Buying a Preconstruction Condo Assignment | Plain-English Guide

Our Plain-English Guide To Buying A Preconstruction Condo Assignment

Buying an assignment offers buyers a genuinely unique opportunity. Assignment condos and homes are often found in buildings that sold out years ago, and they can sometimes be purchased below current market value (especially during market downturns). Whether you’re a seasoned investor or a first-time buyer, though, assignments are one of the most complex types of residential real estate transactions out there.

We’re going to skip the fancy legal language where we can, and just walk you through this as plainly as possible. This blog focuses on buying an assignment from the buyer’s side. We can’t cover every nitty-gritty detail of these specialized sales in one post, so if you’re seriously considering a purchase, hire a professional agent with a lot of experience in assignment sales. (Like us!)

If you’re thinking about selling your assignment instead of buying one, is is the blog you want.

The Basics: What Is an Assignment Sale?

At its core, an assignment is the sale of someone’s right to buy a home from the builder once it’s complete. Almost any real estate contract can technically be assigned…leases, preconstruction agreements, even resale deals. But, in practice, the overwhelming majority of assignments involve preconstruction properties, and preconstruction condos make up the largest share of all assignment sales by far.

It’s worth repeating, because it trips people up constantly: an assignment is not the sale of real estate. It’s the sale of someone’s rights in a contract. The technical terms are “assignor” (the original buyer, now selling their spot) and “assignee” (you, the new buyer stepping into that spot), but we’ll mostly just say seller and buyer in this blog.

Because you’re buying a legal contract rather than a finished home, assignments can feel a lot more complicated than a typical purchase, and they genuinely are. They also carry more risk than buying an existing home. And since they are significantly more complex than a resale purchase, many buyers place their trust in inexperienced agents or lawyers, who might not understand the intricacies of an assignment sale. When buying or selling an assignment, having an experienced assignment agent and a lawyer with a lot of experience in assignments, will make a huge difference in negotiations.

One last misconception people have when buying assignments is they underestimate the builder’s role in the transaction. The seller is in a legal contract with the developer, and even if the seller has a clause in their contract allowing them to assign their rights in the offer, the clause has stipulations that limit the assignment; the assignment is subject to the developers every whim… they decide when you can and can’t assign a property, and they can refuse a specific buyer. When buying an assignment, we confirm with the developer beforehand that they are currently accepting assignments, then we negotiate our assignment deal with the seller, and then the seller submits the paperwork, your mortgage approval letter, and we wait up to a month for the developer to accept you as the new buyer.

Why Buy an Assignment Sale?

Despite the added complexity, there are real reasons assignments attract buyers:

Access to sold-out developments: Assignments let you get into a building or location that’s otherwise fully sold, sometimes years after the original sales launch. This dramatically shortens the timeline to get a brand-new home, which, in the case with condos, can sometimes take up to 6-8 years after the first launch otherwise.
Potential price advantage: Depending on market conditions, an assignment can sometimes be purchased below current market value, especially if the original buyer is motivated to sell quickly. In hot markets, assignments are usually priced higher than resale, but lower than comparable new construction from developers. In a down market, investors flee the market, and assignment sales drop in price dramatically, giving willing buyers a great opportunity to buy into a new construction home. (Assignments properties suffer from more dramatic price appreciation and depreciation than resale homes, so in a down market, you can usually get a great deal on an assignment because no one wants to buy into something that might go down a bit more).
Customization opportunities: If the assignment is being sold early enough in the construction timeline, you may still have a window to choose finishes or upgrades with the builder. Just remember, if you’re buying a property 6-8 months out from closing, it’s close to when the finishes must be chosen. Assignments have long conditional periods (sometimes over a month), in that time, we’ve had developers request the finishes be chosen, so it’s important to negotiate into the deal that you can have input on the design choices.
Less competition: Assignment sales tend to attract only a small niche of buyers, and so if you’re a buyer in the assignment market, you generally have a lot more leverage for negotiations.

It’s worth understanding why assignments exist in the first place, too. Preconstruction brings in a lot of speculative buyers… they do not intend to live in the property, instead, they buy the property to resell at a later date for a potential profit. It worked well for a while… place a 5-20% deposit on a $800,000 property ($160,000 deposit), and in 4 years assign the contract for $1m, a return of more than 200% on their cash. Developers welcomed these speculative buyers, because they helped sell out buildings, and the sooner a building can pass 60-70% sales, the sooner construction can start.

