EMD & Inspection Period Essentials · The Cowboy Sales Process

This guide breaks down a critical component of structuring novation deals: the Earnest Money Deposit (EMD) and the inspection period. We'll dissect a high-level conversation to give you the exact tactics used by successful investors to maintain flexibility, build seller credibility, and navigate the legal tightrope of real estate investing without a license.

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The Core Strategy: Low EMD, Long Inspection

The central question raised is: When you might close on a deal yourself but also plan to novate it, how do you structure the EMD and inspection period?

The answer is brutally effective in its simplicity: Keep your risk as close to zero as possible.

Earnest Money Deposit (EMD): Put down the lowest amount possible. The goal is to have skin in the game without exposing yourself to significant financial loss if the deal goes sideways.

Inspection Period: Negotiate the longest period possible, ideally extending all the way to the close of escrow. This gives you maximum time to find a buyer, conduct due diligence, and solve any problems that arise without being under pressure.

This approach ensures you control the property with minimal personal capital at risk.

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Navigating the Legal Gray Zone: The Power of Verbiage

A critical insight from the discussion is how to avoid being perceived as an unlicensed real estate broker. Simply telling a seller your only plan is to find them a buyer can land you in hot water. It's a legal gray area that can put a target on your back.

The solution lies in your positioning and the specific language you use.

The Key Verbiage:

You must be transparent while framing your role correctly. The key is to present multiple potential outcomes where you are the principal party, not just a middleman.

Verbiage

Verbiage

Name

Notes

State Your Intention to Purchase:

Open

Explain the Process:

Open

This language accomplishes two things:

Open

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Real-World Application: From Theory to Profit

This isn't just theory. The video highlights an investor, Kevin, who has successfully implemented this strategy to great effect.

Results: He has closed four novation deals and is in the process of closing a complex commercial novation on a former car wash.

Profit: Even with unforeseen challenges, like discovering a potential underground storage tank from when the property was a gas station, he is projected to make $22,000 on the commercial deal.

Learning Curve: He rates his understanding at 80%, proving that you don't need to be a master to execute and profit from this strategy. Mastery comes from doing deals.

This example demonstrates that the low-risk structure (low EMD, long inspection) combined with precise verbiage is a repeatable, profitable system for both residential and commercial properties.

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Actionable Takeaways

Minimize Your Risk:

Always push for the lowest EMD and the longest possible inspection period. Your goal is control, not ownership, until a deal is secured.

Master Your Language:

Never present yourself as just a broker. You are an investor, a problem solver, and a potential buyer who works with partners. This positioning protects you legally and builds trust.

Be Transparent:

Explain your process to the seller. Showing them how you can get them their price builds massive credibility and sets you apart from the competition.

Embrace Complexity:

Don't shy away from deals with hair on them. As shown with the car wash example, big problems can still lead to big paydays if you have the time and flexibility to solve them.

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The Cowboy Marketer⁠

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