Assignments have run hot, then cold, and now hot again.
There are several websites that specialize in assignments, but I’m quite surprised to say that MLS is not one of them, nor is anything with TREB’s name on it…
I have never worked on an an assignment for a buyer or a seller, and I never will.
And with that disclaimer out of the way, let the games begin!
Here is the definition of an assignment, straight from www.assignit.ca’s website:
An Assignment is a legal sales transaction whereby the Original Purchaser (the “Assignor”) of a property sells, and thereby transfers, their interest and obligations under the original contract to a new Purchaser (the “Assignee”). This assignment takes place during interim occupancy. The “Assignee” will assume all of the “Assignor’s” duties and obligations under the original Purchase & Sale Agreement. These rights and obligations are stated in the original Purchase & Sale Agreement and include terms such as payments of mortgage, taxes and maintenance fees during interim occupancy. Upon Completion, the “Assignee” is granted the Title to the real property and will incur all final closing costs. An Assignment is legally permitted unless otherwise expressed in writing. An Assignment fee may be charged by the Developer and is normally a cost borne by the “Assignor” (the Original Purchaser).
I couldn’t have said it better myself, therefore, I didn’t try… 🙂
Assignments are, in laymen’s terms, “trading paper.”
As an assingor, you don’t really own anything tangible – you just own a piece of paper that says you will do A, B, and C, and the developer will do D, E, and F. You have money being held in trust, and you have obligations down the road. But as far as actual ownership, it could be argued that you own absolutely nothing.
Trading paper has morphed into an entirely different industry in other cities across the world, and yet Toronto seems to lag behind.
Let me tell you a story that, like usual, starts with me being a know-it-all, and ends with me saying “I told you so.”
Four years ago, I started working with the Condominium Committee at the Toronto Real Estate Board. As a sidebar – I will take 100% of the credit for making square footage a mandatory field on MLS, since that was my brainchild, and I was relentless at driving this through the copious amounts of red tape that exist at TREB. But when it comes to assignments, nobody could ever seem to agree on what to do.
Assignments became a hot topic because everybody who owned a piece of paper wanted to flip it, and while we acknowledged that there was a market of buyers and sellers for the product, we also understood that there was no forum in which they could do it.
I modestly offered, “If we, as Realtors, and as the Condo Committee working on behalf of Realtors, don’t find a way to modify Toronto MLS to include the assignments of pre-construction condos, then another company will.”
I didn’t offer a method, nor did I offer the means to create a forum, but I did suggest that we’d lose a large portion of our business (and a MUCH larger portion of our business in the future) if we didn’t secure first-mover-advantage.
On a personal level, I wanted to see a change on MLS simply because I don’t think a “condo” and a “condo assignment” belong in the same category on MLS! I’m tired of scrolling through “Active Listings” and seeing listings for properties that don’t exist, and won’t exist for several years.
I see a fundamental difference between assignments and resales, and I think MLS should reflect this.
My suggestion was to create a whole new category on Toronto MLS that deals with assignments – either right off the main page where you have “Condo, Freehold, Commercial,” or within the actual “Condo” field itself.
Here is how our MLS home page appears:
In my mind, it’s a pretty simple change.
“Residential Condo & Other” includes ‘other’ because you can sell lockers, parking spaces, and assignments. But this skews the sales data as well as run-of-the-mill searches. I believe that we should have a separate category for each of: Resale Condos, Condo Assignments, Parking Spaces, & Lockers.
Wouldn’t this simplify things?
I’m of the opinion that a true condo-buyer is looking for a resale condo, and doesn’t say, “Let’s see these five condos here, as well as that piece of paper for the pre-construction condo that’s going to be ready in 2014.”
I’m told by my colleagues, friends, and blog readers that this does happen, but it doesn’t with my clients!
