How to Sell a Presale Condo in BC: Assignments of Contract Sales
Assignment Sale for a Presale Condo – Step by Step Guide
Selling a presale condo assignment is very different than the process of selling an existing property.
Below is a step by step guide on how to sell a pre construction condo in Greater Vancouver and across British Columbia, Canada.
Before we discuss how to sell a presale condo assignment, we need to clarify what it is.
What is an Assignment Sale for a Presale Condo in BC?
A presale condo assignment is a legal transaction in which the original buyer of a presale condo (a condo that has not yet been constructed) transfers their purchase rights and obligations to another buyer before the property’s completion.
Essentially, it involves selling the pre sale condo contract or agreement between the initial buyer and the developer.
This allows a new buyer to assume the original purchaser’s position, meaning they step into the original buyer’s shoes and take on their interest in the condo or townhouse even before it’s built.
It’s crucial to understand that this is not a sale of the actual condo unit but rather a sale of the contract itself.
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1 – Check the Contract & Purchase Documents
The first step in selling a presale condo through an assignment is to check the original purchase contract.
We primarily review the contract first to understand clearly what the potential assignor has purchased but also to understand if the developer will allow assignments or not.
Some developers prohibit assignments, while others may allow them with certain and specific conditions on the marketing of the unit.
Whether or not the developer allows assignments is typically stated in the purchase contract. Even if the contract says a presale buyer may assign their condo, there is always language in the contract requiring express developer permission for an assignment and the marketing of the assignment.
It’s crucial to first understand if we can obtain permission to assign, to avoid marketing a property that cannot be sold.
2 – Ask Developer Permission to Assign the Presale
After reviewing the contract to determine if assignments are permissible, it’s essential to consult with the developers to see if they are currently allowing
While the contract may indicate the possibility of assignments, we cannot solely rely on it.
Developers, through their lawyers, typically draft the presale condo purchase agreements with a clause reserving the right to disallow contract assignments.
Although most developers are open to assignments, they retain the discretion to deny or revoke assignment permissions at any time and for any reason.
Here are the typical conditions a developer requires to allow the assignment of a presale condo contract:
Typical Developer Conditions for Assignments
Here are the typical conditions that will be needed to get developer permission to assign presale condo contract:
- The contract stipulates assignments are allowed.
- All of the original presale purchase deposits have been paid on the unit in question. Sometimes this might be waived if there is a small deposit payable right before completion.
- The presale project has been sold out. Developers don’t want sales competition from condos they have already sold in the form of assignments.
Will the developer allow an assignment below the original presale purchase price,
Developers Change Their Minds – All The Time
In my experience selling presale condo assignments, developers may allow an assignment but then withdraw that permission several months later because they have more condos they want to sell or for other reasons.
When developers decide not allow assignments after they have initially given permission but, they will not notify the Realtors and potential sellers/assignors.
The expectation of a potential seller of a presale condo should be that it is not certain developer permission will be given to assign and that this permission and the permission to market can be withdrawn at any time.
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Developer Marketing Restrictions for Assignments
Once there is developer permission for the assignment, the next task is to understand the developers marketing restrictions.
Developers meticulously safeguard their brand image and that of their products. They need assurance that assignments of the presales from their brand are marketed professionally and positively to enhance their brand image.
Developers hold significant influence in the assignment process, and their marketing conditions must be strictly adhered to, as written permission from the developer is required to assign the presale.
If the developer finds the marketing of the assignment unsatisfactory, they may retract permission to market.
Furthermore, if a developer is discontented with the marketing of the assignment, they may refuse to sign the assignment purchase agreement even when a ready and willing buyer is found.
MLS Listings for Assignments Mean More Money Sooner
Developer policies around marketing presale condo assignments can have a big impact on how much they can be sold for. The more marketing channels available for selling an assignment, the broader the market reach, potentially leading to higher sale price for a seller sooner.
Policies vary among developers in different BC markets when it comes to listing on the MLS or Multiple Listings Service. MLS listings for presale condo assignments can be very powerful from a marketing perspective due to the vast reach of the system.
In Vancouver and the inner suburbs, it is rare for a developer to allow a potential assignor an MLS listing for an assignment on Realtor.ca. Whereas outside of Vancouver and the inner suburbs, developers are much more open to MLS listings for presale condo assignments.
Some developers, more so again in Vancouver and the inner suburbs may not allow any public marketing on any websites, social media, or realtor sites.
Often a developer may allow an assignment, but put such onerous restrictions on the marketing of an assignment that they are impossible to sell.
2 – Understand the Costs of a Condo Assignment Sale
Once we know if we can sell it, we should understand exactly how much a developer will charge to allow the assignment to occur.
