Novation Agreements – The “New” Way to Wholesale

Novation agreements have gained a lot of momentum over the last couple of years.
If you have a homeowner looking to sell their property quickly, but he or she is not interested or frustrated  with lowball offers or terms that seem too stretched out to be beneficial., then Novation is the way to go. It’s a unique approach that brings buyers willing to pay top dollar for your property, whether for long-term investment or personal use.

What is a Novation Agreement?

A Novation Agreement is a legal contract that allows a seller to transfer the ownership and responsibilities of a property to a buyer while the wholesaler handles all closing costs, fees, and necessary updates, ensuring a smooth and profitable transaction.

How Does It Work?

The investor (you) puts the property under contract, like a regular wholesaling transaction, then leverages their extensive network of buyers, realtors, and the MLS (Multiple Listing Service – yes. You can list the property on the MLS) to find the right buyer for the property in question.

Here’s a snapshot of what can be expected:

  1. Top Dollar Offers
  2. Hassle-Free Process: Property will be sold as-is and all closings costs, fees, etc will be paid by investor at closing 
  3. Quick Turnaround

The Benefits

Detailed 5 Steps in the Novation Process

  1. Initial Consultation and Agreement:
  • The wholesaler meets with the property owner to discuss their goals and the specifics of the property.
  • Both parties agree to the terms, and the owner signs the Novation Agreement, allowing the wholesaler to market the property.
  1. Property Walkthrough and Assessment:
  • The wholesaler conducts a thorough walkthrough of the property.
  • Any minor updates or repairs needed to attract top dollar offers are identified and planned. These are handled by the wholesaler at no cost to the seller (optional step.)
  1. Marketing and Buyer Search:
  • The property is listed on the MLS and marketed through the wholesaler’s network of buyers and realtors.
  • The wholesaler manages all aspects of the listing and buyer interactions to find the right buyer willing to pay a competitive price.
  1. Negotiation and Inspection:
  • The wholesaler handles all negotiations with potential buyers, ensuring the best possible offer.
  • Necessary inspections are conducted, and any issues are addressed by the wholesaler, maintaining transparency and facilitating a smooth transaction.
  1. Closing and Final Payout:
  • Once a suitable buyer is found and terms are agreed upon, the wholesaler coordinates the closing process.
  • The seller signs the final closing documents and receives their payment, typically within 1-2 months from the start of the process.

Common Questions About Novation Agreements

  • What does “as-is” mean? Selling “as-is” means the seller doesn’t need to invest in costly repairs or renovations. 
  • How does the investor cover closing costs? All closing costs, including title fees and realtor commissions, are covered at closing out of the final proceeds. 
  • What if the property has back taxes or liens? Any existing mortgages, back taxes, or liens will be deducted from the final payout. There is no cash outlay upfront from either seller or investor, since everything will be settled out of the proceeds at final settlement/closing.

Novation Agreements are reshaping the wholesaling landscape by offering a more flexible, profitable, and streamlined approach to property transactions. They provide sellers with the benefits of traditional sales without the associated hassles and delays, while allowing wholesalers to reach a broader market and close deals more efficiently.