There’s a huge difference between a resale condo that will close in 40 days and an assignment that ‘may’ close in three years. How could any buyer possibly mull over the two options together? That’s like going to a restaurant and saying, “I might order the steak, or I might just drink water and then eat when we get home.” What was the point in going out to the restaurant in the first place?
I don’t want to get into a long discussion about why I won’t work on assignments, but let’s just say that I think they’re a logistical nightmare, and a lawsuit waiting to happen. It can often be hard enough to transact with a buyer and a seller as it is, but when you add a third party into the mix – often a developer, then it gets even worse.
Simply put: I don’t think purchasing an assignment is a good idea, UNLESS that building is seemingly weeks away from registration. Purchasing an assignment before ground-breaking, during construction, or during occupancy opens the floodgates to a host of issues, and often the buyer is left to either stop the bleeding from the original buyer’s pocket, or mop-up the future issues with dollar bills from their own.
Nevertheless, buyers want to buy assignments, and sellers want to sell them.
I’m sure you’ve all heard of www.assignit.ca, which is a website that specializes in assignments.
I don’t have figures from TREB, but I would assume that a good majority of assignments are still being listed on MLS. I know that there are Realtors that specialize in assignments (God help them…), and brokerages as well. Re/Max Condos Plus down on Queen’s Quay deals with a ton of assignments, and if you’re looking for an expert – call their broker of record. He knows more about assignments than anybody I’ve ever met.
But what shocks me is that CREA, OREA, and TREB – the federal, provincial, and municipal levels of organized real estate, haven’t moved faster to capture a larger percentage of the market for assignments!
This should have happened a long, long time ago. As soon as it became obvious that the buying and selling of assignments was here to stay (not to mention grown potential), the MLS committees should have had proposals to change MLS to include assignments as a separate category.
I’m of the opinion that there will never be a successful competitor to MLS in Canada for residential resale properties, but we’ve seen the rapid rise of View-It and Craigslist/Kijiji for rentals. Maybe it’s because the product is cheaper, and maybe it’s because the product is less complex, but either way – we do know that other companies have taken market share.
MLS is a trademark of Realtors, and it’s owned by Realtors. We’re not going to get into a conversation about the Competition Bureau and their unreasonable and ridiculous quest to get us to sell Fords, Hondas, and bicycles at our Toyota dealership (sorry if you don’t follow the analogy…), but I will say that the success of the MLS system speaks for itself, and the ease with which buyers and sellers transact, as well as the increase in property values, can be attributed to the invention and successful implementation of the MLS system.
As for assignments, there needs to be a place for them within MLS, otherwise market dynamics dictate that somebody else will come along and build a better system. Nobody is stopping property owners from selling houses and condos outside MLS, but they list with Realtors via MLS because it offers the greatest exposure. What came first – the chicken or the egg? Did buyers start using MLS because of all the sellers? Or did sellers start listing on MLS because that’s where the buyers were looking?
With no dedicated section for assignments, and having to root through resale condos to find assignments, I think buyers and sellers will ultimately grow frustrated by MLS’s inability to adapt to a booming section of the real estate industry, and they’ll look for other options.
I don’t deal in assignments, and I never will.
But if TREB doesn’t look to dedicate a portion of Toronto MLS to assignments, then Realtors are going to lose a lot of business to start-ups like www.assignit.ca…
at 8:03 am
I think you’re out of touch. Want to see an easy transaction? Try a stock brokerage’s client website. Five seconds flat, for a cost of (YMMV) about 0.05% (That’s five one hundredths of one percent). Want to see a great real estate website? Try Trulia, or any of a number of other US sites.
I don’t have access to the brokers’ side of the MLS system, but it’s likely built by the same people who do the public side, so just as bad. It’s just a bad web interface on top of a database full of crap:
– gee, the LR and DR are exactly the same size. Is each half of the total area, or is the agent double counting?
– hey, a 1+1 condo. I wonder if that second bedroom is a vestibule, or a nook?
