In Vancouver, many condos are sold by way of presales. This means the developer pre-sells the units, or a portion of the units in the building, before construction begins. This is done for a variety of reasons including reducing their own financing costs and inventory, as well as lowering the risk to the Developer.
But what happens if you buy a presale unit and then don’t want to live in the property or need to sell it for some other reason? Here we’ll take a look at selling a Presale Assignment.
What Is A Presale Assignment?
A presale assignment means the contract is being sold to a third party, before the completion of the construction process and the original closing date. The contract for the presale unit is assigned to another purchaser by the original buyer and all of the rights of the purchaser are assigned to the new buyer.
Does The Developer Have To Approve The Assignment?
Generally, because the original purchaser has not yet taken title to the property, the Developer or seller will have to give consent to the Assignment of the contract to another buyer. There may be restrictions to the number of Assignments allowed in development, or in how the unit can be marketed for sale by the original buyer.
Is It Safe To Sell A Presale Assignment?
As with any transaction this large, you should ensure you get legal advice regarding the terms of the Assignment. The Developers Disclosure Statement may limit how many units can be sold by Assignment or they may refuse to approve an Assignment if their own inventory is high.
Legal fees and Real Estate fees or commissions may be payable if the original buyer sells a presale assignment. The original Contract may also detail an Assignment Fee which will be payable to the developer. Make sure all parties are clear on whose responsibility these costs are to avoid any nasty surprises later.
Ultimately, the developer may not release the original buyer from their responsibilities under the Contract in the event the new buyer fails to complete the purchase or defaults on the terms of the deal in some way. To reduce the risk, the original buyer should thoroughly vet the new buyer to ensure they are financially able to complete the transaction. The biggest upside for the original buyer, is that the price the new buyer pays will often be higher than what was agreed to in the Contract. This is due to anticipated increases in the real estate market, making the unit more valuable one or two years down the line. The original buyer pockets the expected profit, although sometimes this is shared with the Developer.
Selling a presale assignment, when done correctly, is quite safe. Finding the right buyer for the Contract and utilizing experienced professionals to handle the real estate and legal functions of the Assignment, ensures the risks are minimized.
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