Condo Assignment Fees
Typically assignment fees are either a set amount or a percentage. The set amount assignment fees are typically for transfers to family members whereas percentages are used for transfers to non-family member 3rd parties.
A developers opinion of assignments can be seen from the percentage they will charge for a third party transfer. Developers who are not excited about assignments charge higher assignment fees. In my experience, I have seen assignment fees as high as 50% of the profit, but typically assignment fees are between 1% to 5% of the assignment sale price.
Assignment fees can have a major effect on the decision as to whether or not to assign, so reviewing the contract first to understand these is critical.
Real Estate Commissions
Real estate commissions will also be a cost to consider when selling a presale condo.
I charge 7% on the first $100,000 and 2.5% of the balance of the assignment sale price. We offer just under 50% of this commission to a buyers agent who brings us a buyer who completes a purchase of the assignment. Here is a commission calculator that you can use to understand exactly how much it will cost to assign your presale condo.
Taxes
When you sell a presale condo assignment, tax may be payable. I am not qualified or licensed to give tax advice, so it is strongly recommended to consult with a qualified tax accountant who understands presale assignment sales. More on that below.
3 – Understand the Current Market Value of the Assignment
Once we understand what it will cost to assign a presale condo and can potentially assign and how we can market the assignment, we need to know what it is worth.
Typically we calculate the value of the assignment using comparable properties. If a developer has allowed MLS listings and there have been documented of comparable assignments on MLS, the process is simpler. Quite often, developers do not allow MLS listings so local recently built properties are used as sales comparables to calculate value.
We also look at market statistics to inform about current market conditions. Marketing restrictions will also figure in the analysis and more restrictive developer marketing restrictions will put downward pressure on the price.
Once the analysis is done, we typically email all the data (sales comparables, stats, and other information) we used for the analysis to the prospective seller/assignor to support the conversation about value.
This market analysis helps a prospective assignor/seller make decisions on the following:
- Decide whether it makes sense to assign the presale. Typically if a prospective seller does not want to lose money or wants to profit on the sale of an assignment we like to see a 15-20% increase in value over the original presale purchase price.
- Foundation for a pricing strategy – The market analysis is a confidential conversation we have with a prospective seller/assignor. The second purpose of the analysis is to provide a foundation for a pricing strategy to get the result the client wants. As part of our services, we also assist the client in formulating a pricing strategy to reach client goals whatever they may be.
- Preparation for when Offers are Received – Our job when assisting a seller or assignor of a presale assignment is to be an advisor to provide the best analysis, data, and advice to allow the client to make the best decisions. The market analysis allows the assignor to understand clearly the market value of their assignment so they are prepared to negotiate offers from prospective purchasers with our support.
4 – Get Qualified Tax Advice
Buying or selling a presale condo assignment in BC is not a straightforward process, especially when considering the unique tax implications set by the Canada Revenue Agency (CRA).
Unlike the sale of a primary residence or an investment property, condo assignments are treated differently under the evolving GST rules.
This distinction underscores the importance of seeking expert tax advice. By consulting a tax professional, individuals can gain clarity on the specific financial implications of condo assignments, including potential rebates and the treatment of deposits.
Misunderstanding these nuances can lead to unexpected financial burdens and penalties from the CRA.
To ensure a smooth transaction and to avoid unpleasant surprises, it’s crucial to be well-informed and prepared.
Before making any decisions on condo assignments, always prioritize expert tax guidance to navigate the distinct tax landscape set by the CRA.
5 – Marketing Your Presale Condo Assignment
We specialize in the marketing and selling of presale condo assignments across Metro Vancouver and British Columbia and sell them every week.
Marketing presale condo assignments is very different from marketing existing properties. With existing condos, there is a property to visit and view and we can do open houses to publicize and advertise.
With a presale condo assignment, there is rarely a property to view and the marketing is primarily online using floor plans, contracts, documents, and developer marketing materials.
7 – Vancouver New Condos Presale Condo Assignment Marketing Plan
We at Vancouver New Condos are uniquely positioned to sell presale condo assignments due to our strong online presence and deep understanding of the new home market. We have refined several processes to sell a presale condo assignment.
Here is what we do to market your presale condo assignment:
Expose your assignment to an going presale and assignment buyer lead generation program bringing a minimum of 30 qualified presale and assignment buyers per day.
- Check in with the developer to see if we can assign and what the current marketing restrictions are.
- Gather all the necessary document required for a successful assignment sale.
- List the presale condo assignment on our sites under the dedicated assignment section both of which consistently consistently rank at the top of the Google search results.
- Expose your pre sale contract assignment to an going presale and assignment potential buyer lead generation program bringing a minimum of 30 qualified presale and assignment buyers per day.
- If possible, list the presale condo assignment on MLS.