TREB doesn’t seem to have any problem with listings for SFH that doesn’t exist yet, complete with artist’s sketch of an elevation and a parallel listing for the yet-to-be-torn-down teardown currently occupying the lot.
at 6:59 pm
Yeah, I was flabbergasted when I noticed that rooms were all being doublecounted on MLS. Then noticed all the other fails on that system and gave up on some level.
at 2:00 pm
hmmm… how about you get access to a 99.99% accurate system where you can access every property from every real estate brokerage across the city…
Reminds me of this: http://www.youtube.com/watch?v=8r1CZTLk-Gk
at 9:25 pm
Unless the new assignment site is amazing (and I mean AMAZING) and way cheaper, MLS will remain the place to be. It’s the market. That’s where you go to first. Even FSBOs pay some dude $200 to get listed. Network effects, plain and simple.
MLS lost rentals for many reasons. Complicated, clunky, hard to use, inaccurate, limited, and oh yeah, costs lots of money to use. No one goes to MLS for rentals. Until very recently, I didn’t even know they had rentals.
But now the interface is good enough for everyone to use, and the functionality sufficient, that it’s where people go to find assignments. Network effects.
Proprietary monopolistic databases have to realize people won’t put up with crappy interfaces, unless they have to, like realtors. That makes it easier for competitors to come in. MLS/realtor.ca still has a looong way to go, but at least that war is won now.
at 3:36 pm
mls will not allow for someone to list a property that either is not available for showings within 24 hours or if it belongs to someone else ie. developer.
http://WWW.Assignit.ca offers not only a portal for the assignment but also specialists to assist and an easy to follow user manual depending on if you are the buyer, seller, developer or realtor.
at 3:33 pm
Assignments are much easier than people think. Our findings would show that educated end users are taking advantage of this opportunity and saving up to $50,000. Its simple, assignors will not sell at the same price as the developer whom has millions to advertise, full staff, and presentation centre…Savings! The units while on interim occupancy are at a loss ie. maintenance fee, mtg, tax, when assigned the loss dissapears when that the assignee moves in…Savings! Since there is only one final closing, there are no taxes being paid twice or being paid as an investor on the first closing, these costs are passed on to buyers on closing with mls, unless assigned…Savings!
at 3:19 pm
Is there anything in an Assignment that poses a risk to the buyer that the unit will not be finished? If you buy the assignment during construction or the occupancy, is there a chance your unit won’t be yours still? Is the builder obligated to finish? what happens if that ddoesnt’ happen?
at 7:36 am
Thank you for the good writeup. It if truth be told was once a entertainment account it. Glance complex to far added agreeable from you! By the way, how can we be in contact?
at 5:10 pm
David, I’m surprised at your view in regards to assignments. Most realtors I know would say they are a great opportunity for buyers and certainly are advantageous to sellers who are looking to get rid of the unit they once thought they wanted to keep. They are also actually a lot less complicated than you make them sound. I have purchased for my self and for my clients by assignment and was able to find deals much better than the resale market offered.
I have also purchased a pre-construction condo about 4 years ago with intention of living there one day, of course things have changed, I have married since, live in a 3 bedroom house and have no desire to move to a 1 bedroom condo. I now want to sell it ( because i don’t intend on living there, and don’t want it as an income property because I know of real estate that can generate a better return on my investment). Now there are two options to sell: 1. Before registration (as an assignment) or 2. After registration (as resale), and I can’t think of too many reasons why I would want to sell after registration (as resale). Selling by assignment for one saves me from paying the land transfer tax on a condo I don’t even intend on living in. So I wonder, if you were in a same situation and you had to sell your condo that is nearing completion, would you still say I don’t deal with assignments? Or do you just prefer not to help others with them?
at 8:54 am
Thought-provoking writing , Just to add my thoughts , you are requiring a IRS 1098-C , my business partner found a blank document here http://goo.gl/1Ihevm