The Assignment deal from the Assignee Perspective
Things to consider:
- What are the extra costs the Assignee will need to account for?
2. Does the Assignee need financing? How will it be secured? Or is it already?
3. What are the adjustments the builder will charge at the time of closing? Have your lawyer review the original contract to uncover all charges.
4. Who pays the assignment fee? If the original contract allows for the “assignment clause”- it would normally be paid by the original purchaser.
5. How money in total will the Assignor get and when will he receive these payments? (Consider the original deposit paid. Upon the completion of the assignment, the new buyer takes on the deposit. The assignor will want to add the deposit amount to the profit when negotiating the deal
6. When is that the closing date? (The closing/registration date is when the ownership of the property is transferred to the client and becomes the legal owner of the property- this is when the bank will want to start charging you the mortgage payments.
7. When is that the occupancy date? (Occupancy date is that the date on which the customer is allowed to live into the property. The Assignee can only enter the new home after the occupancy date has been formalized by the builder. This is when the occupancy fees begin or as some call It “phantom rent”.
8. Who will receive incentives and interest from the deposit before the deal is closed? (Depending upon the quantity of interest and therefore the sorts of incentives, the Assignor and therefore the Assignee can decide who receives which benefits)
The timing of the all the Payments
When exactly do the builder and therefore the Assignor receive payments from the Assignee? This must be determined before the assignment is signed and will be detailed in Form 150 – the assignment agreement of purchase and dale.
Deposit – In most assignment agreements, the deposit made by the Assignor to the builder is paid back to the Assignor when the builder consents to the assignment. The deal must specify the amount and the timing of the monies covering the deposit. Depending on what stage of the development the property is, there can be still deposit money left to pay. Ex: 5% at occupancy.
Profit – The profit the Assignee can pay to the Assignor is typically paid when the agreement between the builder and therefore the Assignee is closed. This happens after the final closing because the Assignee can only receive mortgage funds after his or her deal closes with the builder. Therefore, the Assignor has got to wait till the Assignee’s deal closes with the builder to receive profit. But this too can be negotiated. Perhaps the new buyer has the funds available already and may choose to give the assignor the profit portion- if there is a discount involved?…
Adjustments – Any adjustments that the Assignee will got to pay to the builder like development charges, gas and meter connection, etc. are paid at the time of the final closing. Lawyers will produce the final statement of adjustments stating the monies and remaining financial responsibilities of all parties.