyers or sellers.
Step 2 – Provide a Description of the Goods
The contract should describe the goods sold. This should include:
- The type and quantity of goods
- Whether specific goods or unspecified goods are identified
- Whether they are existing or future goods
Step 3 – Include the Purchase Price and Payment Information
The contract for the sale of goods should include the price the buyer must pay for them. This includes the flat rate for the goods or the cost per item outlined in the contract. Any conditions or terms that affect the purchase price should be clear. This includes information on who will pay taxes on the goods and how the buyer will make payment.
Step 4 – Determine the Delivery Method
The contract should include how the seller will deliver the goods. Will they be shipped by the seller or picked up by the buyer? When are the goods to be delivered? These important questions require a clear answer.
Step 5 – Allocate Risk of Loss
The contract should state when the risk of loss of the goods shifts from the seller to the buyer. This may be upon shipment of the goods or delivery.
Step 6 – Include a Right of Inspection Provision
The contract should include a provision as to whether the buyer can inspect the goods before delivery.
Step 7 – Establish Warranties
The warranties section should state what warranties cover the goods and disclaim any warranties the seller doesn’t wish to provide in the transaction.
Step 8 – Add Assignment Information
Either the buyer or the seller “assigns” or transfers its rights, obligations, or any benefits they will receive under this contract to a 3rd party. For example, if the seller is a company that another company has bought, the seller may assign its rights under this contract to the new company. The new company would then be obligated to provide the goods to the buyer and receive payment.
Step 9 – Provide a Right to Cancel
Many federal and state laws require a three-day cooling-off period for certain types of sales. [5] If this applies to your transaction, include the required right to cancel language in the agreement.
Step 10 – Address Potential Breach of Contract
The contract should address what will happen if there’s a dispute over the sales agreement. This should determine whether it will go to court, arbitration, mediation, or other potential resolution. It should also address the governing law of the contract and any venue provisions if necessary.
The dispute resolution options available are:
Court litigation – when a party files an action or claim in court, and each side presents its case or defense in a trial for a judge or jury to determine a final outcome on the claim. The decision by the judge or jury is final and binding.
Arbitration – when an arbitrator, a neutral third party selected by the parties, evaluates the dispute and determines a settlement. The decision by the arbitrator is final and binding.
Mediation – when a mediator, a neutral third party selected by the parties, tries to facilitate a compromise and agreement. The decision by the mediator is nonbinding.
Step 11 – Add Signatures of Both Parties
Finally, add the signatures of the seller and buyer so the sales agreement can become a legally binding contract.
What Should Be Included in a Sales Agreement?
A well-drafted sales agreement will also include provisions for:
- Amendments — how the contract may be modified
- Assignment — whether a party requires written permission to transfer their rights to another party
- Notices — how the parties will communicate or send notices to one another
- Severability — a provision that states the remainder of the agreement will still be valid if one part is rendered un enforceable
- Entire Agreement — a provision that states the written contract is the entire agreement and not subject to unwritten modifications.
The sample sales agreement below details an agreement between a seller and a buyer. Under the terms specified, the buyer agrees to purchase items from the seller. You can also use our template builder to create your sales agreement step-by-step.
A sales agreement is an important document that does more than record a transfer of ownership.
A sales agreement means you will document the purchase price and payment information. Details such as a payment plan , down payment, closing costs, and late fees will all be included, and both parties will be contractually obliged to stick to the payment terms.
If the sale isn’t immediate, a sales agreement will hold both parties to their responsibilities to complete the sale at a later date, ensuring the sale goes through as planned. It also documents what should happen if the sale falls through.
Having the above written down in a legally binding contract means any miscommunication can be prevented, and any disputes can be resolved. If neither party upholds the agreement, then the document provides the buyer and seller with legal protection.
Is a sales agreement a contract?
A sales agreement is a contract. It’s a legally binding document that obligates the seller and buyer to the terms of the agreement. A properly drafted sales agreement is enforceable in court if one party breaches the contract.
When does an agreement to sell become a sale?
An agreement to sell becomes a sale when the contract conditions are fulfilled, the items are tendered, and they’re paid for. While an agreement is legally binding, the sale does not occur until the items are delivered and paid for successfully.
Does a sales agreement need to be notarized?
A sales agreement doesn’t have to be notarized to be effective. The signed contract itself is legally binding even without a notary’s signature and stamp. The parties may choose to have the contract notarized as additional proof of its enforceability, but they aren’t required to use a notary.
What’s the difference between a sales agreement and a bill of sale?
A sales agreement is a more detailed document with all the terms of the sale. It’s a binding contract the parties must follow in their transaction. A bill of sale is often part of a sales agreement but is used to show that the goods have officially changed owners.
Where can I get a sales and purchase agreement?
You can get a sales and purchase agreement from Legal Templates. You can download a sales agreement template in PDF or Word format and then fill in the blanks to make it your own.
What is the difference between a purchase agreement and a sales contract?
The difference between a purchase agreement and a sales contract depends on whether you’re the buyer or the seller. If you’re the buyer, you view it as a purchase agreement, while the seller views it as a sales contract.
What’s the purpose of a sales agreement?
The purpose of a sales agreement is to detail all of the terms and conditions for exchanging money for goods, services, or property in a legally binding document. A sales agreement offers both parties legal protection and helps prevent miscommunication.
Legal Templates uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial guidelines to learn more about how we keep our content accurate, reliable and trustworthy.
- Lex Mercatoria . CISG (Article 35) . (03/08/2022). https://www.jus.uio.no/lm/un.contracts.international.sale.of.goods.convention.1980/35.html
- Legal Information Institute. § 2-314. Implied Warranty: Merchantability; Usage of Trade.. (03/08/2022). https://www.law.cornell.edu/ucc/2/2-314
- Legal Information Institute. § 2-104. Definitions: "Merchant"; "Between Merchants"; "Financing Agency".. (03/08/2022). https://www.law.cornell.edu/ucc/2/2-104
- Federal Trade Commission. Buyer’s Remorse: The FTC’s Cooling-Off Rule May Help. (03/08/2022). https://www.consumer.ftc.gov/articles/buyers-remorse-ftcs-cooling-rule-may-help
- Buyer’s Remorse: The FTC’s Cooling-Off Rule May Help. https://www.consumer.ftc.gov/articles/buyers-remorse-ftcs-cooling-rule-may-help
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Understanding an assignment and assumption agreement by Belle Wong, J.D.
Understanding an assignment and assumption agreement
Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.
by Belle Wong, J.D. updated February 08, 2023 · 3 min read
While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.
If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.
The assignment and assumption agreement
An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.
In order for an assignment and assumption agreement to be valid, the following criteria need to be met:
- The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
- The assignor must agree to assign their rights and duties under the contract to the assignee.
- The assignee must agree to accept, or "assume," those contractual rights and duties.
- The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.
A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.
The basics of assignment and assumption
When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:
- First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
- All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
- Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.
Filling in the assignment and assumption agreement
Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:
- Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
- The effective date of the assignment and assumption agreement
- Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
- Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
- Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
- A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same
In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.
Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.
About the Author
Belle Wong, J.D.
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Sale and Assignment Sample Clauses
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How To Navigate The Real Estate Assignment Contract
What is assignment of contract?
Assignment of contract vs double close
How to assign a contract
Assignment of contract pros and cons
Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.
A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.
In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]
What Is A Real Estate Assignment Contract?
A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.
The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.
There are a couple of caveats to keep in mind when considering using sales contracts for real estate:
Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.
Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.
What Is An Assignment Fee In Real Estate?
An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.
Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.
The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.
Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.
Assignment Contract Vs Double Close
The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.
A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.
Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.
Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.
Flipping Real Estate Contracts
Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.
Is An Assignment Of Contract Legal?
Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.
When Will Assignments Not Be Enforced?
In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.
It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.
How To Assign A Real Estate Contract
A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:
Find the right property
Acquire a real estate contract template
Submit the contract
Assign the contract
Collect the fee
1. Find The Right Property
You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.
The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.
With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:
Direct Mail
Real Estate Meetings
Local Marketing
2. Acquire A Real Estate Contract Template
Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.
One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.
You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.
3. Submit The Contract
Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.
4. Assign The Contract
Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.
Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.
5. Collect The Fee
Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.
Assignment of Contract Pros
For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.
The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.
Assignment of Contract Cons
Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.
Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.
Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.
Assignment of Contract Template
If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.
As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.
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Purchase Contract Assignment Form
Create a high quality document online now!
Updated October 30, 2021
A purchase contract assignment is between a holder (assignor) that transfers their interest in buying real estate to someone else (assignee). Before the closing, it is common to assign a purchase contract to a business entity or the person whom the loan or mortgage will be under. It’s also accepted for a contract holder to sell their rights to buy a property for a fixed amount.
Seller’s Consent
Depending on the purchase contract signed between the seller and assignor, the seller may be required to give their consent before the agreement is legally valid.
Table of Contents
- Simple Version
- Advanced Version
- Step 1 – Come to a Verbal Agreement
Step 2 – Share the Purchase Contract
Step 3 – create an assignment, step 4 – attach and close, sample : purchase contract, how to write.
Download: Adobe PDF , MS Word , OpenDocument
How to Assign a Purchase Contract (4 Steps)
This guide is for assignments when selling a purchase contract to a 3rd party .
Step 1 – Come to a Non-Binding Agreement
The buyer (assignor) in the original purchase contract and the new buyer (assignee) will need to come to an agreement. In most cases, the assignee will offer a fixed amount to buy the contract.
