The Complete Guide to Toronto Assignment Sales: Pros and Cons

If you called me today and said you wanted to invest in a farm, I would tell you that is not my specialty and refer you to an agent who does it well through my RE/MAX network. I stick to the parts of the Toronto and GTA market where I have real experience. One area I know inside and out is the assignment market, the business of buying and selling the right to a pre construction unit before it closes.

I am Moe Asgarian, a senior real estate broker in Toronto, ranked number 47 at RE/MAX worldwide. Here is what the assignment market is, what is good and bad about it, and who it actually suits.

What an assignment actually is

In an assignment you do not buy the condo or house itself. You buy the ownership rights to it before closing. Picture someone who registered in a pre construction project years ago but now cannot close, maybe because rates rose or their income no longer qualifies them for the mortgage. Their way out is to sell those rights to a buyer who can close. When you pre buy, you promise the builder you will complete the deal and take ownership. If you default, the builder can keep your deposit, that 10, 15 or 20 percent you put down, and even sue you for damages. Backing out is expensive, so an assignment is often the responsible exit.

The upside of buying an assignment

The first advantage is that the seller genuinely needs to sell. Some worked with the wrong agent and did not buy well, and a few will hand over the assignment at the price they paid four or five years ago, sometimes less. You can pick up a pre construction unit at prices from a few years back. Pre construction today usually runs 10 to 20 percent above a comparable resale condo, so an assignment lets you buy brand new and still pay less, sometimes even less than resale. You often do not need a tenant right away because the building may not be at occupancy yet, and by the time it is, market rents may be higher. With rates expected to drift down, a closing six months to a year out could mean a lower mortgage rate. New units also come with warranty coverage, one year on many items and up to seven years on others, and new condos are exempt from rent control.

The risks and hidden costs

The trade offs are real. Your choice of unit is limited, since you take what the seller has rather than picking the view, floor plan or materials. Closing costs are harder to predict. On top of land transfer tax and legal fees, you may owe levies and development charges. When a builder assembles several old detached lots into a 200 unit tower, the city requires payments for parks, schools and roads, and that cost lands on you as the buyer, not on a resale purchase where the first owner already paid it. The building may not be fully ready at handover, with amenities still under construction. You also pay a larger lump sum up front than in pre construction, and the deal carries an extra legal and tax layer that has to be handled carefully.

A real deal at Galleria on the Park

A good Toronto agent referred a seller to me. He was a Vietnamese Canadian who in 2019 bought a one bedroom plus den in phase one of Galleria on the Park at Dupont and Dufferin downtown. Back then he had just married. By the time he reached me he had two kids and a house in Barrie, and he could not qualify for a mortgage with 20 percent down on the pre construction unit. He had pre bought at $650,000, about $1,000 per square foot for a 650 square foot unit, 750 with the balcony. I found an investor among my clients and closed it at $600,000, which works out to $920 per square foot. The developer is now pre selling later phases at an average of $1,250 per square foot. My buyer qualified for a mortgage with 20 percent down, needs $120,000 ready on closing late this year, and will likely get a much better rate than today's.

Buy pre construction to close, not to flip

Selling an assignment is not always a loss. In better markets I have sold assignments with $200,000 of profit for the seller. But an assignment is meant to be an emergency exit strategy. The day you buy pre construction, you should plan to close it yourself and hold the unit for several years to earn a good return. Never buy pre construction purely to flip through an assignment. In today's slow condo market, though, buying through an assignment can be a smart way to earn a solid return.

Whether you want to sell your assignment or buy one, my team and I can help you do it right. Fill out the form at the bottom of this page or book a free consultation, and we will walk through the numbers and the good deals available. Stay well and take care.