How assignment profit is actually calculated

What you own, and what you are selling

Before the arithmetic, the thing itself. When you buy pre-construction you do not own a condominium — the building may not exist. You own contractual rights to acquire a unit on completion, under an agreement with the builder.

An assignment is the sale of that contractual position to someone else. They step into your place: they take on your obligations, they pay the remaining deposits and they close with the builder. The distinction matters because what you are selling is a contract, and what the contract says decides whether you can sell it at all.

The arithmetic, with the assumptions stated

These figures are an illustration of the mechanism. They are not a prediction, and they are not drawn from a transaction we did. Assume:

• an original purchase price of $500,000;
• deposits paid to date of 15 per cent, so$75,000, with the final 5 per cent still due at occupancy;
• an agreed assignment price two years later that values the unit at$700,000 — that is, the assumption that the unit has appreciated by $200,000, which is the entire load-bearing assumption here.

What the assignee pays you

Two separate things, and running them together is where the original article went wrong:

Deposit reimbursement

$75,000 — your own money, returned

The uplift

$200,000 — the difference between $700,000 and $500,000

Total cheque

$275,000

Of which is gain

$200,000, before any costs

$275,000 arrives, and $75,000 of it is capital you already put in. Treating the whole cheque as profit overstates the result by more than a third. The assignee also takes over the remaining 5 per cent due at occupancy, which is a real benefit to you but is not income.

What comes off the $200,000

All of these are ordinary and none of them were in the original article:

• The builder's consent fee. Set by your agreement. Some builders charge a flat fee, some a percentage of the assignment price, and the range between builders is wide. Read the clause before you price the sale, because it comes off the top.
• Legal fees on the assignment.
• Brokerage commission.
• HST. Since 7 May 2022 assignments of new residential housing are taxable, and the rules on which part of the price is taxable turn on how your assignment agreement is written. See our note on assignment tax — and then ask an accountant, because we are not one.
• Income tax on the gain. How it is characterised depends on the residential property flipping rule and on your circumstances. Same answer: your accountant, not your brokerage.

We are deliberately not netting these down to a number. The honest statement is that the figure you keep is materially below $200,000, and that how far below depends on your agreement and your tax position — both of which are knowable before you list, and neither of which we can guess at from here.

Why the deposit structure is the actual appeal

Strip out the appreciation assumption and something still distinguishes pre-construction: you take a position with staged payments rather than a single down payment, typically 15 per cent over the first couple of years with the balance at occupancy. You are not carrying a mortgage, property tax or maintenance fees in the meantime, and you do not fix a mortgage rate until close to final closing.

That is a genuine structural difference from a resale purchase, where the down payment is due at closing and the rate is fixed then. It is a point about cash flow and timing. It is not a return, and it does not become one unless the value moves.

One correction to the original while we are here: it said the minimum down payment on a resale purchase "is usually 20 per cent because anything below that requires insurance". Twenty per cent is the threshold above which mortgage default insurance is not required, and it is the usual minimum for a property you will not occupy. For an owner-occupied purchase the minimum is lower and tiered by price. Your lender will tell you which applies to you.

The case nobody puts in the brochure

Assume instead that the unit is worth $450,000 two years on. You are now asking someone to take over a contract to buy at $500,000. To sell it at all you would have to accept less than your $75,000 of deposits back — you are selling at a discount to your own cost base, and the loss is real money you have already paid.

If you cannot sell it, you are still contractually bound to close.

Three other ways this goes wrong, none of them exotic:

• Your agreement may not permit assignment, or may permit it only with consent the builder can withhold.
• You usually cannot list it publicly. Most agreements bar MLS marketing, so the buyer pool is narrower and the market is thinner and slower than for a resale unit.
• The clock does not stop. Occupancy approaches whether or not you have found an assignee, and after it you are carrying occupancy fees.

So: is it worth doing?

Sometimes, and it depends entirely on the contract you hold and what the district has done since you signed — which is a question with an actual answer. Our Toronto and GTA pages carry the current TRREB benchmark by district, updated monthly. Comparing your purchase price against the benchmark for your district is the first honest read on whether there is anything to sell.

If you hold a contract, how we sell assignments sets out the sequence — agreement first, price second, marketing third. Send us the project name and your firm date and we will tell you what your agreement permits before quoting a price.