The assignor may need to require the assignee to sign a non-disclosure agreement (NDA) as the details included in the purchase contract are confidential.
After signing the NDA, the assignor should share the purchase contract with the assignee.
After the purchase contract is shared an assignment should be written and signed. If there is a payment as part of the assignment, it should be paid at the time of signing.
If the seller’s consent is required, the assignment will need their signature to be valid.
After the assignment is signed, it should be attached to the original purchase contract. The assignee will be recognized as the buyer and will be required to close on the property in accordance with the terms of the purchase contract.
Section 1 The Parties
(1) Effective Date For Purchase Contract. The calendar date considered the first day of this document’s effect on the Parties involved must be established in the first section.
(2) Assignor Of Real Estate Interest. The Party who shall release his or her interest on the concerned real estate upon the satisfaction of this agreement’s conditions must be identified with a record of his or her full name and mailing address. If Assignor is a Business Entity then make sure the name recorded is its entire legal name.
(3) Assignee Of Real Estate . The Party that will be able to express a rightful interest or claim on the real estate or real property through this document will need to be named. This will require a record of his or her name and address. Bear in mind, a Business Entity acting as the Assignee must have its legal identity including status suffix (if any) produced.
(4) Seller Of Real Estate. The Property Owner or the Party selling the concerned real estate requires his or her name presented.
(5) Date Of Purchase Contract. Furnish the time and date of the original purchase contract this agreement concerns.
Section 2 The Property
(6) Property Location. The concerned real estate must have its physical address (where it may be visited in person) documented.
(7) Property Description. In addition to the location of the concerned real estate, it is recommended that an adequate description be provided. For instance, define any type of structure on the property (i.e. residential building, office building with parking lot, etc.). Ideally, the property’s legal description can be reported here or attached to this agreement.
Section 3 Transfer
(8) Fixed Payment. The manner by which the Assignor releases his or her interest over the concerned real estate to the Assignee will need to be discussed in this paperwork. If this transfer of interest results from a payment from the Assignee to the Assignor then mark the “Fixed Payment” checkbox (found in the third section). This statement will require the exact “Payment Amount” and the maximum number of days after the Effective Date when this payment must be received from the Assignee in order for it to be on time and in compliance with this agreement.
(9) No Payment. Select the second checkbox if “No Payment” will be required of the Assignee to assume the real estate interest being discussed from the Assignor.
(10) Gift. If this transfer of interest is considered a gift from the Assignor to the Assignee then select the “Gift” checkbox.
(11) Other. There may be other circumstances or conditions the Assignee and Assignor have agreed to fulfill for this assignment to occur. For instance, the release of interest may be dependent on the termination of the Assignee from a shared Business Entity with the Assignor. In any case, if none of the statements made in the third section accurately define the basis for this assignment, select the “Other” checkbox and provide this definition to the space available.
(12) Required Seller Approval. This agreement has thus far dealt with the Assignor and the Assignee. If the Seller of the real estate must approve this assignment then the first statement made in Section IV should be selected and a report the number of days within the effective date of this agreement when such approval must be gained (from the Seller) will be required.
(13) No Seller Approval Requirement. Select the second statement made by Section IV if this agreement may require only the consent of the Assignor and the Assignee to be effective.
(14) Governing Law. Report the state that will hold authority over this assignment and the agreement being developed.
Section 10 Additional Terms
(15) Remaining Agreement Conditions. All the conditions and the terms that the Assignor and Assignee require to be complied with should be contained within this agreement before it is signed. Section X will supply the space for such information to be presented and will allow the title of additional paperwork that will be attached to be included. This area may be left unattended if the information produced thus far represents the full scope of the obligations each Party must live up to for this assignment to proceed to completion.
(16) Assignor Signature And Date. The Assignor making this assignment should sign his or her name and dispense the date this action was completed.
(17) Assignor Printed Name.
(18) Assignee Signature And Date. The Recipient of this assignment, the Assignee, should review this agreement then sign his or her name. The date of the Assignee signature must also be reported at the time of signing.
(19) Assignee Printed Name.
(20) Seller Signature And Date. If it has been indicated that the Seller must provide consent, then he or she must sign this paperwork upon its completion and a thorough review so that this assignment may proceed. His or her signature date will also be required.
(21) Seller Printed Name.
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What Is an Assignment Sale? An All-Around Guide
If you’re new to real estate , some terms might leave you in disarray. One of these might be the elusive “ assignment sale.”
So what is an assignment sale ? Why do these sales happen? Are they even legal?
Whether you’re a home buyer , seller , or investor , stick around for an answer to these and other essential property questions!
What Is Assignment in Real Estate?
An assignment of contract in real estate is the transfer of rights from one party to another, i.e. the assignor (the original buyer of the property) and the assignee (the other buyer) . Essentially, the assignor sells their right to purchase a property to a third-party buyer, so the latter takes over the Agreement of Purchase and Sale obligations and completes the purchase.
For example, imagine you’re purchasing a pre-construction condo. After signing all the necessary paperwork and putting down a deposit, you lose your job. The day when you can move into your condo won’t happen soon, as the Interim occupancy period is long , so now, you can’t actually afford the payments anymore.
In this case, you might look for an assignee willing to take over your purchase and complete the transaction under the previously agreed-on conditions, as the assignee can’t negotiate the price or terms with the builder. In other words, it is simply an assignment of the contract you negotiated.
Finding an assignee can be as simple as posting a notice in the building where the property is located. Alternatively, you can go through a realtor or lawyer to help facilitate the sale. What you must remember is that many builders restrict you from marketing your assignment, so be cautious and ask for the terms of your contract before you do so.
Regarding taxes , you should be mindful that any profit you’ve made from a property assignment is taxable. However, you won’t be paying land transfer taxes or HST, as that befalls the assignee. To ensure you’re getting all the relevant details, talk to a certified accountant.
Why do Assignment Sales Happen?
If done correctly, an assignment contract in real estate is perfectly legal and can even be helpful. In many instances, an assignment can significantly benefit both the assignor and the assignee.
Most assignment sales happen with pre-construction properties, like the example mentioned above. But that’s not the only time they can come in handy.
For example, if someone begins negotiating the terms to buy an existing house and before closing, their financial situation worsens, they might be inclined to hand over the responsibilities to another person who is able to bear the burden. That way, the assignor is not unnecessarily going into debt, and the assignee was able to quickly close on a property.
Related article: What is Real Estate Wholesaling?
Assignment vs Resale
For some reason, property assignments and resales get mixed up. In reality, the two are distinct and easily differentiated.
If you’re buying resale, you’re buying the actual real estate property. Therefore, this property exists and is legitimately registered in the land registry system of your province. However, when you’re buying an assignment in real estate , you’re simply buying a piece of paper that gives you the right to own a property once it is entered into the land registry system.
Moreover, resales require a mortgage and their closing days are usually within 60 to 90 days. On the other hand, assignments don’t require a mortgage upfront, but they do ask for steep deposits of 25% or more , with variable closing dates that can extend from a few months to a few years.
Now that you know what an assignment of contract is in real estate, you know that you have options at your disposal should something unexpected happen.
If you’re thinking about entering into an assignment sale, be sure to consult with a lawyer and an accountant to understand the legal and tax implications before proceeding.
An assignment in real estate is the transfer of rights to a property from one party to another. Thus, the original owner sells their right to purchase the property to a third-party buyer.
Assignment sales in Ontario work in pretty much the same way like in other provinces. However, these sales are more common in pre-built properties than on-sale ones. Moreover, real estate professionals are required by law to disclose any personal interest in a purchase or a sale to avoid repercussions.
Real estate assignments are perfectly legal so long as they are done properly. There have been reports of real estate professionals abusing their rights and not disclosing their personal interest in a property. With this, the assignment is illegal, but the agent is the one who would bear the consequences in court.
An assignee is the person who buys the right to purchase a property from the assignor. Essentially, it’s the person who will ultimately close on the property and own it.
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Assignment of Contract – Assignable Contract Basics for Real Estate Investors
Beginners to investing in real estate and wholesaling must navigate a complex landscape littered with confusing terms and strategies. One of the first concepts to understand before wholesaling is assignment of contract, also known as assignment of agreement or “flipping real estate contracts.”
An assignment contract is the most popular exit strategy for wholesalers, and it isn’t as complicated as it may seem. What does assignment of contract mean? How can it be used to get into wholesaling? Here’s what you need to know.
What Is Assignment of Contract?
Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer.
This strategy is also known as flipping real estate contracts because that’s essentially how it works:
- The wholesaler finds a property that’s already discounted or represents a great deal and enters into a contract with the seller,
- The contract contains an assignment clause that allows the wholesaler to assign the contract to someone else (if they choose to!), then
- The wholesaler can assign the contract to another party and receive an assignment fee when the transaction closes.
Assignment of contract in real estate is a popular strategy for beginners in real estate investment because it requires very little or even no capital. As long as you can find an interested buyer, you do not need to come up with a large sum of money to buy and then resell the property – you are only selling your right to buy it .
An assignment contract passes along your purchase rights as well as your contract obligations. After the contract assignment, you are no longer involved in the transaction with no right to make claims or responsibilities to get the transaction to closing.
Until you assign contract to someone else, however, you are completely on the hook for all contract responsibilities and rights.
This means that you are in control of the deal until you decide to assign the contract, but if you aren’t able to get someone to take over the contract, you are legally obligated to follow through with the sale .
Assignment of Contract vs Double Closing
Double closing and assignment of agreement are the two main real estate wholesaling exit strategies. Unlike the double closing strategy, an assignment contract does not require the wholesaler to purchase the property.
