Tuesday, January 20, 2009

Assigning Your Condo Contract - Flipping

Many buyers have purchased condo's that are currently under construction. Some of the units, even sold as late as 2006, have delayed completion till 2010. The Buyer's realities of their choices have made them reevaluate their changed situations. Singles now have spouses. Couples are now families and that One plus one does not fill their needs. The other factor that is intangible is FUD, Fear Uncertainty and Doubt.

I receive many calls from people with a contract, who have discussed with their lawyer and the developer's sales people what choices they have.

Contracts vary but we will try in layman's terms to explain the options; If your contract (Agreement of Purchase and Sale) contains an ASSIGNMENT CLAUSE you may find a buyer to take over your exact contract at whatever price you agree to... provided they accept the balance of the contract verbatim. Verbatim means exactly that.. No Changes.

So.. You need a buyer.. You need to find a Buyer... You may need a realtor to find a buyer for you to conclude your contract. That is possible but.....

Do you have an assignment clause so you can unload it before interim occupancy? Are you in the unit now or is it still in the fresh "never lived in" state (slight price premium for the new condo smell)? When do you expect it to be registered? Interim occupancy can last for six months to a year or more. Who is responsible for the Phantom Mortgage during the interim occupancy?

From the situation described, you may have 2 or more years before you take title (ownership) of the unit. You can only sell a condominium that you hold title on. You *might* be able to sell the agreement to purchase a condominium, the contract you signed but that depends primarily upon the contents of that agreement and often the mood of the developer.

The developer will typically, even with an assignment clause, have a number of restrictions on the sale including the ability to reject your buyer for any arbitrary reason. At very least there will be a number of fees charged by the developer for various bits of paper work.

The restrictions of the sale will be specific to your agreement. I beg you to speak to your lawyer to help you interpret your agreement for restrictions and fees followed by the developer to see what their mood is (how flexible they are on those restrictions) before contacting a Realtor, and I give this advice as a Realtor.

Assignment of a contract is very different than selling a condominium. You are selling a "condominium future", not a property. There are many ways you could get into trouble that don't exist for typical sales of condos.

Now consider the following process; A realtor "lists" the unit and finds a buyer, you agree to a price, Lawyers review the documents, and a "deal" is made. When do you get your money?

The Realtors hold the deposit "In Trust" pending successful completion of the transaction. The successful completion is the REGISTRATION of the condo, as that is the point where title is transferred. This senario better applies to a freehold property.

You, as the original buyer made staged deposits on your purchase that typically were 10 - 15% of the purchase price, the assignment BUYER makes a single contract deposit. They may this deposit to you if an assignment fee is paid. A side agreement must be created for the new purchase price. These may or may not be the same amounts. This balance (profit) does not flow to you until there is a closing.

The Caveat here (WARNING) is simply that the builder will still hold you contractually responsible to fulfill the terms of your agreement should the subsequent Buyer not conclude the transaction. The Builder would never permit the advertising or MLS Listing of a unit, where the condo is not yet registered for obvious reasons, as they may still have their own remaining units.

The conclusion made from this is get experienced advice and a knowledgeable lawyer in your corner to examine the choices and remedies available to you.

Contact me with your story, I welcome the lessons we can all learn.

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