Skip to content
Closing a Novation Deal with Right Documentation
This document breaks down the essential documentation and strategy needed to overcome common roadblocks in novation deals, specifically broker resistance and restrictive MLS rules. This is a tactical guide for investors at any level.
Glossary & Key Concepts
Name
Notes
Novation:
Open
Equitable Interest:
Open
MLS (Multiple Listing Service):
Open
AIF (Attorney-in-Fact)
Open
PSA (Purchase and Sale Agreement):
Open
There are no rows in this table
1. The Core Problem: The Broker & MLS Bottleneck
In the world of novations, your biggest hurdle often isn't the seller—it's the real estate establishment.
As highlighted in the discussion, many real estate brokers are wary of working with investors due to the noise around wholesaling regulations. Under a simple, rigid assumption: if you're not the legal owner on title, they won't run comps or market the property for you. This creates a massive bottleneck, stopping your deal before it even starts.
The primary challenges are:
Broker Resistance:
Agents hear "investor" and immediately think "illegal wholesaling." They demand you be on title, which defeats the purpose of a swift novation.
MLS Regulations:
Many Multiple Listing Services (MLS) have strict rules against marketing a property based on "equitable interest" alone. Equitable interest is the right you have when you get a property under contract, but it's not legal ownership. If their rules forbid this, you're barred from listing on the primary platform for retail buyers.
There are no rows in this table
To close these deals, you need a strategy and a set of documents that satisfy their requirements and give you control.
2. The Pitch: The "Double Offer" Strategy
Before you get to the documents, you need to get the seller's buy-in. The most effective method is the Double Offer Strategy. This approach provides the seller with clear options and frames your higher novation price as a superior choice.
This positions you as a flexible partner, not a predator. The seller understands the trade-off and is psychologically primed to work with you on the novation to get the higher price.
3. The Legal Toolkit: Your Essential Documents
Your paperwork needs to be simple, strong, and strategic. You don't need a mountain of complex legal forms. The entire process hinges on two key documents:
Purchase and Sale Agreement (PSA):
A straightforward, 3-page agreement. This document establishes your legal right to the property (your equitable interest). It's the foundation of the deal.
The Authorization Document (AIF):
This is your secret weapon. This one-page document is an Attorney-in-Fact (AIF) or Power of Attorney (POA). It grants you, the investor, the legal authority to act on the seller's behalf for the specific purpose of selling the property.
There are no rows in this table
Why is the AIF so critical? It’s the key that unlocks the MLS.
Template copy A-B Contract (Novation) TEMPLATE.docx
12.5 kB
4. Bypassing the MLS Gatekeepers with the AIF
The AIF is the tool that transforms you from a "wholesaler with a contract" to an "authorized representative of the owner" in the eyes of the MLS and brokers.
Here’s the tactical breakdown:
Understanding the Hurdle:
Column 2
The AIF Solution:
Column 2
Execution in Practice:
Column 2
This small but critical distinction allows you to legally and ethically list the property on the MLS, gain access to the largest pool of retail buyers, and facilitate the novation without being on title yourself. It's the solution to the broker bottleneck.
This strategy is being used effectively across multiple states, including Texas, Louisiana, Alabama, Georgia, South Carolina, Florida, and is expanding to North Carolina and Tennessee. Note: Always consult with a local attorney to ensure compliance with state-specific laws.
Struggling to find consistent deals? Prexium connects you with the opportunities you’ve been missing. Get started now 👉
Want to print your doc?
This is not the way.
This is not the way.
Try clicking the ⋯ next to your doc name or using a keyboard shortcut (
CtrlP
) instead.