Assignment of contract is usually the preferred option because it can be completed in hours and does not require you to fund the purchase . Double closings take twice as much work and require a great deal of coordination. They are also illegal in some states.
How Assignment of Contract Works in Real Estate Wholesaling
Ready to see how an assignment contract actually works? Even though it has a low barrier to entry for beginner investors, the challenges of completing an assignment of contract shouldn’t be underestimated. Here are the general steps involved in wholesaling.
Step #1. Find a seller/property
The process begins by finding a property that you think is a good deal or a good investment and entering into a purchase agreement with the seller. Of course, not just any property is suitable for this strategy. You need to find a motivated seller willing to accept an assignment agreement and a price that works with your strategy. Direct mail marketing, online marketing, and checking the county delinquent tax list are just a few possible lead generation strategies you can employ.
Step #2: Enter into an assignable contract
The contract with the seller will be almost the same as a standard purchase agreement except it will contain an assignment clause.
An important element in an assignable purchase contract is “ and/or assigns ” next to your name as the buyer . The term “assigns” is used here as a noun to refer to a potential assignee. This is a basic assignment clause authorizing you to transfer your position and rights in the contract to an assignee if you choose.
The contract must also follow local laws regulating contract language. In some jurisdictions, assignment of contract is not allowed. It’s becoming increasingly common for wholesalers to assign agreements to an LLC instead of an individual. In this case, the LLC would be under contract with the seller. This can potentially bypass lender objections and even anti-assignment clauses for distressed properties. Rather than assigning the contract to someone else, the investor can reassign their interest in the LLC through an “assignment of membership interest.”
Note: even the presence of an assignment clause can make some sellers nervous or unwilling to make a deal . The seller may be picky about whom they want to buy the property, or they may be suspicious or concerned about the concept of assigning a contract to an unknown third party who may or may not be able to complete the sale.
The assignment clause should always be disclosed and explained to the seller. If they are nervous, they can be assured that they will still get the agreed-upon amount.
Step #3. Submit the assignment contract for a title search
Once you are under contract, you must typically submit the contract to a title company to perform the title search. This ensures there are no liens attached to the property.
Step #4. Find an end buyer to assign the contract
Next is the most challenging step: finding a buyer who can fulfill the contract’s original terms including the closing date and purchase price.
Successful wholesalers build buyers lists and employ marketing campaigns, social media, and networking to find a good match for an assignable contract.
Once you locate an end buyer, your contract should include earnest money the buyer must pay upfront. This gives you some protection if the buyer breaches the contract and, potentially, causes you to breach your contract with the seller. With a non-refundable deposit, you can be sure your earnest money to the seller will be covered in a worst-case scenario.
You can see an assignment of contract example here between an assignor and assignee.
Step #5. Receive your assignment fee
The final step is receiving your assignment fee. This fee is your profit from the transaction, and it’s usually paid when the transaction closes.
What Is an Assignment Fee in Real Estate?
The assignment fee is how the wholesaler makes money through an assignment contract. This fee is paid by the end buyer when they purchase the right to buy the property as compensation for being connected to the original seller. Assignment contracts should clearly spell out the assignment fee and how it will be paid.
An assignment fee in real estate replaces the broker or Realtor fee in a typical transaction as the assignor or investor is bringing together the seller and end buyer.
The standard real estate assignment fee is $5,000 . However, it varies by transaction and calculating the assignment fee may be higher or lower depending on whether the buyer is buying and holding the property or rehabbing and flipping.
The assignment fee is not always a flat amount. The difference between the agreed-upon price with the seller and the end buyer is the profit you stand to earn as the assignor. If you agreed to purchase the property for $150,000 from the seller and assign the contract to a buyer for $200,000, your assignment fee or profit would be $50,000.
In most cases, an investor receives a deposit when the Assignment of Purchase and Sale Agreement is signed with the rest paid at closing.
Be aware that assignment agreements can have a bad reputation . This is usually the case when the end buyer and seller are unsatisfied, realizing they could have sold higher or bought lower and essentially paid thousands to an investor who never even wanted to buy the property.
Opting for the standard, flat assignment fee is much more readily accepted by sellers and buyers as it’s comparable to a real estate agent’s commission or even much lower and the parties can avoid working with an agent.
Assignment of Agreement Pros & Cons
Real estate investors enjoy many benefits of an assignment of contract:
- This strategy requires little or no capital which makes it a popular entry to wholesaling as investors learn the ropes.
- Investors are not added to the title chain and never own the property which reduces costs and the amount of time the deal takes.
- An assignment of agreement is easier and faster than double closing which requires two separate closings and two sets of fees and disclosures.
- Wholesaling can be a great tool to expand an investor’s network for future opportunities.
As with most things, there are important drawbacks to consider. Before jumping into wholesaling and flipping real estate contracts, consider the downsides .
- It can be difficult to work with sellers and buyers who are not familiar with wholesaling or assignment agreements.
- Some sellers avoid or decline assignment of contract offers because they are suspicious of the arrangement, think it is too risky, or want to know who they are selling to.
- There is a limited time to find an end buyer. Without a reliable buyer’s list, it can be very challenging to find a viable end buyer before the closing date.
- The end buyer may back out at the last minute. This may happen if they do not have owner’s rights until the contract is assigned or they do not want to pay an assignment fee.
- Not all properties are eligible for wholesaling like HUD and REO properties. There may be anti-assignment clauses or other hurdles. It is possible to get around this by purchasing the property with an LLC which can then be sold, but this is a level of complication that many wholesalers want to avoid.
- Assignors do not have owner’s rights. When the property is under contract, investors cannot make repairs or improvements. This makes it harder to assign a contract for a distressed property in poor condition.
- It can be hard to confirm an end buyer is qualified. The end buyer is responsible for paying the agreed upon price set by the seller and assignor. Many lenders do not handle assignment agreements which usually means turning to all-cash end buyers. Depending on the market, they can be hard to find.
In the worst-case scenario, if a wholesaling deal falls through because the end buyer backs out, the investor or assignor is still responsible for buying the property and must follow through with the purchase agreement. If you do not, you are in breach of contract and lose the earnest money you put down.
To avoid this worst-case scenario, be prepared with a good buyer’s list. You should only put properties under contract that you consider a good deal and you can market to other investors or homeowners. You may be able to get more time by asking for an extension to the assignment of contract while you find another buyer or even turn to other wholesalers to see if they have someone who would be a good fit.
Assignable Contract FAQs
What is the difference between assignor vs assignee.
In an assignment clause, the assignor is the buyer who then assigns the contract to an assignee. The assignee is the end buyer or final buyer who becomes the owner when the transaction closes. After the assignment, contract rights and obligations are transferred from the assignor to the assignee.
What Is an assignable contract?
An assignable contract in real estate is a purchase agreement that allows the buyer to assign their rights and obligations to another party before the contract expires. The assignee then becomes obligated to meet the terms of the contract and, at closing, get title to the property.
Is Assignment of Agreement Legal?
Assignment of contract is legal as long as state regulations are followed and it’s an assignable contract. The terms of your agreement with the seller must allow for the contract to be assumed. To be legal and enforceable, the following general requirements must be met.
- The assignment does not violate state law or public policy. In some states and jurisdictions, contract assignments are prohibited.
- There is no assignment clause prohibiting assignment.
- There is written consent between all parties.
- The property does not have restrictions prohibiting assignment. Some properties have deed restrictions or anti-assignment clauses prohibiting assignment of contract within a specific period of time. This includes HUD properties, short sales, and REO properties which usually prohibit a property from being resold for 90 days. There is potentially a way around these non-assignable contracts using an LLC.
Can a non-assignable contract still be assigned?
Even an non-assignable contract can become an assignable contract in some cases. A common approach is creating an agreement with an LLC or trust as the purchaser. The investor can then assign the entity to someone else because the contractual rights and obligations are the entity’s.
Assignment agreements are not as complicated as they may sound, and they offer an excellent entry into real estate investing without significant capital. A transaction coordinator at Transactly can be an invaluable solution, no matter your volume, to keep your wholesaling business on track and facilitate every step of the transaction to closing – and your assignment fee!
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Assignment of Contract
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What is an Assignment of Contract?
An assignment of contract is a legal term that describes the process that occurs when an existing contract assignee wishes to transfer their contractual obligations to another party. When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.
How Does Assignment of Contract Work?
An assignment of contract is simpler than you might think.
The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.
When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement. Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer.
In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment” to notify any other contract signers of the change.
The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. It must also be signed by both the incoming and outgoing parties.
Check out this article to learn more about how assigning a contract works.
Contract Assignment Examples
Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:
Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.
Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.
Here is an article where you can find out more about contract assignments.
Assignment of Contract in Real Estate
Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts.
This process is called real estate wholesaling.
Real Estate Wholesaling
Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.
The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.
This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.
This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.
But how do real estate wholesalers find these properties?
It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:
- Direct mailers
- Place newspaper ads
- Make posts in online forums
- Social media posts
The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.
Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to buy to another person, they are always upfront about during the preliminary phases of the sale.
In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.
After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.
Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.
If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.
One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.
On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.
Learn more about assignment of contract in real estate by checking out this article .
Who Handles Assignment of Contract?
The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract, post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.
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Proposed GST/HST Treatment of Assignment Sales
GST/HST Notices - Notice 323 May 2022
On April 7, 2022, the Minister of Finance Canada tabled Budget 2022 which proposed an amendment to Part IX of the Excise Tax Act. The proposed amendment would make all assignment sales in respect of a newly constructed or substantially renovated single unit residential complex or residential condominium unit taxable.
