Finding a good price on a pre-construction condo in the Greater Toronto Area (GTA) might seem like an elusive pursuit. As a first-time buyer or a new investor, you may feel like you have searched every nook and cranny, only to come up empty-handed. The truth is, affordable condos are out there, but it can take a seasoned real estate agent to find them in today's market.
One area a platinum agent can help you in is the assignment market. This "hidden" market is a gem. It represents lucrative listings that are not usually advertised to the general public but can present great real estate investments.
Before we get into the benefits of the assignment market, let's discuss what an assignment sale is. An assignment sale is the sale - or "assignment"- of a contract to purchase a pre-construction condo unit. An assignment sale is usually applied to condos that still need to be built, are currently under construction, or have yet to be registered with the city. This means that no one can take ownership of the unit- only the contract can be sold.
When you purchase a pre-construction condo unit, you may be given an assignment clause in your contract that provides you with the option to transfer all rights and obligations of the Agreement of Purchase and Sale (APS) to a new buyer before construction is complete. Assignment sales rely on word-of-mouth communication among realtors and can bring lucrative opportunities.
What's the inside scoop on today's GTA assignment market? We spoke with Brigitte Obregon, Founder & Broker at GTA-Homes with twenty years of experience, to find out.
Sellers Desperate to Sell Has Led to Low Pricing
Why do some investors choose to sell their assignment? Obregon says sometimes homebuyers put down a deposit on a unit but then get a job in another area before closing, or they have kids and realize the unit they bought will be too small for their growing family. Life changes. In other cases, investors may have bought a pre-construction unit years ago and are now having trouble closing due to rising interest rates and tightening mortgage approvals.
Investors sometimes buy pre-construction condos with the intention of flipping them, Obregon points out. Flipping a pre-construction condo means buying and selling before construction is completed. Buyers have done this thinking they can time the market.
In the past, investors used to buy and sell, and make $200,000 to $300,000 in profits this way because pre-construction condo prices were going up. But now, the market has shifted, Obregon explains. People who cannot qualify for a mortgage today but put a deposit on a pre-construction unit in the past, when interest rates were lower, have no choice but to sell and are sometimes doing so at a lower price than they bought their unit for five or six years ago.
Pre-Construction Prices Went Up, Resulting in a Big Price Gap (and Gains)
So, the market is hot, but how hot?
Assignment sales in today's market are huge, Obregon says. In the past, there was at least a 10% price gap difference between an assignment sale and a pre-construction project or a resale unit. This meant an assignment was priced at 10% less than pre-construction condos or a resale unit. That was considered a lucrative investment. But since mid-2022, when the pre-construction market changed, the assignment market has taken off. Conditions are now even better for investors. Pre-construction sales have slowed down because savvy investors changed their investment portfolio to assignments as opposed to investing in the pre-construction market.
Obregon points out investors have been taking advantage of this new environment in spades. Pre-construction pricing is currently trading at an average of around $1,600 to $1,700 per square foot in Toronto. But, the assignment market is trading at an average of around $1,000 - $1,100 per square foot. That's a big difference! Buyers can invest in an assignment sale for a discounted price and potentially resell that same condo down the road for a solid profit.
Good to Know: The Developer Needs to Grant Permission
Do investors need permission from developers to sell their assignment?
Obregon explains that even if your developer provides you with an assignment clause in their pre-construction contract allowing you to assign your unit, you still have to ask for permission to do so. If the developer won't give permission to assign, you cannot put your unit up on a list for sale. But sellers can still take action.
Some developers are not giving assignment permission right now because they don’t want their current inventory to compete with assignment sales. But the scene is quite active, nonetheless. So, how do assigners sell their unit? How do you find a buyer? Potential sellers find a platinum agent and ask them to connect with a client until assignment approvals are available. That's where platinum agents step in and facilitate the deal.
Obregon reinforces that even if the developer says no, you can still contact an agent to start promoting your unit to potential buyers. You can get an agreement in place between the assignor and the assignee and get the ball rolling until the developer provides their approval for you to assign. Keep in mind, it always helps to deal with a pre-construction agent who specializes in these deals. Because platinum agents specialize in the pre-construction market, they have a pool of clients ready to invest. These agents have relationships with the developers, and they can often get assignment approvals earlier.
This type of agent can find a client for you and the minute you get permission from the developer to assign, you're ready to go.
And if you want to invest in an assignment sale, do the same. Contact an experienced pre-construction agent. Tell them what type of unit you're looking for and the location. Platinum agents will look for assignments for close to the same price the purchaser bought it for five or six years ago. If your agent finds that unit, they will start the offer, track everything, and once the developer is ready to approve the assignment, your agent will submit all the paperwork to them and start the deal.
Good to Know: Assignments Sales are More Complicated…but Protected
Assignment sales can be a bit more complicated than conventional resale or pre-construction sales. This is because these sales involve three parties: the developer, the assignor and the assignee. Platinum agents ensure issues such as occupancy and reimbursement of the seller's deposits are all handled with care.
Assignment deposits are protected and go into either the brokerage’s trust account or the lawyer’s trust account, and if the deal does not go through for any reason, the assignee will get all their money back. The sale is protected.
You Can Avoid Bidding Wars and Potentially Save on Taxes
The benefit of buying an assignment unit, Obregon says, is that a buyer can get a brand-new condo and not necessarily wait years to take occupancy. Some assignment sales occur just a couple of months before the official occupancy date, or even during occupancy.
- Get a brand new condo right away
- Avoid bidding wars
- Potentially save on GST/HST
- Inherit VIP incentives like upgrades and capped development charges
- Potentially choose your finishes and colours
You can also avoid bidding wars because you're the only one looking at the unit, and you might save on taxes such as GST and HST. You also will likely inherit VIP incentives such as a seven-year New Home Warranty Program and other incentives from the developer, including upgrades and capped development charges. You might even have the opportunity to select your own finishes, colours and upgrades, but that depends on how far along construction is. You could say buying an assignment is almost like buying a brand new condo, but you don’t have to wait for it to be finished and it comes with a better price tag.
We asked Brigitte how long she thinks the desire for assignment sales will last.
"We can never predict anything for sure; that's what I've learned from decades of working in this business,” she says. “But I think this will continue for a long while. It's a hot market, and it's happening all across the GTA. I don't think the assignment market is going to slow down any time soon."
Contact a Platinum Agent: We’ll Find You the Best Unit or Client
For more information on assignment sales, visit our Assignments page to learn how these exclusive deals work.
If you're an investor and want to buy an assignment, or you have an assignment to sell, contact a platinum agent. Our platinum agents know which deals are happening right now, and we can help you find the assignment or client to best suit your needs. At GTA-Homes, we know where the assignment sales are, what they consist of, and what you can get for your money. It’s easy: register now and connect to get ahead.
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