Should You Consider Buying an Assignment Sale in Real Estate? A Comprehensive Guide

Real estate assignment sales, also known as flipping contracts, have become increasingly popular in recent years. In an assignment sale, the original purchaser of a property sells the rights to that purchase contract to a new buyer prior to closing. As a buyer, assignment sales can provide unique opportunities to purchase properties at discounted prices with built-in equity. However, these transactions also come with risks and complex legal considerations. This comprehensive guide examines the ins and outs of buying real estate on assignment to empower you to make informed decisions.

What is a Real Estate Assignment Sale?

In simplest terms, a real estate assignment sale happens when:

So Buyer B assumes Buyer A’s purchase contract and ultimately closes on the property. The key defining aspect of an assignment sale is that the legal title or deed does not transfer until closing with the end buyer.

Assignment sales frequently occur with pre-construction condominium purchases. The original purchaser may choose to “flip” their contract if market prices appreciate or their circumstances change. By selling the contractual rights, they can profit without incurring closing costs.

Why Consider Buying an Assignment Sale?

There are several unique advantages to buying real estate via an assignment sale:

Purchase at Below-Market Value: Assignment contracts are often sold below fair market price, allowing buyers to secure properties for less. Sellers may accept discounts to exit contracts quickly.

Built-in Equity: Any price appreciation or added property value between contract singing and assignment closing goes to the buyer. This provides instant equity.

Customization: Depending on timing, buyers may get to select interior finishes like flooring, countertops, etc. This personal customization is rare with resales.

Faster Closing: Assignment purchases close almost immediately rather than waiting through long pre-construction periods. This improves cash flow timing.

Investment Potential: As marketsrise, assigned contracts can generate excellent returns for investors seeking short-term gains. Properties can be resold again before closing.

For buyers who understand the risks, assignment sales unlock unique real estate investment opportunities unavailable through traditional channels.

How Does the Assignment Sale Process Work?

While rewarding, completing an assignment purchase involves more complex legal and financial steps than typical closings. Here is the basic process:

  1. Original Purchase Agreement: Buyer A contracts with the developer to purchase the property.
  2. Assignment Agreement: Buyer B agrees to purchase the rights & responsibilities per the original purchase agreement from Buyer A.
  3. Developer Approval: The developer reviews and formally approves assigning the purchase contract to Buyer B.
  4. First Closing – Rights Transfer: Buyer B provides payment to Buyer A to assume contractual rights. Funds are held in trust by lawyers.
  5. Second Closing – Property Transfer: Buyer B closes on the property with the developer, finalizing the purchase.

Both buyer and seller retain real estate lawyers during an assignment sale. All agreements should be carefully reviewed before signing to understand rights and tax implications.

Weighing the Pros and Cons of Assignment Purchases

While discounted pricing and equity gains tempt buyers, assignment transactions have risks to consider. Weigh the key pros and cons before proceeding:

Potential Advantages

Potential Disadvantages

As with any real estate purchase, conduct thorough due diligence, review agreements carefully, research market conditions extensively, and consult professionals. While rewarding when done right, assignments have less margin for error than typical closings.

Navigating the Complex Legal Landscape of Assignments

Beyond unfavorable pricing risk also lies legal liability risks for unwary buyers. Assignment sales exist in a gray area legally. While legitimate, they violate most purchase agreements. And complex contract transfers open the door for disputes. Consider a few key legal factors:

Purchase Agreement Restrictions – Most developers prohibit advertising contract assignments in purchase agreements. But silent sales happen despite restrictions. Tread carefully during marketing to avoid contract cancellation.

Tax Implications – Capital gains taxes apply on profits. But tax deferrals or exemptions based on use as a primary residence may ease burdens. Consult accountants to maximize after-tax returns.

Title Liability – Courts may impose legal judgments that create future property liens. Ensure title insurance covers liabilities tied to the assignor that could impact closing.

Deposit Structure – Deposits range from 5% to 20% down payment on assignments. Low deposits postpone payments but reduce quick profits. Expect to mirror original purchaser deposits.

Closing Fees – Legal fees often run higher for assignments. Transfer taxes and developer fees also apply. Model all costs accurately to determine actual investment returns.

