Assignments are getting a lot of scrutiny in the Greater Vancouver real estate market. I’ve had more people ask me about ‘shadow flipping’ in the past months than in the past seven years.
But what is an assignment? And how can sellers protect themselves from being exploited by an assignment resale?
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An assignment is when a purchaser and a seller enter into a firm and binding contract that assigns the sale to another buyer before the completion date of the initial sale.
There’s nothing wrong with an assignment. But there have been cases of abuse; agents with an eye to a profitable assignment have deceived sellers by undervaluing their property or not even offering it up for sale on the open market.
The BC government has introduced new legislation to reign in unscrupulous assignments. It includes the addition of two new clauses in contracts that stipulate the sale can’t be assigned without the written consent of the original seller and any profits realized by an assigned sale would go to the original seller. Here are the clauses:
- This contract must not be assigned without the written consent of the seller; and
- The seller is entitled to any profit resulting from an assignment of the contract by the buyer or any subsequent assignee.
*With the exception that the buyer may instruct their agent not to include these clauses in the offer.
Sellers can also take steps to protect themselves. Hire an agent based on the recommendation from people you trust. Don’t take an offer on your property without adequate market exposure, like listing it for at least a week, holding an open house. Accept only set offers presented in person.
In the eight years I’ve been a real estate agent in Greater Vancouver, I’ve never sold an assignment. But there are a few bad apples out there.