When the market downturns, these speculative buyers need to assign their interest in the preconstruction condos or homes because they never intended to close on them, or live in them.

The Risks of Buying an Assignment

All preconstruction purchases carry some inherent risk, and most buyers accept that risk because the upside is worth it: the home is brand new, the finishes and appliances haven’t been touched, and in many cases you can still put your own stamp on the space. But the risks are real, and they stack up:

Market volatility

One of the risks in buying any preconstruction property is the elapsed time between when you purchase the property and when it closes… in that time, anything can happen; like, rising interest rates, inflation, war, or job loss. If you purchase a preconstruction property with a long closing, you need a contingency plan in case interest rates climb significantly, or if you face potential job loss.

Construction Delays

Construction delays are inevitable. The builder can only delay construction by the outlined “tarion critical dates” in your contract, but, delays outside of the developers control can push closing further away. There are also half a dozen unions that take their turns at going on strike. A strike can push out closing, and is outside of the builder’s control.

Construction Cancellation Or Builder Bankruptcy

In the original agreement of purchase and sale, there will be a contingency in the offer that allows the developer to cancel the construction of your property and refund you your deposits back. This can happen at anytime. There are developers who cancel projects 6+ years after selling the units, and all the buyers are entitled to is the return of their deposits without interest. That means buyers who could have brought a home and gotten into the market 6 years ago end up back at square one, and have nothing to show for their patience, risk tolerance, or investment.
- If you purchase an assignment, it’s critically important to work with an experienced agent who will include a clause that claws back any profit paid to the seller in the instance a purchase agreement is cancelled.

You Step Into The Seller’s Contract, And Any Fees Levied Against Them

Here’s a real example. I purchased an assignment 4 years after it was first launched, and 6 months before closing. The contract was iron-clad, and included a clause that stated the seller was not in default with the developer, and there were no additional charges or levies contemplated that were not disclosed in the offer. But, on closing, it turned out the sellers had paid all their deposits, but some of the deposits were paid late, so I inherited the admin fees, charges, and interest on the missed payments. It added up to around $2000, which isn’t going to break the bank, but it was also an unwelcome surprise on closing date.

Do You Need An Agent To Buy A Preconstruction Assignment?

We hear this a lot: “Why do we need an agent for an assignment? There’s nothing to physically tour.” That’s a real misunderstanding of what an agent actually does for you in this kind of deal. Yes, showing homes is part of a resale transaction. But agents don’t just show properties. They are specialized in buying and selling property, and in the case of an assignment, they are the “boots on the ground” experts that buy, sell, and negotiate these contracts before they go to lawyers. (Often times, the assignment agents need to walk the lawyers through the assignment process).

Now, assignments are not something taught in real estate classes, and most agents that have learned about them, have taken a 2-3 course online one time. To truly work in this real estate niche, it takes decades of experience, network building, and a conscientious approach to continuing education on the changes in the industry.

Here’s what we consider standard representation for our buyers:

Education: walking you through the assignment process up front, and following up with the right next steps as the deal unfolds, since almost nothing about an assignment moves like a normal purchase.
Due diligence: investigating the sale, the developer, the neighbourhood, and current market conditions so we know you’re paying fair market value, not a hopeful number someone pulled out of thin air.
Offer negotiation: The first offer originates from the buyers side, so that offer should be iron-clad. We’ve worked with experts in the field for decades to perfect our assignment offers, and we keep them up to date to accommodate changes in the industry. Also, once a deal is agreed upon, it’s very rare for a seller to re-negotiate terms if your agent missed any and your lawyer caught the mistake. The negotiation must be done right the first time.
Paperwork review: We’re not lawyers, but I studied professional writing and institutional communication, so I love reading builder’s agreement of purchase and sales (APS). I’ll review the original builder’s APS, so we can flag concerns to discuss with the lawyer.
Vetting both sides: who you’re buying from (and sometimes where they live) makes a big difference in how the transaction is handled by the lawyers. If a seller lives overseas, for example, the sale could trigger tax withholding obligations. If that seller skips town without paying the tax owed, the bill can fall to the buyer. We structure the paperwork to protect you from that.
Coordinating the closing: assignments involve the buyer, seller, both agents, the developer, the developer’s lawyer, and both brokerages, all reviewing and submitting paperwork on overlapping timelines. If every party takes even 2-3 days longer than necessary, an assignment closing can slip by well over a month. Keeping this moving is a real, active job. It takes everyone executing paperwork as soon as it hits their inbox for an assignment to close on time.
Staying with you through two or three closings: assignments are unique in that there isn’t just one closing date, there are effectively three moments that matter: the day the contract changes hands (ie assignment closing), the day the unit is ready for occupancy (for condos, the move-in date or interim occupancy date), and the day the building finally registers with the developer (the final closing date). We stay involved through all of them, every step of the way.