This publication provides questions and answers regarding the proposed amendment. Any commentary in this publication should not be taken as a statement by the Canada Revenue Agency that the proposed amendment will become law in its current form.
Except as otherwise noted, all statutory references in this publication are to the provisions of the Excise Tax Act (ETA). The information in this publication does not replace the law found in the ETA and its regulations.
If this information does not completely address your particular situation, you may wish to refer to the ETA or relevant regulation, or call GST/HST Rulings at 1‑800‑959‑8287 for additional information. If you require certainty with respect to any particular GST/HST matter, you may request a ruling. GST/HST Memorandum 1-4, Excise and GST/HST Rulings and Interpretations Service , explains how to obtain a ruling or an interpretation and lists the GST/HST rulings centres.
If you are located in Quebec and wish to request a ruling related to the GST/HST, please call Revenu Québec at 1‑800‑567‑4692. You may also visit the Revenu Québec website at revenuquebec.ca to obtain general information.
For listed financial institutions that are selected listed financial institutions (SLFIs) for GST/HST or Quebec sales tax (QST) purposes or both, whether or not they are located in Quebec, the CRA administers the GST/HST and the QST. If you wish to make a technical GST/HST or QST enquiry related to SLFIs, please call 1‑855‑666‑5166.
GST/HST rates
Reference in this publication is made to supplies that are subject to the GST or the HST. The HST applies in the participating provinces at the following rates: 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The GST applies in the rest of Canada at the rate of 5%. If you are uncertain as to whether a supply is made in a participating province, refer to GST/HST Technical Information Bulletin B-103, Harmonized Sales Tax – Place of Supply Rules for Determining Whether a Supply is Made in a Province .
Table of Contents
Proposed amendment, definitions, questions and answers.
An assignment sale in respect of residential housing is a transaction in which a purchaser (an assignor) that has entered into an agreement of purchase and sale with a builder of a new house sells (assigns) their rights and obligations under the agreement of purchase and sale to another person (an assignee). The agreement that details the terms of the assignment of an agreement of purchase and sale (the assignment sale) is generally referred to as the assignment agreement.
For purposes of this notice, a house includes a detached or semi-detached house, a duplex, a condominium unit, a townhouse, a unit in a co-operative housing corporation, a mobile home (including a modular home) and a floating home.
Under the current GST/HST rules, an assignment sale made by a person that is not an individual in respect of newly constructed or substantially renovated residential housing is generally taxable, whereas an assignment sale made by an individual may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the house as a place of residence), the assignment sale is generally exempt. Any amount an assignor paid as a deposit to a builder is included in the consideration for a taxable assignment sale. For more information on the current GST/HST rules, refer to GST/HST Info Sheet GI-120, Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit .
The proposed amendment to the ETA would make all assignment sales, including those made by individuals, in respect of newly constructed or substantially renovated residential housing taxable for GST/HST purposes. Furthermore, the proposed amendment would exclude any amount attributable to a deposit paid by an assignor to a builder from the consideration for a taxable assignment sale, when certain conditions are met. The proposed amendment would apply to all assignment agreements entered into after May 6, 2022.
The proposed amendment adds section 192.1 to the ETA. Proposed section 192.1 states that if a taxable supply by way of sale of a single unit residential complex (as defined in subsection 254(1)) or of a residential condominium unit is made in Canada under an agreement of purchase and sale (in this section, referred to as the purchase agreement) entered into with a builder of the single unit residential complex or of the residential condominium unit and if another supply by way of assignment of the purchase agreement is made by a person (other than the builder) under another agreement, then the following rules apply:
- the other supply is deemed to be a taxable supply, by way of sale, of real property that is an interest in the single unit residential complex or residential condominium unit
- the consideration for the other supply is deemed to be equal to the amount determined by the formula:
Proposed section 192.1 applies in respect of any supply by way of assignment of an agreement of purchase and sale if the supply is made after May 6, 2022.
Proposed section 192.1 applies to a single unit residential complex or a residential condominium unit.
Single unit residential complex means a residential complex that does not contain more than one residential unit, but does not include a residential condominium unit.
For the purposes of the proposed amendment, a single unit residential complex also includes:
- a multiple unit residential complex that does not contain more than two residential units (for example, a duplex)
- any other multiple unit residential complex if it is described by paragraph (c) of the definition of residential complex in subsection 123(1) and contains one or more residential units that are for supply as rooms in a hotel, motel, inn, boarding house, lodging house or similar premises and that would be excluded from being part of the residential complex if the complex were a residential complex not described by that paragraph (for example, a bed and breakfast establishment)
Residential condominium unit means a residential complex that is, or is intended to be, a bounded space in a building designated or described as a separate unit on a registered condominium or strata lot plan or description, or a similar plan or description registered under the laws of a province, and includes any interest in land pertaining to ownership of the unit.
1. I am an individual who entered into an assignment agreement before May 7, 2022. Is the assignment sale taxable?
If an assignment agreement is entered into before May 7, 2022, the current GST/HST rules apply. This means that the assignment sale may be either taxable or exempt. An assignment sale made by an individual is generally taxable if the individual had originally entered into the agreement of purchase and sale with the builder for the primary purpose of selling their interest in the real property. If, on the other hand, the individual had originally entered into the agreement of purchase and sale for another primary purpose (for example, to occupy the property as a place of residence), the assignment sale is generally exempt.
Under the current GST/HST rules, if an assignor’s sale of their interest in the real property to an assignee is taxable, the total amount payable for the sale of the interest is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.
For more information, refer to GST/HST Info Sheet GI-120 .
2. The assignor already paid a deposit under the purchase and sale agreement. Is the portion of the assignment sale that is attributable to the deposit taxable?
Typically, the consideration for an assignment sale includes an amount attributable to a deposit that had previously been paid to the builder by the assignor. The application of the GST/HST to the amount attributable to the deposit in the context of the assignment sale depends on the date the assignment agreement was entered into and not on the date the deposit was paid to the builder.
Where an assignment agreement is entered into before May 7, 2022, and the assignment sale is taxable, the total amount payable for the sale of the assignor’s interest to the assignee is subject to the GST/HST, including any amount the assignor paid as a deposit to the builder, whether or not such an amount is separately identified.
Where an assignment agreement is entered into on or after May 7, 2022, and the assignment agreement indicates in writing that a part of the consideration is attributable to the reimbursement of a deposit paid by the assignor to the builder under the purchase and sale agreement, the proposed amendment excludes the amount attributable to the deposit from the consideration for a taxable assignment sale.
3. Who is responsible for remitting the tax on the assignment sale under the proposed amendment?
The proposed amendment does not change who is responsible for remitting the tax on the assignment sale. The assignor in respect of a taxable assignment sale would generally continue to be responsible for collecting the GST/HST and remitting the tax to the Canada Revenue Agency (CRA). Where the assignor is a non-resident of Canada, the assignee would continue to be required to self-assess and pay the GST/HST directly to the CRA.
For more information, refer to Guide RC4022, General Information for GST/HST Registrants .
4. Will the proposed amendment affect the new housing rebate?
The amount of a new housing rebate under the GST/HST legislation is determined based, in part, on the total tax paid and the total consideration for a taxable supply of a house, which includes any other taxable supply of an interest in the house (for example, the tax and consideration paid by an assignee for a taxable assignment sale). As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on both the total tax paid and the total consideration for the taxable supply of a new house, which may affect the amount of a GST/HST new housing rebate in respect of the GST or the federal part of the HST, or of a new housing rebate in respect of the provincial part of the HST, that may be available in respect of a new house.
Only one new housing rebate application can be made for each new house. Therefore, an assignee purchaser cannot submit a rebate application through a builder (Builder A) for the tax paid to Builder A on the purchase of the house and submit a second rebate application for the tax paid to the assignor on the purchase of the interest in the house. In such cases, the assignee purchaser may want to file their new housing rebate application directly with the CRA rather than through Builder A. In this way, the assignee purchaser can include in the new housing rebate application the tax paid to Builder A and the tax paid to the assignor in determining the amount of their GST/HST new housing rebate and, where applicable, a provincial new housing rebate.
For more information, refer to Guide RC4028, GST/HST New Housing Rebate .
5. Will the proposed amendment affect the new residential rental property rebate?
The amount of a new residential rental property rebate (NRRPR) under the GST/HST legislation is determined based, in part, on the total tax payable in respect of a residential complex and the fair market value of the qualifying residential unit that forms part of the complex at the time the GST/HST becomes payable on the purchase of the complex. As a result of the proposed amendment, where an assignment agreement is entered into after May 6, 2022, the GST/HST applies to assignment sales that were not otherwise taxable, and the amount attributable to a deposit is excluded from the consideration for all taxable assignment sales. Consequently, the proposed amendment may have an impact on the total tax payable in respect of the complex, which may affect the amount of a GST/HST NRRPR in respect of the GST or the federal part of the HST, or of an NRRPR in respect of the provincial part of the HST.
For more information, refer to Guide RC4231, GST/HST New Residential Rental Property Rebate .
Further information
All GST/HST technical publications are available at GST/HST technical information .
To make a GST/HST enquiry by telephone :
- for GST/HST general enquiries, call Business Enquiries at 1‑800‑959‑5525
- for GST/HST technical enquiries, call GST/HST Rulings at 1‑800‑959‑8287
If you are located in Quebec , call Revenu Québec at 1‑800‑567‑4692 or visit their website at revenuquebec.ca .
