Lots of stories about 40-storey condominium projects
By Mark
Schadenberg
When buying and
selling stocks, you are essentially trading for current market value of an
intangible item – pieces of paper – something that appears as a few lines in a
computer ledger of your personal equity. You can accrue profit while you own it
and collect even more dollars when you sell it (assuming the value has
increased).
What about buying or selling a
condominium unit in Toronto which is under construction or possibly not yet
under construction? You look at blueprints and make a purchase. You could buy a
1,000 sq ft 2-bedroom apartment condo in a 40-storey complex that won’t even
provide occupancy for two years. One year later, while hard hats are the only
people occupying the structure, you could sell your condo for a profit.
The buyers may
be happy because they are buying for less than the new ‘market value’ and are
still receiving a brand new residence and likely one with a preferred view as
it was purchased much earlier in the development stage. The seller is happy
because they have made a profit.
While I fail to
fathom most of what occurs in the GTA real estate world, I certainly believe
this practice should not be permitted. It costs millions to build these massive
condos, including the purchase of the land to begin with, but then beginning on
day one of occupancy, the owners are paying condo fees into a ‘rainy day’
reserve fund when likely a good portion of the original purchase price should
have included future improvements (i.e gymnasium, in-house theatre or perhaps a
gazebo).
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New website meant to shine light on
underground segment of condo sales
'Assignments' seen as the Wild West of condo sales
Published on Wed March 13, 2013
TORONTO -- A veteran Toronto real
estate agent is launching a new MLS-like website aimed at opening up the
underground condo assignment market.
The new site, AssignmentListingService.com, is
meant to provide a centralized listing of assignment units now largely being
sold via word of mouth or through unregulated online sites such as Craigslist
and Kijiji.
For now, it’s largely restricted to Realtors for a fee but, over time, it’s hoped more public listings will be
accessible to the public as resale properties are now on Realtor.ca
“What we’re trying to do is add some
transparency to the process,” says Jamie Johnston of downtown’s ReMax Condos
Plus Corp. “I don’t know how big this is going to be, but it’s important it be
an orderly market.
“Right now it’s the Wild West.”
Assignments are typically brand new
condos or units still being built that buyers purchased years earlier in the
pre-construction phase. By “assigning” — or flipping — them to new buyers before
the project is fully occupied and registered, the initial buyer is able to
pocket considerable profits and pass some or all of their closing costs to the
new buyer.
The new buyer gets the benefit, in
many cases, of being able to actually walk through a never-lived-in unit rather
than having to buy from blueprints, although the uncompleted building can still
be, as Johnston puts it, “a war zone.”
The secondary buyer can also snag a
bit of a bargain: Assignments tend to sell below market value, or at least they
did before condo prices started slipping last fall.
But these deals can also be complex
and risky and the sector largely unregulated. Many Realtors and lawyers avoid
assignments because the contracts and fees are far more complicated than normal
resale deals.
It can also be more difficult to
determine the real value of the units because any comparables sold in the
building seldom show up on the resale Multiple Listing Service.
On top of that, most developers’
contracts forbid initial purchasers from marketing their units on MLS or other
online services, for fear they will compete with any units the builder has yet
to sell.
Some developers charge $5,000 to
$7,000 for the right to assign units.
Many allow it free but forbid
marketing the units on MLS or other public online services. Buyers found
violating that rule can have their units seized and lose their deposits, but
developers usually back down as long as the unit is pulled off public sites,
says real estate lawyer David Feld.
Johnston anticipates that up to
8,000 assignment units could come on the market annually across the GTA over
the next few years as developers start to build the record 28,000 condo units
sold in 2011. Market research firm Urbanation believes the real number will be
substantially lower than that as buyers opt to hold on and rent out units in
the softening market.
Johnston’s aim is to not only
provide a centralized listing service for assignments, but also real estate and
legal experts knowledgeable about the specifics of this small but important
segment of the growing condo market.
He believes that because www.AssignmentListingService.com is quite different and separate from the resale
MLS computer listing service, it won’t violate most developers’ rules.
Feld isn’t so sure, as someone who’s
seen the assignment market from both sides — he’s handled many such deals and
is now quietly trying to find a buyer for a brand new townhouse he bought in
the preconstruction phase.
“They aren’t voodoo. You’re getting
something new with the added bonus of actually seeing it first,” says Feld.
“But, ultimately, it’s the builder that is in control.”
Buying or selling in the Woodstock area?
Call: Mark Schadenberg, sales rep
Royal LePage Triland Realty Brokerage
(519) 537-1553
