As far as deals found on Facebook go, it’s a decent one.
The item is listed at more than $300,000 less than the original purchase price, with an invitation to make an offer.
The product? A three-bedroom downtown Toronto condo for sale through a process called assignment, where buyers try to off-load a unit they agreed to purchase before it was built.
It’s a painful loss, but the realtor behind it, Jeff Carr with the Re/Max Plus City Team, said this is far from a unique listing.
“This is happening all across the city. I think this is one of the few sellers that is realistic with what they’re actually going to sell it for, whereas a lot of others, they’re reducing by 10 or 15 per cent and hoping for a miracle” he said.
“But you can’t hoodwink a buyer. ”
The 935-square-foot unit was originally purchased for $1,153,900 with a $173,085 deposit. It’s in a 32-storey tower called “The Goode” near the corner of Parliament and Front streets in the Distillery District.
Carr, who posted the listing in the group “GTA/ONTARIO ASSIGNMENT SALES (NO RESALE ADS ALLOWED)” in early December, said the owner did not want to speak about it as it’s a tough subject.
Such sales have become commonplace over the last few years as higher interest rates and a flood of supply have left buyers with a gap in financing and unable to close, while those same forces have sunk the assignment market.
So sellers are unable to cover the purchase price, if they can sell at all.
In better times, investors would sometimes buy these pre-construction units to flip them, hoping to find someone to take over the original contract before they ever had to close on the condo.
But purchasers are now hard to find, even if the buyer will give up their original deposit of a couple hundred grand in the process.
Grace Chan, a real estate agent at Forest Hill Real Estate Inc. in Toronto, knows this all too well.
Not only has she seen it professionally, her own pre-construction unit in Leaside, a 439-square-feet junior one-bedroom she said was bought for $635,000 in 2021, is closing early next year.
“I’m in a very difficult spot right now,” she said.
Chan said she’ll have trouble qualifying for a mortgage, now that interest rates have risen and her personal circumstances have changed, following a divorce and an injury.
“The people who are buying are looking for a deal. They’re looking for blood,” she said. “I’d be lucky if I got $400,000 for it.”
She’s seeing many people impacted by this problem in the region right now, even if they didn’t buy these units as family members are pitching in to avoid defaults.
Carr said there are “hundreds and hundreds, if not thousands of assignment listings out there. Every single buyer is willing to walk away.”
“A lot of these products were sold at the peak of the market,” he said, “and the market has dropped.”
In order to make an assignment sale, sellers need to be in line with what existing condos are being sold for now, Carr said.
That’s 17 per cent less than during the peak in February 2022, according to November numbers from the Toronto Regional Real Estate Board.
Plus, at the height of the market, pre-construction condos were going for 40 per cent more than recently built ones, with the expectation prices would be even higher once the units were done, according to real estate research firm Urbanation.
A buyer is required to pay what they originally agreed to, even though the bank will likely now appraise the unit as worth less today.
If they can’t get a mortgage for that original price, they have to pay the developer the gap.
If instead, they walk away, they not only forego their deposit but also but open themselves up to being sued.
The Parliament Street listing shows that even larger units are not immune. But shoebox condos have in many ways been at the eye of the storm, as there’s so many of them available and most buyers want something larger if they’re going to live in the unit (a second bedroom for a child, or even just enough room for a dog).
Carr also has a listing at the Festival Condos in Vaughan, a 452-square-foot one bedroom, one bath on the 40th floor. It was bought for $556,890 and is now advertised as an assignment at $350,000.
Realtor Jonathan Zadegan, managing partner at the Zadegan Group, said he is seeing some buyers in the assignment space — including first-time homebuyers, and investors hoping things will turn around.
But one interesting group is equity funds that are buying up units in bulk.
Zadegan said he is not seeing more assignment sales now, compared to the last few years. But the losses are bigger.
One thing for sure is that it will be a fascinating time to watch the condo market in the city, Chan said.
“Because there are going to be more buildings to come.”