Build contingencies into assignment agreements and work with specialized real estate lawyers to shield yourself from unnecessary risks. Respect contract restrictions and understand the developers can rescind illegally marketed deals.

How Market Conditions Impact Assignment Investment Potential

Not all real estate markets hold equal opportunities for contract flipping profits. The risks and returns of assignments shift dramatically based on broader housing market movements. Consider how conditions impact outcomes:

Appreciation Accelerates Gains – Rapid price growth allows assigned contracts to sell far above original purchase values, enabling immense profits.assignments thrive in up-trends.

Declines Spell Danger – Falling prices lead banks to deny financing and panic sellers to offer fire sale pricing. Avoid assigning in downward momentum.

High-Demand Fuels Churn – Low housing inventory and fierce competition incentivize rapid resales sight-unseen. These conditions produce bidding warsideal for profit.

Oversupply Skews Values– Surplus units create uncertainty and incentivize developers to dropprices. Expect below-market sales and limited interest when supply outpaces demand.

Closely follow housing indicators like pricing trends, resale volumes, inventory levels, mortgage rates and construction activity before investing in assignments. Properly reading conditions separates big profits from losses.

8 Insider Tips for Buyers of Assignment Sales

Follow these key tips to tilt the odds of success in your favor while buying real estate assignments:

1. Find Knowledgeable Agents – Seek out brokers specialized in assignments who can accurately assess risks and valuebased on deep market experience.

2. Inspect Properties Yourself – Do not rely solely on assignor representations. Visit personally whenever possible, even for pre-construction units, to verify conditions.

3. Verify Financing Pre-Approval – Confirm lenders will finance the property prior to closing. Also validate terms like rates and income requirements.

4. Examine Title Documents – Require title insurance listing you as the insured. Thoroughly review for past liens or future obligations impacting your rights.

5. Review All Contracts Extensively – Scrutinize original purchase and assignment contracts. Understand all timelines, contingencies, restrictions and fee clauses with no assumptions.

6. Model True Returns – Calculate accurate profits based on fees, taxes and financing costs. Do not rely on assignor estimates alone when negotiating.

7. Build In Exit Strategies – Structure contingent clauses allowing you to reverse the purchase if issues emerge later, like unsuitable inspection findings.

8. Complete Assignments Quickly – When selling rather than occupying, quickly flip assigned contracts again through silent sales before final closing to maximize gains.

Above all, exercise patience and only proceed with expert guidance when criteria align favorably with your investing goals.

Case Study – Leveraging Assignments for Short-Term Profits

Assignment sales offer particular appeal for real estate investors aiming to capitalize on market uptrends. As a case study consider Frank, an individual investor in Toronto, Canada.

Frank identified a pre-construction townhome development projected to complete construction within 12 months. The project had 66% of units pre-sold to individual buyers. Frank estimated 15-20% future appreciation given active homebuyer demand and tight resale inventory in the neighborhood.

He contacted agents to find sellers interested in assigning purchase contracts before closing. After offering 10% finder fees, agents located six investors seeking quick exits to cash in on valuation gains and upgrade units.

Frank negotiated a $92,500 purchase via assignment below the $102,800 prior sale price. Given the $10,300 appreciation and avoiding $7,500 upcoming closing costs, the effective discount totaled $25,600 (20% below true value).

By offering $2,000 assignments to agents, Frank quickly resold the unit rights six times across four months for between $115,000 and $118,750 per sale as values continued rising. After costs including taxes, Frank walked away with $43,050 profits from an initial investment of just $10,000 over five months for a 334% unleveraged return.

Potential Drawbacks & Risks Buyers Should Consider

Despite major upside, assuming real estate contracts through assignments also harbors downside dangers. As an educated buyer, consider these potential pitfalls:

Fickle Developers – Initial buyers violate resale clauses in purchase contracts. Reassignments depend on developers not exercising cancellation rights. Seek their formal approval.

Market Shifts – Unexpected housing plunges between purchase and closing can trap buyers in losses. Execute quick flips to avoid exposure.