Here’s a personal example of why it’s important to get the offer negotiated well before it goes to the lawyer: When I bought my assignment, I structured the deal so that I would pay the seller’s back their deposits on assignment closing (so within 1 month or less after assignment acceptance), but I would only pay their profit (the increase on top of the original purchase price they paid) on final closing. The offer was accepted without hesitation, but during lawyer review, the seller’s lawyer informed their clients that at the point of construction we had hit (nearly complete) it is common to pay out the profit early; so the sellers wanted their profit. But our deal was negotiated and signed already with their inexperienced agent, and it was too late for me to re-open a negotiation that was already agreed upon.

How Does Financing an Assignment Work? Does The Bank Look At Original Price or Assignment Price?

This is one of the most misunderstood parts of buying an assignment. People assume the bank either lends against the builder’s original price, or against the new assignment price. In reality, it’s neither; the bank lends against current fair market value, based on an appraisal, and that number can land anywhere.

Here’s how that plays out in two different scenarios.

Scenario 1: Assignment sold at the original purchase price

Say you’re buying an assignment for $800,000, and that’s exactly what the original buyer paid the developer.

| Deposits already paid to developer | $160,000 |
| You reimburse the seller | $160,000 |
| Still owed to developer at closing | $640,000 |
| Bank appraises the unit at $800,000, lends 80% | $640,000 |

You were fortunate that the bank appraised the unit at the original purchase price, so on closing you’re only responsible for the preconstruction closing fees; which can be quite a lot more than a resale property, so ensure you know the total closing fees before buying an assignment.

Scenario 2: Assignment sold below the original purchase price

Now say the market has softened, and you’re buying that same $800,000 contract as an assignment for only $700,000 — the seller is taking a $100,000 loss to get out. This math catches buyers out all the time, because they think the $100,000 deposit reduces the cash needed to buy the property by the price difference between the purchase agreement and the original APS, but the gap in appraisal eats away a significant amount of that market drop.

| Deposits already paid to developer | $160,000 |
| You pay the seller (their deposit, minus their $100,000 loss) | $60,000 |
| Still owed to developer at closing (based on the original $800,000 contract) | $640,000 |
| Bank appraises the unit at today’s value, roughly $700,000, lends 80% | $560,000 |

| Funds needed to close the deal: $80,000 because of the lower mortgage amount from the bank |

Notice what happens there…even though you “got a deal” on paper, you actually need almost the same amount of cash to buy the $700,000 assignment as you did when buying the $800,000 assignment. The catch is the $800,000 needed the funds up front, and you took a larger mortgage. The second scenario is better because you’re taking a smaller mortgage, but the difference in cash needed to buy the property only dropped by $20,000.

This is exactly the kind of math we walk buyers through before they get excited about a below-market assignment price.

A note on rates: Financing gets riskier the further out your closing date sits. Today, you might see fixed rates as low as 4%, but a bank will typically only guarantee a rate for about 3 months. If your assignment won’t close for another 1-2 years, you’re often looking at a “worst case” guaranteed rate closer to 6% instead, with the expectation you’ll requalify at whatever the market rate actually is closer to closing. Some buyers take a calculated risk here, working with only a 3-month preapproval and planning to requalify later. Rates rarely move dramatically, but 2023-2025 proved they can, and can stay elevated far longer than expected. It’s a good reminder to stress-test your numbers at a higher rate before committing to a long-closing assignment, rather than assuming today’s rate will still be there when you need it.

Financing Tip: The developer will have a preferred mortgage broker / bank that might offer longer approvals (up to 48 months) and they may also appraise the unit higher, but it’s highly uncommon to appraise a unit for more than the new assignment price.

RISK: The bank will appraise the unit close to final closing, so between purchase date and final closing, if prices slip further, your total mortgage amount can drop further too. If you buy an assignment that was $800,000 but you get a deal on it today for $700,000 and in 1 year it is worth $600,000, the bank will only owe you based on the most recent value.