If you are a selected listed financial institution (whether or not you are located in Quebec) and require information on the GST/HST or the QST , go to GST/HST and QST - Financial institutions, including selected listed financial institutions or:
- for general GST/HST or QST enquiries , call Business Enquiries at 1‑800‑959‑5525
- for technical GST/HST or QST enquiries , call GST/HST Rulings SLFI at 1‑855‑666‑5166
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Assignment Sale
What is an assignment sale in ontario.
If you have purchased pre construction properties in Ontario, chances are you have come across the term “assignment sale”. So what exactly is an assignment sale?
An assignment sale is when the original purchaser of a pre-construction property assigns their original purchase agreement to another party before taking ownership of the unit. The new purchaser then takes on all the obligations of the original contract and completes the transaction with the builder.
Assignment sales are prevalent in new construction condo buildings. This is because many purchasers who buy pre-construction condos do so with the intention of flipping the unit for a profit before taking possession.
The Importance of an Assignment Clause in Pre Construction Condo Purchase
A purchase and agreement of a new construction property may include an assignment clause. This assignment clause gives the purchaser the right to assign their contract to another party, subject to the approval of the developer. An assignment fee and their lawyer’s legal fees are typically charged by the builder.
If you are planning to assign your pre-construction purchase, it is essential to have a real estate lawyer review the contract beforehand to make sure the important assignment agreement clause is included and that you understand all the terms and conditions. Assignment sales can be complex transactions with many different stakeholders involved.
Does Land Transfer Taxes Apply in Assignment Sales?
If you are the seller of the assignment, then you are not required to pay a land transfer tax. However, if you are the buyer of an assignment sale, you will be required to pay a land transfer tax on the assignment purchase price. Be sure to factor in these additional closing costs when considering an assignment sale.
HST on Profit
On April 7, 2022, the Government of Canada unveiled Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable. As a result, GST will be added to all assignment sales of newly constructed properties as part of the government’s effort to curb housing speculation. These tax implications are important to take into consideration when contemplating an assignment sale.
As of May 7, 2022, under the Excise Tax Act, every individual assignor of residential real estate would have to collect GST/HST on their assignment profit and remit it to the CRA. For example, if you originally purchased a pre-construction condo for $500,000 and assigned it for $700,000, you would be required to remit GST/HST ($23,008.96) on the profit to the CRA. For greater understanding, it is important that you consult a tax specialist.
Factors to Consider When Purchasing on Assignment
It is important to have a lawyer review the contract to ensure that the important clauses are included and that you understand all the terms and conditions before considering an assignment sale.
There are a number of closing costs associated with purchasing a pre-construction condo unit. These costs can include but are not limited to development levies, meter installation fees, real estate lawyer fees, and land transfer taxes. As part of the assignment agreement, these will all need to be paid by the new purchaser.
An assignment deal can be a great way to get into the real estate market. However, it is important to do your homework and understand all cost involves. If you have any questions, be sure to speak with a real estate lawyer.
Right to Lease During Occupancy
An interim occupancy period occurs when a purchaser takes possession of their new condo unit before the building has been officially registered. In return, the purchaser will pay the builder monthly occupancy fees which include the property tax, maintenance fees, and interest on the outstanding balance owed to the builder. These occupancy fees are payable until the project is registered and the title has been transferred to the purchaser.
If you are planning to purchase a pre-construction condo unit with the intention of renting it out, it is important to ensure that the contract includes a clause that allows for interim occupancy with the right to lease. This is typically only allowed with the permission of the developer and would be at their discretion. If you are planning on leasing the unit, it is important to make sure that you will be able to do so before signing a purchase and sale contract.
What are the Legal fees for an Assignment Sale?
If you are planning on selling your condo unit before taking occupancy, it is important to factor in the real estate lawyer fees associated with an assignment sale. These fees can range from $1000 plus disbursements and are typically paid by the seller. As an assignment is not a typical sales transaction, it is important to ensure that you have both a real estate lawyer and a real estate agent who is experienced in handling these types of transactions.
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What Is An Assignment Of Contract In Real Estate?
An assignment of contract is when one party (the “assignor”) has a contract to which they have certain obligations, and transfers those contractual rights to another party (known as the “assignee”).
In real estate, assigning contracts is an effective strategy to achieve an extremely high return on investment (ROI) for as little capital and risk as possible.
Click below and jump to your section of choice on the assignment of contract :
• What Is An Assignment In Real Estate?
• How Does Assignment Of Contract Work?
• Is It Legal To Assign A Real Estate Contract?
• Why Use A Real Estate Assignment Contract?
• What Is An Assignment Fee In Real Estate?
• Who Buys Real Estate Contracts?
• How To Assign A Contract In Real Estate?
• How Do Real Estate Wholesalers Get Paid?
• What Is An Assignment Clause In Real Estate?
• What Is Assignment Of Contract?
• Assignment Of Contract Template
• Assignment of Contract vs. Double Closing
• Assignment Of Contract: Pros & Cons
• Common Misconceptions About Assigning Real Estate Contracts
What Is An Assignment In Real Estate?
An assignment of contract in real estate is when the original party who has a piece of real estate transfers their contractual obligations to that of a new party.
How Does Assignment Of Contract Work?
The assignment of contract is one of the easiest exit strategies in all of real estate investing. With this being said, there are a number of steps to ensure a profitable and efficient contract assignment for your learning. Below are 6 simple steps on how to assign a real estate contract:
- Find the right investment property for sale
- Obtain the contract
- Submit the contract
- Discover an end buyer
- Assign the contract
Is It Legal To Assign A Real Estate Contract?
Yes, it is legal to assign real estate contracts. However, there are situations when assignments will not be enforced, such as:
- Not getting consent from all parties involved. It is important to get written consent from all parties involved on the contract.
Solution: Get written consent from all parties.
- When the existing contract says it is non-assignable. You cannot take it upon yourself to assign a contract that says it is non-assignable.
Solution: Modify the contract with the permission of all involved parties. If the parties involved are okay with it, then you can modify the contract from being non-assignable to assignable.
- Properties that have certain restrictions. Some properties such as short sales , REOs , and HUD can have deed restrictions which do not allow you to perform an assignment of contract within a certain time period.
Solution: Close on the property and sell it after the restriction is over. Back out of the property if you have the appropriate contingencies.
All in all, it is legal to assign real estate contracts . In fact, all contracts are assignable by default, unless specifically stated otherwise within the agreement.
As with anything having to do with contracts, it is extremely important to read the contract you will be signing with any seller of a property.
It’s recommended you use a real estate attorney to review the agreement you plan on using for your real estate deals to make sure it is worded correctly.
Why Use A Real Estate Assignment Contract?
The biggest reason to use a real estate assignment contract is: you can profit from a piece of real estate by solely transferring your contract rights.
This process is called “wholesaling,” and is a great way to flip real estate while lowering your risk and using as little money as possible .
Many people see the house flipping shows where investors buy, fix, & sell houses. This entire process can take months, and even longer than a year to effectively renovate and resell a property.
Additionally, when you buy a property there is always risk that comes with it. Most real estate investors raise money and invest other people’s money into their real estate deals in order to work on multiple projects at one time. When a fix & flipper borrows this capital, there is usually an interest rate along with it.
What this means is, every day a fix & flipper has a house that they have bought and are renovating is another day that they will pay more interest on the money they’ve borrowed.
When a real estate assignment contract is used where the goal is to wholesale (“assignment of contract”) the property, then you virtually eliminate any risk. This is because you are assigning all contractual obligations to the new buyer of the property.
What Is An Assignment Fee In Real Estate?
An assignment fee is the compensation an assignor receives for selling the equitable interest in a real estate contract to another buyer (“the assignee”). This is also known as a “wholesale fee.”
Who Buys Real Estate Contracts?
Real Estate Investors, such as fix & flippers , typically buy real estate contracts from wholesalers so they can have properties to renovate and resell.
Download FREE Wholesale Real Estate Contracts (PDF)!
How To Assign A Contract In Real Estate?
Once you have a property under contract, then it is time to locate a buyer for the real estate contract. Make sure the first thing you do is ask for an earnest cash deposit to ensure that your earnest money will be paid upfront. This clause protects you from any breach of contract between you and the assignee.
An assignment fee (“wholesale fee”) is then agreed upon between you and the buyer. You will then need to execute an Assignment of Real Estate Purchase and Sale agreement between you and the buyer.
As the assignor you are assigning all of your duties and obligations that you agreed upon in the original purchase and sale agreement with the seller of the property. This means that the buyer must purchase the property at the original agreed upon price between you and the seller as stated in the original contract.
Just because the assignor of the contract is not the one purchasing the property that doesn’t mean there isn’t additional work to be completed to ensure the deal gets closed. Once a buyer is found to sell the contract to, it is time to make sure the buyer follows through and closes on the deal.
This makes it important to have a great title company or real estate attorney to handle the closing. Whether you use a title company or attorney is dependent upon which state you are in. Some states have title companies handle the closing, and some states have attorneys handle it.
How Do Real Estate Wholesalers Get Paid?
Real estate wholesalers get paid when a successful assignment of contract takes place. Their terms of getting paid are to be stated in the Assignment of Real Estate Purchase and Sale Agreement.
Important: Everything is negotiable and no payment terms are set in stone unless agreed upon and signed in writing.
As a real estate wholesaler, you can get a deposit when the Assignment of Real Estate Purchase and Sale Agreement is signed. Then, when the transaction closes the wholesaler can receive the rest of the profit.