- List the property on Craigslist, Kijij, and other similar sites.
- Share the listing on private and exclusive WhatsApp and Facebook groups where assignments are shared with Realtors who have clients for this type of investment.
- Include the listing on our monthly presale assignment email that goes out to over 67,000 prospective presale and assignment buyers on our private email list we have created.
8 – Selling a Presale Condo Assignment – Our Process
Find a Buyer
The next step is to find a buyer for the contract assignment. We are always speaking with assignment buyers and their Realtors who enquire looking for assignments.
Negotiate the Contract of Purchase and Sale
Once a buyer or potential assignee is found, their Realtor will prepare an assignment Contract of Purchase and Sale.
This contract or sales agreement will include the following among other things:
- How much the assignee (buyer) will pay for the assignment.
- When the assignee will reimburse the assignor (seller) for their deposits.
- When the assignee will pay the assignor’s profit (or when the assignor will credit the assignee if there is a sale at a loss to the seller) and how.
We have decades of negotiating experience and will help, support, and guide you with the negotiations on the sale of your assignment. This includes presenting and advice on all offers submitted, preparation and advice on counter offers, and specialized assignment negotiation support.
Accepted Offer – Submit for Developer Permission
Once there is an accepted offer, we will assist the buyer and their Realtor to get the documents and answers they need to remove their subject conditions. Once conditions are removed and the initial deposits are submitted, we can prepare the documents and advise on getting developer permission in wiring for the assignment.
Release of Deposit Funds & Payment of Profits
Once developer permission is granted, we can assist in the release of funds for the reimbursement of deposits and payment of profit. We also have people available to pick up and drop off cheques and bank drafts.
Assignment Sale Risks and Considerations
While selling a presale condo through assignment can be profitable, it also comes with risks. Market conditions can change, making it difficult to find a buyer willing to pay a higher price for the contract. There are also legal and financial risks, including potential tax implications. It’s recommended to seek advice from a real estate professional and a lawyer before proceeding with an assignment.
Benefits of an Assignment Sale
Engaging in an assignment sale can offer several advantages.
For the original buyer, it provides an opportunity to exit a contract if their circumstances change before the condo’s completion. This can be especially beneficial if they face financial challenges or have a change in housing needs.
For the new buyer, it offers a chance to invest in a property that might have been sold out or to secure a unit at a potentially lower price than current market rates.
Challenges of an Assignment Sale
While there are benefits, there are also challenges to consider.
There is a chance that a presale project may not complete, and if a buyer/assignee has already paid the profit to the assignor, they might be out of pocket for the amount.
Additionally, the new buyer must ensure they fully understand the terms of the original contract, as they will be bound by those terms once the assignment is complete.
Also an assignor or seller of an assignment may be forces to complete on a presale that they assigned if the buyer/assignee is not able to complete the sale.
Presale Condo Assignment Sale FAQ
1. What is a presale condo assignment?
A presale condo assignment is a legal transaction where the original buyer of a presale condo (a condo not yet constructed) transfers their purchase rights and obligations to another buyer before the property’s completion.
Learn more by reading our detailed article on What is a Presale Condo Assignment Sale?
2. Why would someone want to sell their presale condo through an assignment?
Circumstances can change between the time of purchasing a presale condo and its completion. The original buyer might face financial challenges, have a change in housing needs, or see an opportunity for profit, leading them to sell their contract.
3. Are all developers open to assignments?
No. Some developers prohibit assignments, while others may allow them with specific conditions. It’s essential to check the original purchase contract to understand the developer’s stance on assignments. Its also critical to have your Realtor check in with the developer as their assignment policies on assignments are subject change, even after they have given permission to assign in writing.
4. What are the tax implications of selling a presale condo assignment in BC?
Condo assignments are treated differently under the evolving GST rules compared to the sale of a primary residence or an investment property. It’s crucial to consult a qualified tax professional to understand the specific financial implications.
5. Can a developer change their mind about allowing an assignment?
Yes. Developers can withdraw permission for an assignment even after initially allowing it. They might do this for various reasons, such as wanting to sell more condos within development in a second phase.
6. What are developer marketing restrictions?
Developers often have specific conditions on how an assignment can be marketed to protect their brand image. These restrictions can range from prohibiting MLS listings to limiting public marketing on websites and social media.
7. How is the value of the assignment determined?
The value of an assignment is typically calculated using active and sold comparable properties, what’s happening in the overall real estate market, and what marketing restrictions are imposed by the developer.
If the developer has a permissive marketing policy and/or allows MLS listings the value of the assignment may be higher than if the opposite is in effect. Also if MLS listings have been allowed and there have been comparable assignments sales on MLS in the building, the process is simpler. Otherwise, local recently built properties are used as sales comparables.
