I want to walk you through a real deal we’re working right now because it perfectly shows how a novation deal can save contracts that don’t work as standard wholesale assignments.
A lot of wholesalers walk away from deals that don’t fit the normal cash buyer model. But if you understand novations and structure your contracts correctly, some of those deals can turn into some of your best ones.
Before we get into the story, let’s quickly define what a novation is.
If you want to skip ahead, here’s a quick breakdown of what we’ll cover.
- What is a Novation in Real Estate?
- The Deal That Wouldn’t Sell
- Setting Up the Deal for a Novation Exit
- Getting the Property Ready for Market
- What Houses Work Best for Novation Deals?
- Structuring the Offer Correctly
- The Biggest Mindset Shift
- Final Thoughts
What Is a Novation in Real Estate?
In simple terms, a novation means we replace our original purchase contract with a new contract with a retail buyer.
Instead of assigning our contract to a cash buyer, we partner with the seller to put the home on the open market, sell it to a traditional retail buyer, and then close using that new contract.
The seller still gets the price they agreed to with us. We make our profit from the difference between our contract price and the new retail sale price.
Now here’s how this played out on a recent deal.
The Deal That Wouldn’t Sell
One of my acquisitions managers got a house under contract for $301,000.
The house itself was decent. Built in the late 90s. Structurally solid. But it had some wear and tear from dogs, kids, and everyday living. Nothing major, just rough enough that it needed updates.
After looking at comps, we figured the ARV was around $360k–$370k. But to get there, it needed about $25k–$30k in repairs.
So we blasted it out to our cash buyers list asking for only a $10,000 assignment fee.
Nothing. No calls. No interest.
And honestly, it made sense. A flipper buying at that price and putting money into repairs didn’t have enough margin.
At that point, most wholesalers would cancel the deal.
Instead, we pivoted.
Setting Up the Deal for a Novation Exit
When we originally signed the contract, we already had two important things built in:
- A novation and indemnification clause
- A marketing clause allowing us to pre-market the property on the MLS
If a seller ever asks why we need the marketing clause, we explain it simply:
“Sometimes we list properties on the MLS to pre-market them. It helps us find potential partners or even line up an end buyer before closing.”
Once the wholesale exit didn’t work, we shifted to our novation deal strategy.
We explained everything clearly to the seller:
“We’re going to list the house at a higher price, but your net proceeds stay exactly the same. The extra funds cover commissions, closing costs, and getting the house ready for market.”
The seller agreed.
She signed a limited power of attorney so we could list the property on her behalf. This makes things easier, but if a seller isn’t comfortable signing that, they can still sign the listing documents themselves. They’ll also need to sign closing documents anyway, so we always prepare them ahead of time for what comes next.
Getting the Property Ready for Market
Here’s where the investor mindset matters.
You are not acting like a realtor. You’re an investor partnering with the seller to make the deal happen.
In this case, we invested money to improve presentation:
- Installed missing baseboards
- Hired junk removal
- Scheduled professional cleaning
- Ordered professional photos
- Virtually staged the home
All small investments that dramatically improve buyer interest.
Once listed, the property got strong activity immediately. On the second day, we received an offer at $350,000, actually $10k over asking.
We’re currently in inspections, but assuming everything stays on track, we’re expecting around a $25,000 profit on a deal that originally looked dead.
What Houses Work Best for Novation Deals?
Not every property is a good novation deal candidate. The best ones usually check these boxes:
• Seller is not desperate and wants the highest price possible
• Home was built within the last 20–30 years
• Repairs are light to moderate, not heavy rehabs
• Property is already livable
• Home will qualify for traditional financing
Remember, MLS buyers are usually owner-occupants getting loans. If the property won’t pass financing, a novation deal becomes much harder.
Structuring the Offer Correctly
A Novation deal work best when you anchor low first with a traditional cash offer.
Then you present the novation option at a higher price.
But here’s the critical part: you must know what the home will sell for as-is.
If your comps are wrong, you risk making little money or having to renegotiate with the seller later, which is never a fun conversation.
A good rule of thumb:
• Aim to be around 80% of as-is value
• Up to 85% if the home value is $350k+
That leaves room for commissions, closing costs, light improvements, and your profit.
The Biggest Mindset Shift
The biggest difference with novations is mindset.
You are not a realtor.
You are an investor partnering with the seller and often partnering with the end buyer too.
Sometimes you help pay for cleaning, trash out, paint, or small repairs. Sometimes you help buyers with inspection repairs.
Your job is to help move the deal forward so everyone wins.
Final Thoughts
Novations aren’t complicated, but they require confidence, good communication, and strong comp analysis.
Deals that look too tight for wholesale often become excellent novation opportunities.
And in this case, what looked like a dead deal is turning into a $25,000 payday.
Want to start flipping houses but not sure how to break in? Most successful investors start with wholesaling—it’s the fastest way to learn the business, build capital, and lock down deals without needing big money up front. In fact, many wholesalers never flip a single house because they’re making such big profits just assigning contracts!That’s exactly what I teach inside the Real World Wholesaling Academy. If you’re serious about breaking into real estate investing, this is your launchpad.