For example, if you are looking to get a $20,000 wholesale fee for a house, then you may take a 50% deposit of $10,000 when the contract is assigned. Then, receive the remaining 50% of $10,000 when the property closes.
What Is An Assignment Clause In Real Estate?
A real estate assignment clause is a legally binding service that offers a contracting party the right to assign responsibility or transfer ownership to another contracting party of choice. Some contracts have a real estate contract assignment clause built into them. Below is an example:
“Assignment of Contract: The parties to this Contract mutually agree that it is binding upon them, their heirs, executors, administrators, personal representatives, successors and assigns. All parties agree that this Contract is assignable to any party for a profit.”
It is also a common practice for the original buyer of a contract to put “and/or assigns” next to their name. In addition to the real estate assignment clause, “and/or assigns” will make it even more clear that the contract may be assigned.
What Is Assignment Of Contract?
The real estate assignment contract is also known as the assignment of purchase and sale agreement. This is a separate legal document to the original contract.
The real estate assignment contract has the terms of the assignment, such as to who is the assignor/assignee, when the payment is taking place, and closing terms.
Assignment of Contract Template
Here is an example of an assignment of a contract below:
Here's another example of a real estate assignment contract PDF by The Judicial Title Insurance Company.
Assignment of Contract vs. Double Closing
Beginner investors always tend to wonder whether a seller will have an issue with an assignment of rights taking place. It depends on the seller and your correspondence with them. If you communicate clearly, then this is typically not an issue.
This is because the seller has signed a legal and binding contract making them obligated to fulfill the terms of the contract. You have every right to perform an assignment of contract when everything has been done legally.
The majority of sellers you encounter will not have an issue with the assignment and having another party close on the transaction. Sellers’ are usually most concerned that 2 things take place:
- that they receive the purchase price for the property that was originally agreed upon, and
- that the property closes on time at the date which was agreed upon.
Communicate clearly with the seller and fulfill the contract obligations, and you shouldn’t have an issue with assigning a real estate contract.
Double closing can take place when the seller has an issue with the assignment of contract.
Double closing is when you close on the property (meaning you actually buy it), and then resell the property to the end buyer that you would have assigned the contract to originally.
The process of a double close is typically performed as soon as possible to reduce the risk to the wholesaler. If funds are needed to close on a property for this reason, then transactional funding is a great resource to use for any investor.
Transactional funding lenders lend real estate investors short term capital for double closing transactions.
Assignment Of Contract: Pros & Cons
Assignment contracts can be profitable and well structured, but with anything there can be some obstacles you may face when closing on a home. Always remember to research before doing anything and pick the best option for you in this process. Below we will unpack some pros and cons of assignment contracts:
Advantages Of Assignment Contracts
- Potential quick profit : This is usually the most eye-catching benefit of all in wholesaling and what lures people into starting their wholesaling journey. Who doesn’t want the ability to profit off a property without the haggle of purchasing the property.
- Assignment contract is cheaper than double-closing : An assignment of contract has one closing cost, making this a cheaper option than double closing.
- Possible repeat business : If done effectively, you could potentially establish a positive relationship with a buyer to then repeat business with in the future. Being transparent is essential in this process, so that all parties acknowledge that you are adding value to the deal, not just making profit off of them.
- Networking : Assignors, who were once real estate investors, can increase their network by the different individuals they do transactions with. This can gain you access to different investment opportunities, and remember, you never know who you are talking to or who they have connections with.
Disadvantages Of Assignment Contracts
- Owner rights are off limits at this time : Above we touched upon how a wholesaler doesn’t purchase the actual property, but more so acts as a middleman between the seller and end buyer. This being the case, assignors aren’t allowed to do any renovation or repairs to the property, because they technically don’t own it yet.
- Visibility of the assignment fee : One of the main components that turn buyers off is the assignment fee that appears on the contract. This means that all parties can see what profit the obligee makes on the transaction. Some people are not willing to go through with that, especially if the obligor is unfamiliar with the wholesaling process.
- Limited time frame : Assignment contracts have a limited time frame that they need to be signed by, which can be seen as the closing date on the original contract. It may be a hassle to find a reliable buyer between the time the contract starts to the close of the contract.
- Final buyer financing may be hard to come by : The price that the assignor and seller agreed on will need to be paid by the end buyer. This typically means the property needs to be sold to an all-cash buyer (all-cash buyers are generally harder to find), because most lenders will not fund deals on assignment contracts.
- Properties are not always assignable : Real estate properties like HUD homes and REOs have anti-assignment clauses. This restricts wholesalers from partaking in the use of assignment contracts for their properties.
Common Misconceptions About Assigning Real Estate Contracts
In general, there are a lot of misconceptions about assigning real estate contracts and wholesaling real estate.
There’s a good chance you will encounter agents, brokers , attorneys, and others with little contract law or property law experience leading them to think that assigning real estate contracts is illegal.
Why would these real estate professionals think it’s illegal?
Because they are unfamiliar with the concept and think you are an unlicensed individual acting as an agent.
It’s important to understand that you are the principal buyer of the transaction and you are selling the equitable interest in the contract to another buyer. You are not selling the actual property itself for a commission like a real estate agent does.
It’s wise to be cognizant that you will most likely come across people who think that an assignment of contract is illegal. In these situations you’ll have to educate them on how real estate assignment contracts work.
This is another reason why you want to have a great real estate attorney on your team who can explain the legality of assigning and wholesaling to anyone you’re working with.
Final Thoughts On The Assignment of Contract
Utilizing an assignment of contract is a profitable real estate investment exit strategy. If you don’t want to buy, fix, and flip property, then you can always just wholesale it once it’s under contract by an assignment.
Assigning real estate contracts requires little to no capital, takes much less time to complete than other investment strategies, and is a great way to profit quickly from your deals.
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What Is an Assignment of Contract?
Assignment of contract explained.
Hero Images / Getty Images
Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future. Many assignment clauses require that both parties agree to the assignment.
Learn more about assignment of contract and how it works.
What Is Assignment of Contract?
Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark , and copyright) agreements.
How Does Assignment of Contract Work?
An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.
Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service.
Before you try to assign something in a contract, check the contract to make sure it's allowed, and notify the other party in the contract.
Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.
What Does Assignment of Contract Cover?
Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment.
Rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance. For example, Billy Joel wouldn't be able to transfer or assign a contract to perform at Madison Square Garden to someone else—they wouldn't have his special abilities.
Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.
Assigning Intellectual Property
Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO's Electronic Trademark Assignment System (ETAS) .
The U.S. Copyright Office doesn't keep a database of copyright assignments, but they will record the document if you follow their procedure.
Alternatives to Assignment of Contract
There are other types of transfers that may be functional alternatives to assignment.
Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent.
Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.
Do I Need an Assignment of Contract?
Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:
- Assignment of a trademark, copyright, or patent
- Assignments to a successor company in the case of the sale of the business
- Assignment in a contract with a supplier or customer
- Assignment in an employment contract or work for hire agreement
Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.
Key Takeaways
- Assignment of contract is the ability to transfer rights, property, or obligations to another.
- Assignment of contract is a clause often found in business contracts.
- A party may assign a contract to another party if the contract permits it and no law forbids it.
Legal Information Institute. " Assignment ." Accessed Jan. 2, 2021.
Legal Information Institute. " Specific Performance ." Accessed Jan. 2, 2021.
U.S. Patent and Trademark Office. " 301 Ownership/Assignability of Patents and Applications [R-10.2019] ." Accessed Jan. 2, 2021.
Licensing International. " What is Licensing ." Accessed Jan. 2, 2021.
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GTA-Homes » Real Estate Info » Assignments
- Assignments
An Assignment Sale in the Pre-Construction Market
Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself. Only the contract can be sold.
When you purchase a pre-construction condominium unit, you will be given an assignment clause/right in the form of a contract. You can choose to sell your assignment before the condominium is even built.
- Assignee/Buyer is not buying a property from Assignor – Assignee is buying the “right” to acquire property from a 3rd party (usually a builder)
- Assignor assigns its interest and rights in the Original Agreement with the Builder (or original seller)
- Assignor assigns to the Assignee its interest in the original “deposit”
- Assignee “assumes” and agrees to perform all of the Assignor’s obligations under the Original Agreement
Once the building has been constructed and registered by the city, the ownership will be transferred to the buyer. Until then, it’s just the sale of a contract, but as you will see, there are many advantages to these kinds of sales for both the buyer and seller.
In this article, you will learn more about assignment sales, why they are used, the process of this transaction and how it can be transferred.
This way, you will be able to determine if an assignment sale is right for you. We at GTA-Homes strive to provide our clients with the knowledge of the pre-construction market, so that they can make a more informed choice when it comes to investing in their future.
What You'll Learn...
- What Is an Assignment Sale?
An Example of an Assignment Sale
- Buying an Assignment
Selling an Assignment
Assignments faq.
The Details of an Assignment Sale
An assignment sale can be mutually beneficial for both the buyer and the seller. Watch the video to find out how.
What is an assignment sale why do these kinds of sales happen.
There are many reasons why someone might want to sell the rights to their unit before it’s been built. For example, someone may have bought a suite that’s three years away from being completed, but recently had to relocate for a job. This buyer may need to sell their agreement to afford a property in their new city. Another common reason is that a buyer began the purchase process when they were single but during the pre-construction process they married or are now expecting a child. Suddenly they’ve discovered that the pre-construction one-bedroom suite they bought is not big enough for a growing family.
