Condo Buyers Rejoice! Opportunity Awaits!

It’s been getting incredibly tough for end-consumers and more specifically, first-time home buyers to purchase their first property, let alone their desired property. As the entry-level properties climb in price, the affordability decreases. This week’s Insight Article has been inspired by some of my clients who brought the matters to my attention (thanks!). I will be sharing this insight with everyone here today.

If you have been looking in the resale condo segment of the market, especially in Downtown Toronto, you have probably encountered the countless number of bidding wars and unconditional offers that are almost, but not quite, reminiscent of the market in early 2017. It’s bananas out there!

Thanks to a few unintentional turn of events, everybody should consider looking into the assignment market as there are additional opportunities waiting for you in this very niche segment of the market.

Resale and Pre-construction in One – For anyone who doesn’t know, an assignment is like a resale property but because the seller doesn’t’ officially own the condo yet, as a buyer, you are buying the rights to close that condo in your name. Effectively, this would mean that you are buying it from the builder and being the first to take possession of the property when it is complete.

In an assignment sale, the Assignor, the original purchaser of the property, is looking to sell the rights to his or her purchasing contract. They would have bought the property 3-4 years ago.

Assignment Factors – Recently, there have been some major changes affecting the motivation of Assignors, as follows:
Prices have increased quite dramatically in the last 3-4 years for condos
Non-Resident Speculation Tax (Foreign Buyer Tax)
CRA Assignment Crackdown

Buy Low, Sell High – With the price increases that we’ve seen lately, the people who bought a condo 3-4 years ago are sitting on almost $100,000 in appreciation before having to make a single mortgage payment on their property. This is a ridiculous profit, but this also highlights exactly why we buy pre-construction for investment purposes.

Tax Avoidance – Some of the original buyers who are going to get dinged by the 15% tax as a result of the foreign buyer tax would rather sell on assignment instead of closing on the property.

I’ve done the math for a few of my clients in this category and for those who do not have the intention of moving to Canada, the numbers in most instances work in favour of selling via assignment versus selling a few years after closing.

Although there are workarounds to this tax, these “workarounds” do not work for everyone.

CRA Crackdown – The CRA has been cracking down REAL hard on the capital gains tax on assignments. Previously, investors would sell their property on assignment to avoid paying taxes on the capital gains of the condo. However, times have changed. The CRA is cracking down on this strategy and as a result, some of these investors are scared and have steered away from this strategy (as usual, people are scared of change and make bad decisions under pressure).

It’s a very simple audit for the CRA to conduct. They request all of the original purchasers from the Builder and identifies who actually closed on the condo. If Bob bought unit #1808 of Condo X but Joe closed on it, then evidently Bob sold the contract to Joe. That right there folks would be found tax revenue for the CRA. The CRA will collect every penny they can.

The Requirement – Most assignors will be seeking to have all of their profits paid upfront, but because you don’t own the unit until final closing, you cannot get a mortgage for this upfront cost. A sample calculation in the chart below on a $450,000 condo with an original purchase price of $350,000 works out to $170,000 in cash required to execute the deal. This cash requirement would be even more if the original deposit was an international deposit of 35%.

Having said that though, and through a lot of hard work, a client and I managed to get a deal done with less cash required than anticipated as we found a highly motivated seller.

The Wrap – This market segment containing a unique profile of highly motivated sellers looking to assign their property can be found if given the right tools and resources. So if you are looking to take possession of a condo in the next year and are interested in scoring a great assignment deal, definitely do give me a call at 416-436-9436 or email me at Let’s discuss how we can help you score a great assignment deal!

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