I cannot provide official statistics at the moment, but I personally have witnessed a rapid increase in assignment sales listings in Toronto over the past six months – and even more so relative to a year ago.
What’s more, due to construction and delivery schedules, many of these assignment vendors hope to transact before spring 2024. This large supply of listings makes assignment sales an opportunity that agents should not miss.
Three ways you can benefit from assignments
Leaving aside the opportunity to purchase a bargain investment property for yourself, as a Toronto real estate agent you can benefit from assignment sales in three ways.
The first is by working with first-time homebuyers who are looking for a new, relatively affordable and centrally located home. In today’s market, an increasing number of buyers avoid pre-construction purchases because they no longer trust they will be delivered on schedule. In most assignment transactions, that’s not an issue because these units are usually already under construction and relatively close to completion.
You can also work with investors, helping them find financially desirable properties. Investors are well positioned to benefit because they are easier to satisfy. They want a good investment, not their personal dream home.
Finally, you can help sellers find buyers for their assignment sale. You are well-positioned to do this, given your network and understanding of the industry. By doing so, you can earn a commission and provide a useful service.
What are assignment listings?
You probably have an idea of what assignment listings are, so here let’s cover only the most important facts.
First, and perhaps most importantly, yes, you can earn a commission on consignment sales. Typically, you should expect a commission of 2.5 per cent to 3 per cent as a buyer’s representative. Also, importantly, these transactions are more complex than the typical residential sale.
Since the property hasn’t been built yet, what’s really changing hands is a contract. That means you must read that contract very carefully. Of course, your buyer will need to have a lawyer review the contract, but you, too, should read every page.
Remember that your buyer will need more cash to cover more costs than with most transactions. They will have to pay for land transfer tax and development levies, for example. The contract may also specify an assignment fee, which is typically between $1,000, and $5,000, although usually the original seller pays this.
Also, remember that your buyer will need to reimburse the contract’s seller the agreed-upon amount right away, and before they can obtain financing. Usually, this amount works out to be equivalent to their deposit and associated costs — plus any profit they might obtain. Your buyers won’t receive their mortgage until they take possession of the title itself. So, they need sufficient cash on hand.
How buyers benefit from assignments
In today’s market, assignment sales can allow buyers to purchase at a bargain compared to current prices. That’s because sellers have little leverage given that transaction numbers are low, interest rates are high and some sellers overcommitted to new condos with the expectation they would be able to reassign them all at a profit.
The market has changed, and some sellers face financial issues if they fail to find assignment buyers. Some of these projects were initially purchased as far back as 2019. Others are more recent. What they all have in common is that the original sales contract was signed while the market was hot. Speculators felt they had every prospect of reselling the contract prior to completion out of profit.
How to find assignment listings
One peculiarity of assignment listings is that they cannot be advertised on the MLS or the major real estate portals. To find these listings, you have to turn to other realtors in your network, secondary advertising platforms like Kijiji and Facebook, or narrow condominium specialist sites. (A Google search will turn up several.)
The most common assignment home is a condominium in a larger apartment building, centrally located. For example, I see that a handful of units are currently available in what is probably Toronto’s most luxurious new tower.
But there are also townhomes, like a two-bedroom home in Richmond Hill. The sellers say they are asking for $899,000, down from the original price of $1,025,000.
Even suburban detached houses can be acquired through an assignment sale. You can obtain a $1,285,900 four-bedroom home in Whitby, Ontario, although it’s not being offered at a discount. Another detached house up for assignment sale is a 2,800-square-foot house in Paris, Ontario. The asking price is $975,000 and it will be ready for occupancy in early 2024, according to the agent.
The assignment market is a market of property sellers and buyers who need professional representation from agents – and they will pay for that help. In a market characterized by low transaction volumes, this could be a valuable opportunity for agents in Toronto.
Yousaf Iqbal is director IQI Canada, the Canadian arm of real estate technology group Juwai IQI.