The “ assignment clause ” in the purchase agreement comes in handy when these things happen. It allows the original buyer to pass the contract onto somebody else without accruing financial penalties.
These types of transactions are common and fully legal, but whether you are the buyer or the seller, it’s important to work with both an experienced realtor and lawyer who know how to protect your interests.
These deals are more complex than a conventional resale and involve three parties: the developer, the assignor and the assignee. It’s a two-stage process that involves both interim occupancy and the final closing.
This is just the basics of an assignment deal. There are more details regarding mortgage rules, and other contract details. Keep reading to learn more! Or you can always reach out to talk with one of our agents. We love to talk condos! This is just a general overview, but each arrangement is unique with its own rules, terms, and conditions.
We advise everybody who is thinking of buying or selling a pre-construction assignment to seek advice from a real estate agent, lawyer and tax accountant. Contacting an agent is important because assignors may have to pay a fair amount of tax on any profits they received from the completed sale
Most builders allow assignment sales and you will often see these listings on REALTOR.ca. However, there are some rules in the original purchase agreement that must be followed. They are also more complicated than a regular sale because a mortgage cannot be obtained on the closing of the transaction, only once the building has been registered. Other issues such as occupancy, reimbursement of the seller’s deposits and more must be taken into account.
In 2017, John Smith buys a pre-construction condominium suite from ABC Developments for $400,000 with a total down payment of 20%, equalling $80,000. The project is set to be completed in 2022.
In 2021, John discovered he will be relocated to a new city. He can’t afford to buy a new home while holding onto his pre-construction condo.
Fortunately for John, the assignment clause allows him to sell the contract for his unit before the building is completed and registered!
John has decided to sell the contract to his unit to Jane Doe. Due to the changes in the market, he was able to sell the contract for $500,000.
Assignment Purchase:
- Assignment Agreement: $500,000
- Original Purchaser (Assignor) = John Smith
- New Purchaser (Assignee) = Jane Doe
- Vendor (Builder) = ABC Developments
Assignment Purchase Price by John Smith to Jane Doe = $180,000, due immediately. This includes a deposit of $80,000 + profit $100,000. The amount and timeframe for this payment can also be negotiated.
- In 2022 when the building is complete and ready for interim occupancy, Jane Doe will move into the unit during the occupancy period. At this point she will begin paying occupancy fees to the developer. These fees take the place of mortgage payments and condo fees until the building can be registered.
- Interim occupancy happens when the city has designated the property as safe to live in. The building will be officially registered once the municipality does a final inspection. Jane Doe can occupy her suite in the meantime until the building is officially registered.
Assignment Details:
- When the building is officially registered by the city, the official title transfer takes place between the developer and the new purchaser. Jane Doe can finally register a mortgage and start paying her mortgage payments and condominium fees.
- Funds required to complete the sale by Jane Doe to the builder = $320,000
- Jane Doe now has all the rights to the property, just like any homeowner. Any future re-sale of the property will consist of a regular real estate transaction.
Is It Worth It to Buying an Assignment?
Assignment purchases can actually give you some of the best deals in the GTA condo market because fewer people typically seek out these types of sales. In addition to fewer buyers, many real estate agents aren’t familiar with the structure of an assignment sale and often won’t bother to advertise these listings. Even lawyers may not know the ins and outs of an assignment sale.
The high demand in the resale market can potentially force buyers into bidding wars, which can cause people to overpay for their suite. Buying a contract through assignment gives you the opportunity to avoid excessive competition and often means you pay much less than you would for a resale unit.
The assignment condo market can be mutually beneficial for both the buyer and the seller. The seller can list their unit without having to wait until the building is completed, and the buyer can save time and potentially thousands of dollars.
Another advantage to buying an assignment agreement is that you will get a brand-new unit that automatically comes with the seven-year Tarion Warranty Program. Let’s not forget that you’ll likely move into the unit sooner instead of waiting the usual 3 to 4 years for the building to be completed!
Let’s Recap Some of the Advantages for Buyers:
- Options: More choices when there’s a shortage of listings in the market.
- Less Competition: Fewer people look at these types of listings.
- Peace of Mind: Fewer people looking at these sales means there’s less of a chance for a bidding war. You can avoid bidding wars and paying more than you can afford just to outbid another buyer.
- You Become A VIP: You will likely inherit VIP incentives like the seven-year Tarion Warranty Program and other incentives from the builder such as credits, upgrades, capped developing charges and much more.
- More Choices: Depending on how far along construction is, you may still be able to select your own finishes, colors and upgrades.
- Negotiate: Sellers usually need to sell because they need to drop their equity. This can give you leverage for prices, deposits, and closing dates.
- Brand New Suite: You will get your unit much faster instead of waiting 2-3 years like in a typical pre-construction contract. Oftentimes the occupancy date is just a couple of months away.
- Taxes: You may also benefit from saving on taxes like GST and HST.
We love to chat about the assignment sale market, so don’t wait, give us a call and let’s find you a great deal.
Traditionally, owners who wanted to sell their pre-construction units had to wait months or years for the final closing date to officially put their suite up for sale. By this time, they could have already put significant funds into occupancy fees and closing costs.
Assignments sales is not a new strategy in Canada, but compared to other countries where condos have been around much longer, the process is not always well understood by sellers, buyers, agents, lawyers, and even lenders. Sellers who have been taking the time to learn about assignments have been reaping the rewards by saving time and maximizing their profits.
These transactions are becoming increasingly popular. Think of it as a sort of condo flipping. Sellers can transfer their property rights during or before interim occupancy and avoid paying hefty carrying and closing costs, which helps them get their deposits back.
Most builders allow assignment sales, although they often have certain rules that must be followed. Even with strict rules in place, however, there are options available for you.
Let’s Take a Look at the Advantages for Sellers:
- Insurance Policy: In the event that your situation changes and you no longer need your unit, you are able to sell your assignment and pull out your equity.
- No Carrying Costs: You can avoid paying monthly fees like occupancy fees that can sometimes last for up to two years.
- No Closing Costs: You don’t need to take out a mortgage or incur any other closing costs.
What is an Assignment Sale?
It is the sale of a contract to purchase a pre-construction unit. This means, instead of selling an already built unit, what’s being sold is the contract or right to acquire the property upon completion. The original purchaser (the "assignor") of a property sells their obligations under the original contract to a new purchaser (the "assignee").
The assignee will generally assume all of the assignor's duties and obligations, such as interest payments, taxes, and maintenance fees during interim occupancy. Upon completion, the assignee is granted the title to the real property and will incur all final closing costs.
Can any kind of purchase agreement involving a real estate transaction be assigned?
Under normal circumstances, any purchase agreement can be assigned, providing the agreement doesn’t prohibit it.
Is an Assignment legal?
It is legally permitted unless prohibited in writing in the original agreement of purchase and sale. In some cases, the developer may charge the assignor a fee for this kind of sale.
Is it necessary to get permission from the developer to assign the contract?
That depends. You need to consult your purchase agreement to get the specifics. Generally developers will not permit an assignment sale without their consent, which means you’ll need to consult with them and a legal representative. There have been incidents where an unauthorized assignment sale has resulted in the original agreement being terminated, and the deposit withheld!
Is there a standard legal form for these types of sales?
Yes, there are two: OREA Form 150 Assignment of Agreement of Purchase and Sale Condominium and OREA Form 145 Assignment of Agreement of Purchase and Sale (including applicable schedules.) In most cases, the developer will have their own form as well.
Will either the assignor or assignee’s lawyer services be adequate?
It is essential that the assignor and assignee each retain a lawyer with expertise in this area of real estate.
Can the assignor’s realtor market the assignment listing on MLS or REALTOR.ca?
Sometimes. Double check with your builder, as it depends on whether they permit advertising.
What happens if the construction, occupancy, closing, or unit transfer date is delayed?
In the event of a delay, the agreement is still valid. This means the assignee has agreed to take on the agreement and all responsibilities associated with it, including delayed construction or occupancy.
What if the assignee doesn't close?
This is no different than any other property sale, meaning the assignor, in most cases, is not released from the obligations under their original purchase agreement. In this situation, both the assignor and assignee will be liable.
What is the cost of assigning an Agreement of Purchase and Sale?
If the developer consents to the arrangement, there will generally be an administration fee and legal fees. These fees will vary. Consult the original purchase agreement and the developer for specific information.
When does the assignor get their money?
This generally depends on the closing date and the terms of the agreement that the assignor and assignee agreed on. Usually the assignor is paid when:
- the assignee takes possession or,
- when the developer approves the process, if applicable or,
- when the assignee obtains legal title
Who gets the interest, if any, payable by the builder on the original deposits?
Unless otherwise specified, the interest is likely to be paid to the assignor.
Who pays the interim occupancy costs?
Once the assignment is finalized, the assignee will typically pay occupancy costs.
What closing fees are payable?
After the condominium is registered, the builder transfers the ownership title to the assignee. The assignee pays the balance to the builder and any amount still owed to the assignor. Some of the costs the assignor may pay include:
- Estimated property taxes for up to 2 years
- Hydro/water/gas meter installation and connection charges (approx. $500–$700 per meter)
- Development charges/levies (potentially thousands of dollars)
- Tarion New Home Warranty (ranging from $600–$1,900. See Tarion website for fee structure)
- Discharge of builder’s mortgages (approx. $200–$300 per mortgage)
- Builder’s lawyer’s Law Society charge (approx. $70)
- Two months of occupancy fees for reserve fund
- Other amounts set out in the Agreement of Purchase and Sale
These costs are typically not financed with a mortgage. The assignee is responsible for the following additional fees:
- Legal fees and disbursements
- Land transfer tax (provincial and municipal)
- GST/HST rebate
- Municipal levies
If you’re interested in either buying or selling an assignment, you need a realtor who is experienced in finding, negotiating and drawing up the offer for these types of sales. This means you’ve come to the right place! We have a wealth of expertise, knowledge and resources when it comes to assignment sales and we would be more than happy to discuss the idea with you.