Litigation Risks – Legal disputes between assignors and developers could later impact property. Prioritize title insurance with liability coverage.

Inspection Limitations – Buying unbuilt homes limits full unit inspection. Carefully assess pre-construction sites to gauge overall quality risks.

Financing Issues – Lenders scrutinize assignments more closely and can deny mortgages if risks appear concerning, leaving buyers cash-strapped at closing.

Buying an assignment contract is risky. But for informed buyers who safeguard their investments, leverage knowledgeable professionals, and remain vigilant regarding market conditions, it offers a path to achieve outsized profits unavailable to most real estate investors.

Critical Legal & Regulatory Considerations

Beyond risk factors directly tied to housing valuations also emerge legal and regulatory risks associated with assignments. Consider key legal elements buyers must navigate:

Contract Adherence – Breaching original purchase terms could void contracts. Strictly manage all dates, payments and requirements.

Funding Contingencies – Record escape clauses in case suitable financing gets denied unexpectedly at closing.

Disclosure Forms – Fully complete governing property disclosure paperwork to avoid future liability claims from developers or occupancy buyers.

Title Insurance – Obtain policies that explicitly cover interim liability arising between contract transfer points. Ask for gap coverage between transactions.

Tax Obligations – Declare and pay all taxes owed on profits per local and federal codes. In the US, capital gain taxes often apply on flipped contracts.

Consult real estate attorneys before buying assignments. As a high-risk endeavor for amateurs, legal pros prove instrumental to steering past pitfalls at each transactional milestones.

Key Takeaways – Should You Buy A Real Estate Assignment?

Assignment sales carry an alluring appeal. Discounts up to 20% on properties and equity gains attract buyers and investors eager to leverage real estate without excessive capital outlays. Yet unprepared buyers also risk major losses from complicated transactions.

When weighed carefully against individual risk preferences and guided by knowledgeable professionals, assignments can offer profitable opportunities unmatched by traditional channels. But small missteps compound quickly across the multiple sales required.

Ultimately by educating yourself extensively, thoroughly planning investments, accurately assessing housing markets, and paying for competent legal representation, you can maximize upside potential while minimizing unnecessary risks.

So while assignments merit caution, they can unlock immense wealth for disciplined investors. If you elect to pursue a contract sale, embrace the tips and best practices outlined above as an informed real estate buyer.

The Ins and Outs of Condo Assignment Sales

Pre-construction condos in Toronto are selling faster than the city can build them, and for good reason. Not only do these condos offer more mortgage flexibility and customization options, you can also purchase a pre-con under an “Assignment Sale”. Does the term sound familiar? It’s probably because MLS listings have been full of condos being offered via assignment sales over the last few years. This type of sale has skyrocketed in popularity and you definitely don’t want to miss out.

With the increase in pre-construction condo assignment sales, it’s important for condo buyers to understand what an assignment sale entails.

What Is A Pre-Construction Condo Sale?

A pre-construction condo is a new condominium development that has yet to be built. In the early days of a condo’s construction, a developer will sell the legal paperwork associated with the ownership of the condo to a buyer or investor. Once the condo is built and permits from the city of Toronto are acquired, the condo is ready for move in. While the buyer has technically purchased the condo unit, they do not “own” it yet. At this stage, Toronto’s land registry has yet to provide the land title. This means that a bank or mortgage lender cannot lend money to the buyer yet. As such, the buyer is only inhabiting it for the time being and for a fee that roughly equates to a monthly mortgage payment.

The buyer only receives the legal title once city officials do their final inspections and the condo is registered with its legal title. Once this happens, the bank will release funds to the developer to complete the condo closing, allowing the buyer to purchase the condo officially. Dependent on the condo, this interim period between a buyer moving in and the construction’s closing date can vary; for Toronto condos, it can be anywhere between a few weeks to a couple of years. Ready to sell your condo on assignment? Head over to our real estate team at to get in touch with one of our real estate professionals.

What Is A Condo Assignment Sale?

Now that you understand the process behind a pre-construction condo sale in Toronto, we can talk about how a pre-construction assignment sale and purchase comes into play. Assignment sales happen when buyers decide to put their pre-construction condo paperwork up for sale before closing. “Before closing” just means before the buyer has possession of the title to the condo. Simply, they’re selling the contract that gives them the right to purchase the condo or condos.

