Contract reassignment simplified

A reassigned contract simply put is when Buyer 1 purchases a property [off-plan] from a developer/agent, holds the property for a period of time and sells it to Buyer 2 on or before completing with the seller.

The advantages of contract reassignment for Buyer 1 would be that they may secure the property at a lesser price than its market value/price from a developer/agent as they are buying this off-plan. Buyer 1 would then sell this property prior to completing on it to Buyer 2 at a higher price – this higher price will be the original discount Buyer 1 received from the seller plus and market increases. Below is a typical example:

  1. Buyer 1 exchanges contracts with a developer/agent and puts down a deposit at an agreed lower price. Let’s say Buyer 1 purchases at £295,000.
  2. Buyer 1 holds the property for a set period and before they complete, they agree a sale with Buyer 2 – generally at a higher price. Let’s say the market price now is £360,000. To get a quick sale Buyer 1 agrees a sale to Buyer 2 for £330,000 for a quick sale.
  3. Buyer 1 ‘reassigns’ the contract to Buyer 2 at the new price agreed.
  4. Buyer 2 will now purchase this property and become the legal owner.

In principle this scenario sounds great and an easy way to make money in property. This is really not the case and we strongly advise you seek legal advice and speak with a mortgage broker who has experience in this type of a transaction. You will find now that many lenders are not comfortable with reassignment contracts and the ones that do allow this are very specific in their criteria and will offer lending with limitations.

It’s definitely worth speaking to one of our advisors before going down this route. We can then discuss your options, lending requirements, planned results and provide the best advice for your individual requirements.

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