Check out These Helpful Buying / Investing Articles…
- Why Pre-Construction Condos Are the Best Investment
- Most Frequently Asked Questions
- Why Buy With a Platinum Agent
- Interim Occupancy and Final Closing
- Steps to Buying a Pre-Construction Condo
- Renting vs Buying
- Condo Investments
- Pre-Construction Condo Closing Costs
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- Statement of Critical Dates
- Condo Project Cancellations
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Assignment of Purchase Agreement
An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. 3 min read
An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. In this situation, the buyer is the assignor, and the third party is the assignee. Under the agreement, the assignee pays a higher price. This agreement must take place in the time between when the assignor agrees to buy the home, but before the contract closes with the builder.
With this period, the assignor never takes the title of the property. Instead, the title is put in the name of the assignee. This is informally known as "flipping a home." The flipping of a home occurs when:
- The original buyer enters into a purchase contract and assigns the contract to the third party before closing ends.
- The original buyer makes a profit from the sale.
If the sale does not close, the seller will lose time, money, and resources.
Advantages and Disadvantages of an Assignment of Contract
There are several advantages of an assignment of contract. With an assignment of contract, you are not actually flipping a home. Instead, you are flipping the contract, which means you don't have to have the financial backing to purchase the property. Not only do you not close on the property, but you will also not have to pay any closing costs or take on any additional expenses.
For wholesale flippers, using the assignment of contract is a way to save thousands of dollars each month. For example, if the closing costs per property are $1,000, and you "flip" 10 properties, that is a $10,000 savings.
Wholesalers only need to put down the purchase contract deposit amount that will be held in escrow with the title company or with an attorney. The lower the deposit, the lower the risk that will be assessed. Deposits may be as low as $10 or $100 and will be easier to lose if there are any delays or issues.
An assignment of purchase agreement allows the assignee to buy into new and desirable neighborhoods that are no longer available through the builder.
The main disadvantage of an assignment of contract is the risk of not finding a buyer. If a third-party buyer is not found, and you are under contract, you are responsible for completing the contract. Additional responsibilities include the responsibility of:
- Existing liens.
- Property taxes.
In addition, if the financing of the assignee cannot be obtained before the closing, this may cause the assignor to be responsible for the closing costs and the purchase of the property. The assignor may also not be able to get his or her deposits returned.
Obtaining the Builder's Consent
For an assignment of a purchase agreement to be valid, the builder and assignor must first have a valid legal contract in place that shows the assignor is obligated to purchase a home or condominium unit from the builder.
The buyer may limit how the property can be sold, including that the property cannot be listed on the MLS (multiple listings service). If it is, it is seen as a competing with the builder. If the assignor puts the property on the MLS, it will be a breach of contract, and the builder will be entitled to damages or rescission of the contract. The buyer will also be able to retain any deposits that have been paid and any other money paid for upgrades and extras.
The assignor must also clearly state the property is an assignment of an agreement of purchase with the builder and not a direct sale from the assignor.
Preparing an Assignment of Purchase Agreement
When preparing the agreement documentation, there are questions that should be asked to determine responsibility. Some of the questions to be asked are:
- Who will be preparing the documents?
- Who will pay the cost to prepare the documents?
- Will the assignment agreement and written consent of the builder be prepared by the builder's attorney? And will they cover the costs?
- Can terms agreed to by the assignor and builder be negotiated by the assignee? If so, who will cover the costs, and how will they be resolved?
A detail that should also be negotiated is the responsibility of paying the commission of the assignment agreement.
If you need help with an assignment of a purchase agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.
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Content Approved by UpCounsel
- Assignor Definition
- What Is the Definition of Assigns
- Assignment of Rights Example
- Assignment Of Contracts
- Assignment of Rights and Obligations Under a Contract
- Assignment Agreement Definition
- Partial Assignment of Contract
- Assignment Law
- Legal Assignment
- Assignment Contract Law
IMAGES
VIDEO
COMMENTS
Your Agreement of Purchase & Sale stipulated your rights to assign the contract. While most builders allow assignments, there is usually an assignment fee that must be paid to the Builder (we've seen everything from $750 to $7,000). There may be additional requirements as well, the most common being that the Builder has to approve the assignment.
• OREA Form of Assignment Agreement - Form 145 • Customized (lawyer drafted) Assignment Agreement • Normal OREA form of Agreement of Purchase and Sale with a detailed "Schedule A" explaining the true nature of the transaction (ie an Assignment vs a Purchase) - Assignee should get a copy of the underlying (original) Agreement of P ...
The assignment of contracts for sale of goods is governed by the Uniform Commercial Code (the "UCC") in § 2-209 Modification, Rescission and Waiver. How to modify the template You fill out a form. The document is created before your eyes as you respond to the questions. At the end, you receive it in Word and PDF formats.
A sales agreement is a legally binding contract that outlines the terms of a sale where there is an exchange of goods and services. It involves two or more parties, including the seller and buyer, and identifies the items to be sold, the selling price, and all other relevant details of the transaction.
How to Assign (4 steps) Step 1 - Make a Deal Step 2 - Verify Ownership Step 3 - Write the Agreement Step 4 - Take Control Step 1 - Make a Deal The assignor (seller) and the assignee (buyer) should get together to make a verbal agreement or write a letter of intent.
An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.
An assignment of purchase and sale agreement is a real estate transaction contract that defines the parties and terms of a real estate purchase. This agreement allows the original purchaser of a property to transfer or assign their rights in the deal to a third party. This agreement is often used in flipping houses.
Assignment of Agreement. Trust Depositor has the right to assign its interest under this Agreement to the Issuer as may be required to effect the purposes of the Sale and Servicing Agreement, without further notice to, or consent of, Seller, and the Issuer shall succeed to such of the rights of Trust Depositor hereunder as shall be so assigned.
Subject to the terms and conditions of this Assignment Agreement, Assignor Bank hereby agrees to sell, assign and delegate to each Assignee Bank and each Assignee Bank hereby agrees to purchase, accept and assume an undivided interest in and share of Assignor Bank's rights, obligations and duties under the Credit Agreement and the other Credit …
A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home.
Agreement as the Loan Value Schedule thereunder, and (iv) the delivery of the executed Transferee Acknowledgment and Certification, in the form attached as Exhibit D, the sale and assignment of the LLC Interest to Transferee and the closing of the other transactions contemplated hereby shall be effective.
Assignment of a Purchase and Sale Agreement for a New House or Condominium Unit From: Canada Revenue Agency Effective May 7, 2022, all assignment sales in respect of newly constructed or substantially renovated residential housing are taxable for GST/HST purposes. This publication will be updated to reflect this legislative change.
Assignment Clause Examples. Examples of assignment clauses include: Example 1. A business closing or a change of control occurs. Example 2. New services providers taking over existing customer contracts. Example 3. Unique real estate obligations transferring to a new property owner as a condition of sale. Example 4.
How to Assign a Purchase Contract (4 Steps) This guide is for assignments when selling a purchase contract to a 3rd party. Step 1 - Come to a Verbal Agreement Step 2 - Share the Purchase Contract Step 3 - Create an Assignment Step 4 - Attach and Close Step 1 - Come to a Non-Binding Agreement
Essentially, the assignor sells their right to purchase a property to a third-party buyer, so the latter takes over the Agreement of Purchase and Sale obligations and completes the purchase. For example, imagine you're purchasing a pre-construction condo. After signing all the necessary paperwork and putting down a deposit, you lose your job.
What Is Assignment of Contract? Assignment of real estate purchase and sale agreement, or simply assignment of agreement or contract, is a real estate wholesale strategy that facilitates a sale between the property owner and the end buyer. This strategy is also known as flipping real estate contracts because that's essentially how it works:
An assignment of contract is a legal term that describes the process that occurs when an existing contract assignee wishes to transfer their contractual obligations to another party. When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.
The agreement that details the terms of the assignment of an agreement of purchase and sale (the assignment sale) is generally referred to as the assignment agreement. For purposes of this notice, a house includes a detached or semi-detached house, a duplex, a condominium unit, a townhouse, a unit in a co-operative housing corporation, a mobile ...
An assignment sale is when the original purchaser of a pre-construction property assigns their original purchase agreement to another party before taking ownership of the unit. The new purchaser then takes on all the obligations of the original contract and completes the transaction with the builder. Assignment sales are prevalent in new ...
The real estate assignment contract is also known as the assignment of purchase and sale agreement. This is a separate legal document to the original contract. The real estate assignment contract has the terms of the assignment, such as to who is the assignor/assignee, when the payment is taking place, and closing terms.
Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future.
An Assignment Sale in the Pre-Construction Market. Simply put, an assignment sale is the sale - or an "assignment" of a contract to purchase a pre-construction condominium suite. An assignment sale is usually applied to the pre-construction condominium that has not been registered yet, so no one can take ownership of the unit itself.
An assignment of purchase agreement and sale is when a buyer of a new home sells a third party the right to assume the purchase contract. In this situation, the buyer is the assignor, and the third party is the assignee. Under the agreement, the assignee pays a higher price. This agreement must take place in the time between when the assignor ...