There are a number of reasons why original buyers may choose to put their condos’ “right to purchase” paperwork up for sale via an assignment – lifestyle changes, other financial obligations, or an investor just decides they’d like to move onto the next big thing to invest in. Either way, there are pros and cons for both the Assignor (the one selling) and the Assignee (the one buying) in this type of sale, which we’ll review below.

Pros for the Assignor and Assignee

What Is A Assignor For Assignment Sales?

In an assignment, the assignor is the original buyer of the condo/condos. They benefit through selling via assignment because they will not have to close on their condo purchase. This means they can realize the condo’s value appreciation without needing to shell out additional financing to “own” the condo in the end.

Likewise, depending on the timing of the sale and the assignment occupancy date, an assignor can also avoid occupancy fees. Through the sale, the Assignee takes over the responsibility to pay those fees. Though, this is something that requires consultation with a real estate lawyer to establish. We recommend finding a good one to help you understand all the T&Cs in your original purchase agreement.

What Is A Assignee For Assignment Sales?

In an assignment sale, the assignee is the party that is purchasing the right to buy the condo. In purchasing via an assignment, you get a pricing benefit while still getting the bonus of living in a new suite. With Toronto real estate as pricey as they are, this is one of the top benefits of purchasing a condo through an assignment sale.

Likewise, an assignee who moves forward with an assignment transaction has the potential to take advantage of a much shorter closing period. This is especially true if the new buyer goes through with an assignment at a later stage in the construction process. With a closer move-in date, this allows them to avoid the occupancy fees typically involved in a purchase agreement.

Lastly, the assignee will have to reimburse the assignor all the deposits that have already been paid. However, the assignee only has to pay back the original purchase price and not the costs at today’s market value.

Assignment Sale Closing Considerations


A risk for the original buyer is that the they are responsible for any fees charged by the Builder should the new Assignee be unable to close on the home and the assignment falls through. If that happens, the Builder is in their right to request that the original purchaser pay per the terms of the original contract.

Even if everything goes well with the assignment, the assignor will risk being left out of the loop once the sales contract is executed. This is because the builder typically works directly with the new buyer once the sale is finalized. While not an outright issue, it will make it difficult for the assignor to receive important updates during the build. As such, it’s vital that a lawyer is involved to keep everyone updated.

The last con for consideration as an assignor is the potential risk of losing out on future gains of the construction by selling early. With downtown Toronto condos reaching sky-high prices, holding out and waiting to resell later on may allow for additional appreciation gains in the long term. This potential benefit is something they’re opting out of by going through with an assignment transaction.


As the new buyer on a pre-construction unit, you will have to sign the same contract as the original buyer. This means that you may end up taking on risks that the original buyer missed in the agreement. To avoid this, we highly recommend hiring a lawyer well-versed in assignment transactions to ensure that you understand the terms ahead of time.

With anything that requires legal involvement, there will be fees. Legal handling of the closing on an assignment is much more complicated than a resale condo closing. This means that you might end up forking over any savings from the condo’s price towards the additional complexity that comes with an assignment sale.

Likewise, with purchases of new homes in Toronto, there will be a land transfer tax. This is true even for assignment sales. As the one closing on the home, the assignee will end up owing Toronto and Ontario land transfer taxes.

Another chunk of your savings may also unexpectedly go towards the down payment of this new home. While the price of condos sold through assignment are cheaper than your typical Toronto home, assignment sales have a unique caveat when it comes to down payments; An assignee is required to match the down payment made by the original buyer. Depending on the type of assignment, this could end up being as much as 25% to the developer. Whatever it ends up being, it’s a far cry from the standard 5-10% seen in normal Toronto transactions.

Bottom Line

Clearly, assignment sales can be great for both assignee and assignor alike, bringing value to both parties involved. However, there are a number of complexities that come with condo assignments and they should be considered before closing on your dream pre-construction home. As such, it’s imperative to discuss any potential risks with a trained real estate agent and lawyer before signing an agreement!

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