Monday, August 31, 2015

Protecting yourself in an assignment agreement

People buy and sell real estate in BC with a document called the Contract of Purchase and Sale. It describes the rights and obligations of the buyer and seller.

A contracting party can sell those rights to someone else unless the contract states otherwise. This type of transaction is known as an assignment agreement.

In simple terms, someone can buy the right to step into the original buyer's shoes to complete the contract.

The person selling the contractual rights is the assignor. The person buying the rights is the assignee. The money the assignee pays for the contract is the assignment fee.   

Here are 10 steps to take before you enter into an assignment deal.  

You should ensure that:

  1. you work with a REALTOR®. Your REALTOR® will help protect your interests and bring knowledge of the provincial legislation that governs real estate transactions.
  2. the person assigning the contract has the right to do so;
  3. the original contract permits assignments;
  4. the original seller is aware of the assigment;
  5. the property is or was listed for sale;
  6. the identity of every individual involved in the transaction has been verified;
  7. all money already paid and owed is accounted for and dealt with in the assignment contract;
  8. you seek legal advice before agreeing to pay the assignment fee;
  9. you understand the additional risk associated with paying the assignment fee before the original contract is finalized; and
  10. you consult an accountant to understand the tax implications.

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