How to Sell a Presale Condo in BC: Assignments of Contract Sales

By Uzair Muhammad, REALTOR® — Real Broker BC · Published · Updated

Selling a presale condo assignment is very different than selling an existing property. This step-by-step guide covers everything from checking your contract to marketing and closing the sale of a pre-construction condo in Greater Vancouver and across British Columbia.

PresaleProperties.com is the buyer-side representation practice of Uzair Muhammad (REALTOR, Real Broker BC), serving presale and new construction buyers across Metro Vancouver and the Fraser Valley from 3211 152 St, Building C, Suite 402, Surrey BC V3Z 1H8 — (672) 258-1100.

Selling a presale condo assignment is very different than the process of selling an existing property. Below is our step-by-step guide on how to sell a pre-construction condo in Greater Vancouver and across British Columbia, Canada.

Before we discuss how to sell a presale condo assignment, we need to clarify what it is.

What is an Assignment Sale for a Presale Condo in BC?

A presale condo assignment is a legal transaction in which the original buyer of a presale condo (a condo that has not yet been constructed) transfers their purchase rights and obligations to another buyer before the property's completion.

Essentially, it involves selling the presale condo contract or agreement between the initial buyer and the developer. This allows a new buyer to assume the original purchaser's position, meaning they step into the original buyer's shoes and take on their interest in the condo or townhouse even before it's built.

It's crucial to understand that this is not a sale of the actual condo unit but rather a sale of the contract itself.

1 – Check the Contract & Purchase Documents

The first step in selling a presale condo through an assignment is to check the original purchase contract.

We primarily review the contract first to understand clearly what the potential assignor has purchased but also to understand if the developer will allow assignments or not.

Some developers prohibit assignments, while others may allow them with certain and specific conditions on the marketing of the unit.

Whether or not the developer allows assignments is typically stated in the purchase contract. Even if the contract says a presale buyer may assign their condo, there is always language in the contract requiring express developer permission for an assignment and the marketing of the assignment.

It's crucial to first understand if we can obtain permission to assign, to avoid marketing a property that cannot be sold.

2 – Ask Developer Permission to Assign the Presale

After reviewing the contract to determine if assignments are permissible, it's essential to consult with the developers to see if they are currently allowing assignments.

While the contract may indicate the possibility of assignments, we cannot solely rely on it. Developers, through their lawyers, typically draft the presale condo purchase agreements with a clause reserving the right to disallow contract assignments.

Although most developers are open to assignments, they retain the discretion to deny or revoke assignment permissions at any time and for any reason.

Typical Developer Conditions for Assignments

Here are the typical conditions that will be needed to get developer permission to assign a presale condo contract:

Developers Change Their Minds – All The Time

In our experience selling presale condo assignments, developers may allow an assignment but then withdraw that permission several months later because they have more condos they want to sell or for other reasons.

When developers decide not to allow assignments after they have initially given permission, they will not notify the Realtors and potential sellers/assignors.

The expectation of a potential seller of a presale condo should be that it is not certain developer permission will be given to assign and that this permission and the permission to market can be withdrawn at any time.

Developer Marketing Restrictions for Assignments

Once there is developer permission for the assignment, the next task is to understand the developer's marketing restrictions.

Developers meticulously safeguard their brand image and that of their products. They need assurance that assignments of the presales from their brand are marketed professionally and positively to enhance their brand image.

Developers hold significant influence in the assignment process, and their marketing conditions must be strictly adhered to, as written permission from the developer is required to assign the presale.

If the developer finds the marketing of the assignment unsatisfactory, they may retract permission to market. Furthermore, if a developer is discontented with the marketing of the assignment, they may refuse to sign the assignment purchase agreement even when a ready and willing buyer is found.

MLS Listings for Assignments Mean More Money Sooner

Developer policies around marketing presale condo assignments can have a big impact on how much they can be sold for. The more marketing channels available for selling an assignment, the broader the market reach, potentially leading to a higher sale price sooner.

Policies vary among developers in different BC markets when it comes to listing on the MLS or Multiple Listings Service. MLS listings for presale condo assignments can be very powerful from a marketing perspective due to the vast reach of the system.

In Vancouver and the inner suburbs, it is rare for a developer to allow a potential assignor an MLS listing for an assignment on Realtor.ca. Whereas outside of Vancouver and the inner suburbs, developers are much more open to MLS listings for presale condo assignments.

3 – Understand the Costs of a Condo Assignment Sale

Once we know if we can sell it, we should understand exactly how much a developer will charge to allow the assignment to occur.

