Don’t Overlook the Condominium Assignment Sales Market
Typically not seen by your average homebuyer, this segment of the real estate world has been turned on its head this year as interest rates rapidly jumped. Condo assignment sales are different from the regular resale market. It’s typically a transaction where a purchaser buys a unit from a developer and sells the contract to another buyer – essentially, it’s the paperwork trading hands, not the physical unit itself because it’s not registered yet.
With historically low interest rates fueling seemingly ever-climbing home prices, condo preconstruction sales were “on fire”, up until March of this year. But things have changed. The minute that the interest rate landscape changed, an entire fringe of the marketplace, the speculator, had to instantly face the truth of potentially having bought at the height of the market and have to, for the first time in three years, think of interest rates and affordability and carrying a mortgage. The only thing the market had seen for three years straight was decreasing mortgages and affordable loans.
According to Simeon Papailias, managing partner at Toronto-based real estate sales and consulting firm REC Canada, the plunge in assignment sales activity is not done yet, due to further interest rate hikes that are coming. He says, “When I say it’s the tip of the iceberg, it’s because I know there’s further interest rate hikes coming. And I know that this is now uncharted territory from having to qualify for a mortgage perspective.”
In recent years, the big lure of assignment sales for real estate investors has been the fact that they only need to put the deposit down rather than have full mortgage financing activated; the investor doesn’t need to worry about closing costs, and a quick profit could potentially be made on the assignment sale since prices, especially in regions like the Greater Toronto Area, were soaring so quickly. However, there are various conditions and restrictions to be aware of when looking to do an assignment sale. Most developers don’t allow assignment sales for certain periods of time and until a certain percentage of units in the building are sold first.
So, don’t ignore this profitable market! But beware of the conditions and restrictions to avoid costly mistakes. Start looking and talk to an experienced agent today!
