Loading...Markham has become one of the most sought-after cities in the Greater Toronto Area in terms of real estate. With its booming tech sector, top-tier schools, and vibrant community lifestyle, the demand for newer homes increases. A specific type of real estate transaction is becoming increasingly common: pre-construction assignment sales in Markham.
Whether you’re looking for a condo or townhouse, assignment sales offer unique advantages. For sellers, they have an exit strategy before the building is even completed. For buyers, they offer the opportunity to buy at sold-out developments. However, there is more nuance and complexity to these assignments compared to standard resale.
What Is an Assignment Sale in Real Estate?
An assignment sale is when the original buyer (the “Assignor”) of a pre-construction property sells their rights and obligations under an Agreement of Purchase and Sale to a new buyer (the “Assignee”) before the building is officially completed and ownership is transferred. So as a buyer, you’re buying the contract.
Example:
Here’s a typical example of an assignment sale. An investor purchased a condo unit in a new Downtown Markham development in 2024 for $600,000. The tentative occupancy for the condo is estimated to be in 2028. Due to a litany of reasons, the investor decides they rather “assign” the condo to someone else and this way this are no longer obligated to close on the condo and they will get their deposit back.
A new buyer decides to purchase thi assignment for $750,000. The new buyer pays the investor the difference (the profit plus the original deposit) and takes over the responsibility of paying the remaining balance to the builder at the final closing.
Why Assignment Sales Are Popular in Markham
High Demand for Pre-Construction Homes
There’s a high demand for pre-construction homes as Markham’s population grows. New condo and townhouse developments often sell out quickly. For many, an assignment is the only way to get into a specific, highly desirable community.
Investors Selling Before Closing
Many investors engage in selling assignment property in Markham to realize gains without ever having to take out a mortgage or deal with the “interim occupancy” phase. By selling the contract, they secure their profit and move on to the next project.
Buyers Wanting Earlier Access
Some buyers missed the initial sales event three years ago but want a brand-new home today. Buying an assignment allows them to move into a new build much sooner than if they buy at a new development now.
How Assignment Sales Work in Markham: Step-by-Step
Step 1 – Original Buyer Buys Pre-Construction Property
The original buyer/assignor purchases a property from the builder in pre-construction phase. The buyer signs the Agreement of Purchase and Sale agreeing to the terms and conditions on the contract.
Step 2 – Builder Must Allow Assignment
Not all contracts allow assignments. The Assignor must check their original agreement. Most builders require the project to be a certain percentage sold (often 85%+) before they grant permission. The Assignor should also check their agreement and see if there’s additional assignment fees required.
Step 3 – Assignment Agreement Is Created
The Assignor and Assignee sign an “Assignment of Agreement of Purchase and Sale.” This document outlines the assignment price, the refund of the original deposit, and the profit (if any) to be paid.
Step 4 – New Buyer Takes Over
Once the builder gives their consent for the assignment sale to proceed, the Assignee now replaces the original buyer. They are now responsible for the final closing costs which include the remaining payment, HST adjustments, and any development levies.
Benefits of Buying an Assignment Property in Markham
For those looking at buying assignment property in Markham, the perks are significant:
- Access to Sold-Out Units: You can snag the “perfect” floor plan that was snapped up years ago.
- Potential Value: Occasionally, an Assignor is highly motivated to sell, allowing the Assignee to buy at a price lower than the current “market” rate for a resale unit.
- Brand New Infrastructure: You get the benefits of a modern, energy-efficient home with a full Tarion warranty.
- Market Entry: In a rising market, you may gain equity between the time you sign the assignment and the final closing.
Benefits of Selling an Assignment Property
If you are selling an assignment property in Markham, the advantages include:
- Liquidity: You can potentially get back the original deposit you had given the builder and possible profit before the building is registered.
- Avoiding Mortgage Costs: You don’t need to qualify for a mortgage or pay land transfer taxes.
- This also avoids the potential scary situation of the property assessing for a lower value at closing which means the mortgage doesn’t cover the entire remaining amount at closing. In such cases, you’d risk not being able to close and possibly legal implications with the builder.
- Lower Carrying Costs: You avoid the costs associated with “Interim Occupancy,” such as monthly fees paid to the builder before the building is legally registered.
Note: Always seek a legal review before listing your assignment to ensure you aren’t violating your builder’s “No Marketing” clauses. Read more below to learn about this.
Risks Buyers and Sellers Should Know
Despite the benefits, an assignment sale carries risks that require careful management.
Builder Restrictions
Builders often charge a “consent fee” (which can range from $5,000 to $15,000 or more). Furthermore, many builders don’t allow listing assignments on the MLS, forcing sellers to rely on exclusive networks.
Tax Considerations
The CRA has strict rules regarding HST on assignments. If the buyer originally bought the property to flip for profit, the assignment price may be subject to HST. Consult with a professional to avoid an unexpected tax bill.
Complex Contracts
As an Assignee, there are things that need to be considered such as development charges or utility hook-up fees in the agreement. If these fees aren’t capped to a certain amount, the new buyer would be responsible for these charges. This could be tens of thousands of dollars.
Legal Considerations for Assignment Sales
Because there are many parties involved in an assignment sale, legal support is a must. A real estate lawyer will focus on:
- Builder Consent: Ensuring the developer has formally agreed to the transfer.
- Deposit: Making sure the transfer of the original deposit occurs safely
- APS Review: Reviewing the original Agreement of Purchase and Sale for any red flags.
- Occupancy Fees: Clarifying who pays the fees during the interim period.
Assignment Sales vs. Regular Real Estate Transactions
| Feature | Assignment Sale | Standard Resale |
|---|---|---|
| Ownership | Transfer of contractual rights | Transfer of land title/deed |
| Property Age | Under construction or brand new | Existing/Previously occupied |
| Deposits | Usually higher (covering the original deposit) | Typically 5% of purchase price |
| Timeline | Can be years before final closing | Usually 30–90 days |
| HST | Often applicable on the assignment profit | Included in the price or not applicable |
When Assignment Sales Make Sense
An assignment sale is often the best path forward for:
- Investors who want to capitalize on the appreciation of Markham’s real estate without the long-term commitment of being a landlord.
- End-users who want a brand-new home in a prime area like Unionville or Downtown Markham but missed the initial sales phase. If the opportunity presents, the assignment sale could be cheaper than current resale.
- Relocators who need a home that will be ready in 6–12 months rather than waiting 4 years for a new development to start from scratch.
Conclusion
To wrap things up, here’s what you should keep in mind:
- Assignment sales are increasingly common in Markham’s pre construction market
- They can provide opportunities for both buyers and sellers
- However, they involve complex legal and contractual details
Encourage working with an experienced real estate lawyer in Markham to ensure a smooth assignment transaction
FAQ
What is an assignment sale in Markham real estate?
An assignment sale occurs when the original buyer of a pre construction property sells their purchase agreement to a new buyer before the property is completed.
Do builders allow assignment sales in Markham?
Some builders allow assignments, but approval is usually required and may include an assignment fee.
Are assignment sales common in Markham?
Yes, assignment sales are common in areas with many pre construction developments such as Markham.
Do assignment sales require a lawyer?
Yes. Assignment transactions involve complex contracts, deposits, and builder agreements that require legal review.
Can buyers get a mortgage for an assignment property?
Yes, but financing typically happens closer to the final closing date.