Condo Assignment Fees

Typically assignment fees are either a set amount or a percentage. The set amount assignment fees are typically for transfers to family members whereas percentages are used for transfers to non-family member third parties.

A developer's opinion of assignments can be seen from the percentage they will charge for a third-party transfer. Developers who are not excited about assignments charge higher assignment fees. In our experience, we have seen assignment fees as high as 50% of the profit, but typically assignment fees are between 1% to 5% of the assignment sale price.

Assignment fees can have a major effect on the decision as to whether or not to assign, so reviewing the contract first to understand these is critical.

Real Estate Commissions

Real estate commissions will also be a cost to consider when selling a presale condo. Commission structures vary, but a common approach is 7% on the first $100,000 and 2.5% of the balance of the assignment sale price, with approximately 50% offered to a buyer's agent.

Taxes

When you sell a presale condo assignment, tax may be payable. It is strongly recommended to consult with a qualified tax accountant who understands presale assignment sales.

4 – Understand the Current Market Value of the Assignment

Once we understand what it will cost to assign a presale condo, we need to know what it is worth.

Typically we calculate the value of the assignment using comparable properties. If a developer has allowed MLS listings and there have been documented comparable assignments on MLS, the process is simpler. Quite often, developers do not allow MLS listings so local recently built properties are used as sales comparables to calculate value.

We also look at market statistics to inform about current market conditions. Marketing restrictions will also figure in the analysis — more restrictive developer marketing restrictions will put downward pressure on the price.

This market analysis helps a prospective assignor/seller make decisions on the following:

5 – Get Qualified Tax Advice

Buying or selling a presale condo assignment in BC is not a straightforward process, especially when considering the unique tax implications set by the Canada Revenue Agency (CRA).

Unlike the sale of a primary residence or an investment property, condo assignments are treated differently under the evolving GST rules.

This distinction underscores the importance of seeking expert tax advice. By consulting a tax professional, individuals can gain clarity on the specific financial implications of condo assignments, including potential rebates and the treatment of deposits.

Misunderstanding these nuances can lead to unexpected financial burdens and penalties from the CRA.

Before making any decisions on condo assignments, always prioritize expert tax guidance to navigate the distinct tax landscape set by the CRA.

6 – Marketing Your Presale Condo Assignment

Marketing presale condo assignments is very different from marketing existing properties. With existing condos, there is a property to visit and view and we can do open houses to publicize and advertise.

With a presale condo assignment, there is rarely a property to view and the marketing is primarily online using floor plans, contracts, documents, and developer marketing materials.

Our Presale Condo Assignment Marketing Plan

At PresaleProperties, we specialize in selling presale condo assignments across Metro Vancouver and British Columbia. Here is what our team does to market your presale condo assignment:

7 – Selling a Presale Condo Assignment – Our Process

Find a Buyer

The next step is to find a buyer for the contract assignment. Our team is always speaking with assignment buyers and their Realtors who enquire looking for assignments.

Negotiate the Contract of Purchase and Sale

Once a buyer or potential assignee is found, their Realtor will prepare an assignment Contract of Purchase and Sale. This contract will include the following among other things:

Our team has decades of negotiating experience and will help, support, and guide you with the negotiations on the sale of your assignment. This includes presenting and advising on all offers submitted, preparation and advice on counter offers, and specialized assignment negotiation support.

Accepted Offer – Submit for Developer Permission

Once there is an accepted offer, we will assist the buyer and their Realtor to get the documents and answers they need to remove their subject conditions. Once conditions are removed and the initial deposits are submitted, we can prepare the documents and advise on getting developer permission in writing for the assignment.

Release of Deposit Funds & Payment of Profits

Once developer permission is granted, we can assist in the release of funds for the reimbursement of deposits and payment of profit. We also coordinate the logistics of cheque and bank draft handling.

Assignment Sale Risks and Considerations

While selling a presale condo through assignment can be profitable, it also comes with risks. Market conditions can change, making it difficult to find a buyer willing to pay a higher price for the contract. There are also legal and financial risks, including potential tax implications. It's recommended to seek advice from a real estate professional and a lawyer before proceeding with an assignment.

Benefits of an Assignment Sale

For the original buyer, it provides an opportunity to exit a contract if their circumstances change before the condo's completion. This can be especially beneficial if they face financial challenges or have a change in housing needs.

For the new buyer, it offers a chance to invest in a property that might have been sold out or to secure a unit at a potentially lower price than current market rates.

Challenges of an Assignment Sale

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