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…