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The Definitive Guide to Buying Condos on Assignment in 2025

By Luxeprecon Team, February 5, 2025

Buying a condo on assignment can be a great opportunity for real estate investors and homebuyers looking to secure a property at a potentially lower price. However, this process comes with unique challenges and considerations that differ from traditional resale or pre-construction purchases. In this comprehensive guide, we will walk you through the essentials of buying an assignment condo, its advantages and risks, and key steps to ensure a successful purchase.

What Is an Assignment Sale?

An assignment sale occurs when the original buyer (the “assignor”) of a pre construction condo sells their contract to a new buyer (the “assignee”) before the project is completed and the unit is officially transferred by the developer. Essentially, the assignee takes over the contract and all its obligations, including making any remaining deposit payments and closing costs.

Why Do People Sell Their Pre-Construction Condos on Assignment?

There are several reasons why someone may choose to sell their pre-construction condo on assignment:

Financial Constraints: The assignor may no longer be able to afford the closing costs or mortgage.
Change in Life Circumstances: Relocation, job changes, or personal reasons may lead to selling.
Investment Strategy: Some investors purchase pre-construction units with the intention of selling before closing to capitalize on market appreciation.

The Benefits of Buying a Condo on Assignment

1. Potential Cost Savings

Since assignment sales are often not widely advertised, buyers may find good deals compared to buying directly from the developer or on the resale market.

2. Securing a Property in a Sold-Out Development

Many pre-construction projects sell out quickly, making it challenging to secure a unit in a prime location. As explained in The Ultimate Guide to Buying Pre-Construction Condos, purchasing an assignment can be a great way to access a desirable building that may no longer have units available through the developer.

3. Earlier Occupancy

Since the development is often close to completion, the wait time to move in is typically shorter compared to purchasing a pre-construction unit directly from the developer.

4. Potential for Price Appreciation

If the market has appreciated since the original purchase, you may still be getting a unit at a competitive price before it officially hits the resale market.

Risks and Challenges of Buying on Assignment

1. Limited Financing Options

Many lenders are hesitant to provide mortgages for assignment sales since they involve purchasing a contract rather than a completed property. Buyers may need to arrange alternative financing.

2. Higher Upfront Costs

Unlike traditional real estate purchases, assignment deals often require a substantial deposit upfront. Buyers typically need to pay the assignor their original deposit plus any appreciation in the property’s value.

3. Developer Restrictions

Not all developers allow assignments, and those that do may impose conditions, such as requiring their approval or charging assignment fees.

4. Market Fluctuations

If the real estate market declines, you may end up paying more than the unit’s market value at closing. This can be risky if you’re relying on price appreciation.

5. Closing Costs and Hidden Fees

Buyers must be aware of closing costs such as land transfer taxes, development levies, and legal fees, which can significantly impact the overall purchase price.

Key Steps to Buying a Condo on Assignment

Step 1: Understand the Assignment Agreement

Before proceeding, thoroughly review the original purchase contract, including all clauses, deposit structure, and developer policies regarding assignments. Ensure you understand what you’re agreeing to take over.

Step 2: Work with an Experienced Realtor

Not all real estate agents specialize in assignment sales. Working with an experienced agent familiar with assignment transactions can help you navigate the process smoothly.

Step 3: Hire a Real Estate Lawyer

An assignment transaction is complex, requiring legal expertise to review contracts, negotiate terms, and ensure compliance with all requirements.

Step 4: Arrange Financing in Advance

Since securing a mortgage for an assignment purchase can be challenging, it’s essential to discuss your options with a mortgage broker early in the process.

Step 5: Perform Due Diligence

Check Developer Reputation: Research the builder’s track record, including past project completion timelines and customer reviews.
Understand Fees and Costs: Factor in all potential fees, including development levies, closing costs, and assignment fees.
Confirm Assignment Approval: Ensure the developer allows assignments and that all necessary approvals are obtained.

Step 6: Negotiate the Terms of the Assignment Sale

Unlike standard real estate transactions, assignment sales involve negotiating not just the price but also deposit payments, transfer dates, and potential liabilities. Make sure all terms are clearly defined in writing.

Step 7: Secure Final Approvals and Close the Deal

Once financing and legal matters are in order, finalize the transaction by fulfilling all conditions and ensuring a smooth transfer of the contract.

Common Mistakes to Avoid When Buying on Assignment

1. Failing to Budget for Closing Costs

Many buyers overlook the additional fees required at closing, which can add tens of thousands of dollars to the final cost.

2. Not Verifying the Developer’s Assignment Policies

Some developers impose strict rules on assignment sales. Always confirm the terms before proceeding.

3. Assuming You Can Easily Secure Financing

Assignment sales don’t always qualify for traditional mortgage financing. Speak with lenders early to avoid issues.

4. Overlooking Market Conditions

Real estate markets fluctuate, and if values drop, you could overpay for the unit. Consider market trends before committing.

Conclusion

Buying a condo on assignment can be an excellent opportunity to secure a great property at a competitive price, but it requires careful planning, due diligence, and a solid understanding of the process. By working with experienced professionals, securing financing early, and fully understanding all costs and risks, you can successfully navigate an assignment sale and make a smart investment decision. Whether you’re a first-time buyer or an experienced investor, being well-informed is key to making the right move in the assignment market.