Closing Fees, Levies, and Other Costs to Watch For When Buying Preconstruction Assignments

Development levies and uncapped fees. If the original agreement of purchase and sale doesn’t specify a cap on development levies or other ancillary closing fees, that’s a real red flag. An unspecified figure means the developer has room to charge significant, sometimes shocking, fees at final closing. While you cannot re-negotiate the original agreement, you can negotiate that the seller cover any excess fees over a certain amount.
The developer’s assignment fee. Developers typically charge a fee to approve the assignment itself, which can range from a few thousand dollars up to a percentage of the purchase price. This fee is broken up into two portions, the assignment fee and the developer’s lawyers fees. I usually try push these fees onto the seller, but often times the buyer and seller split the fee.
HST. Preconstruction properties are subject to HST in a way resale properties aren’t. If you intend to live in the unit yourself as an end-user, you may qualify for an HST rebate, but that eligibility can be affected by things like whether anyone lived in the unit during interim occupancy, so don’t assume it automatically applies to your situation. It must be confirmed with your lawyer and accountant during the conditional period of your assignment.
Land transfer tax. Both provincial and municipal land transfer tax become due when the unit finally closes.
Tarion Enrolment Fees. Final closing is when you pay for your Tarion warranty
Lawyers fees. Unfortunately, assignments are a lot of work, so your lawyer will charge you for the assignment closing, interim occupancy closing, and final closing.
Utility Set Up Fees. Whether you’re buying a condo or a freehold home, there will likely be utility hook up charges.
Nickel and dime charges. Developers will charge around half a dozen other small fees covering things like reserve fund kick-starter, maintenance fee, trees and landscaping etc.
Unpaid Upgrades. Be careful of any upgrades that might have been selected by the seller which have not been paid for yet. These will be charged to you on final closing.
Admin charges, interest charges, late fees. The developer charges you admin charges for handling cheques, as well as interest and late fees on any late deposits.

The Closing Process: Interim Occupancy and Final Closing

Assignments involve more moving parts than a typical resale closing, and understanding the timeline up front makes the whole process far less stressful.

Assignment closing. This is when the contract officially changes hands from seller to buyer, and typically happens within 3-6 weeks of an accepted offer.
Interim occupancy (condos only) — many condos have a gap between when the unit is physically ready to live in and when the building is legally registered with the city. Since there’s no title yet, you can’t get a mortgage during this period. Instead, you move in and pay the builder an occupancy fee, similar to rent, until final closing. This period can last anywhere from a few months to a few years. It’s important that no one has moved into the unit before you buy it on assignment, or you may lose your HST rebate.
Final closing. This is when the building registers with the city, the bank forwards your mortgage, and you officially become the owner. Land transfer taxes, remaining balances, and closing costs are all due at this point.

Because there’s no fixed closing date on an assignment the way there is on a resale purchase, buyers need to go in with realistic expectations about timing, not a specific date circled on the calendar. Even the first closing, the assignment closing, is a moving target, waiting for the developer to accept the assignment.

A few things worth investigating before you commit to any assignment:

The developer’s track record. Look into their reputation, past projects, and financial stability. A reputable, well-capitalized developer means fewer risks around delays, build quality, or outright cancellation.
Current market conditions. Are prices in the area trending up or down? Is there real demand for this type of unit? This context tells you whether the assignment price you’re being offered is actually a good one.
The original Agreement of Purchase and Sale. This document holds the details that matter most: the deposit structure, upgrade costs, any incentives the original buyer received (and whether those incentives even transfer to you), and the fee structure you’re inheriting.

Another quick word: Developers will capitalize on every opportunity they can, these are business people looking to make as much money as possible… one way is by making incentives offered to buyer 1 non-transferrable to buyer 2. We’ve seen parking spots and lockers become non-transferable to a new buyer, and they go back to the developer who will re-sell them to you for $50,000. It’s important to review that agreement of purchase and sale very carefully.

Our Honest Take

Buying a preconstruction condo assignment can be a genuinely rewarding opportunity… we’ve done it ourselves and we’ve helped many clients do it as well.

But it takes real due diligence, the right financing plan, and professional guidance to get there safely. This is a niche, highly intricate transaction, which comes with more risks (and sometimes rewards) than traditional resale.

If you’re considering an assignment purchase, or you’re not sure whether an assignment is the right move compared to buying resale or straight from a builder, reach out to us. We’ll walk you through it honestly, whether you end up buying an assignment or not.

— Christo