8. What happens after the assignment agreement is signed by the Developer?
Once signed, the ownership of the assignors deposits held by the developer will transferred “assigned over” to the assignee. The assignment fee is typically paid at this stage and in most cases by the assignee. Depending on what we negotiated in the contract, the assignor may get deposits reimbursed and/or receive the profit or “lift” on the assignment sale.
9. Do developers charge a fee for approving an assignment?
Yes. Developers charge a fee for the assignment approval process. It’s essential to check with the developer or review the original purchase contract for any such provisions and to see how much they charge before selling.
10. Are Assignment Fees Lower for Transfers to Family Members?
Yes. Typically assignments among family members are significantly cheaper than assignments to third party no family assignees. Family assignment fees are often $500 or in and around that amount.
11. What risks are associated with selling a presale condo through assignment?
While it can be profitable, there are risks. Market conditions can change, affecting the assignment’s value. There are also legal and financial risks, including potential tax implications. It’s recommended to seek advice from a real estate professional, qualified tax accountant, and a lawyer before proceeding.
12. What Legal Documents Are Required for a Presale Condo Assignment in BC?
For a presale condo assignment in BC, necessary legal documents typically include the original presale agreement, an assignment contract of purchase and sale, and consent forms from the developer. It is recommended to the assistance of a qualified Realtor to assist in the purchase and sale of presale condo assignments due to their complexity and potential for risk.
13. Are There Any Specific Restrictions on Marketing Presale Condo Assignments in Vancouver and BC?
Marketing restrictions for presale condo assignments in Vancouver often involve limitations on public advertising, use of MLS listings, and adherence to developer-specific guidelines. These restrictions are designed to protect the developer’s brand and the image of the project.
14. How Does the Assignment Process Impact the Original Buyer’s Deposit in BC?
In a presale condo assignment, the original buyer’s deposit is typically transferred to the assignee, upon developer written permission for an assignment. The specifics of this transfer can vary based on the terms of the accepted offer and the developer’s policies.
15. Can International Buyers Buyer or Sell in Presale Condo Assignments in Vancouver & British Columbia?
Canada currently has a Foreign Buyers Ban that expires in 2025. So according this legislation, foreign buyers probably cannot purchase presale condo assignments until 2025.
BC has a 20% Foreign Buyers Tax, so even if a non-Canadian citizen was able to buy here, they would be subject to this unfortunate tax.
If foreigners do hold presale condos, they can assign them, but given the Foreign Buyers Tax has been in effect since 2016 the amount of foreign buyers active in the BC real estate market is negligible.
16. What Are the Common Misconceptions About Presale Condo Assignments in BC?
Common misconceptions about presale condo assignments include the belief that they are simpler than traditional sales and always result in profit.
In reality, these transactions involve complex legal processes that should only be undertaken with professional assistance and are subject to market risks.
17. How Do Market Conditions Affect the Value of Presale Condo Assignments in Vancouver?
Market conditions significantly influence the value of presale condo assignments. Elements such as supply and demand, economic trends, and housing market fluctuations can impact both the profitability and viability of assignments.
18. What Role Do Developers Play in the Assignment Process of Vancouver Condos?
Developers play a critical role in the assignment process of Vancouver condos. They construct the presale to be assigned, establish the terms for assignments, approve or reject assignment requests, and may impose various fees or conditions that influence the sale.
19. How Can Sellers Determine the Right Pricing Strategy for a Condo Assignment Sale?
To establish an effective pricing strategy for a condo assignment sale, sellers should have a qualified presale condo specialist conduct an in-depth market analysis, consider any developer restrictions, and evaluate comparable assignment sales data to make informed decisions.
20. Where can I find MLS Listings for Presale Condo Assignments?
We have all MLS listings for presale condo assignments on the page linked to the left.
21. How Much Are Presale Condo Assignment Fees?
Presale condo assignment fees charged by developer range anywhere from 1% to 5% and sometimes up to 10%. I had one occasion were an unsavoury local developer demanded 50% of the profit to allow an assignment.
22. When is a Profitable Presale Condo Assignment Sale Viable?
Typically we need a 20% lift in the market value of the property to make a profit for a seller/assignor because of the costs associated with a sale.
22. Can you sell an Assignment at a Loss?
Sometimes. Developers often will not allow assignments at a loss. We have experience selling assignments for less than what they were paid for. Please contact us to learn how we can help.
23. What Government Body Regulates the Purchase and Sale of Pre Sale Condo Assignments?
In BC, the British Columbia Financial Services Authority oversees and regulates the sale of presale condos and assignments. BCFSA along with the local real estate board of each area of BC oversee and regulate the behaviour of licensed Realtors.
