What is typically seen in an assignment purchase in Real Estate is the following. One party purchases a property pre-construction from the builder. Prior to taking possession, they sell their right to buy this property to a third party (party two), who is the new purchaser of the property.
It can be of benefit to purchase a property through an assignment. Since the property is not yet complete, you can usually get it a little below the market value. If you are looking at purchasing this way, a few things to keep in mind:
– Right to assign – Does the seller have the right to assign the property? This should be written in their original purchase agreement
– Layout & space – Often you’re not able to see the unit as it’s not yet complete, so review the plans and make sure the space, layout & view are what you’re looking for. All of these will affect the future value of the condo.
– Comparables – Check the value of similar properties in the area. If you’re working with a realtor, they should be able to assist with this.
– Mortgage – Many lenders have restrictions on assignment purchases. Some will not do them at all, and others will honor the original purchase price only, not the new price based on the assignment. In the latter case, additional money may be needed for the down payment to make up the difference. If you’re working with a good mortgage broker, they can help. Since they work with a variety of lenders, they know which will finance based on the assigned price.
Purchasing a property on assignment can be great way to buy real estate. Prior to doing so, do you due diligence to ensure there are no surprises.