What is novation

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THE NOVATION PLAYBOOK

SUBJECT: How to Sell Wholesale Deals on the MLS

AUTHOR: Richard Wonders

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1. What is a Novation? Deconstructing the Core Concept

Before we dive into tactics, let's establish a clear definition. Forget the complex nonsense you may have heard.

Novation Definitions

Novation Definitions

The Textbook Definition

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The Pace Morby Model

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The Pace Morby Model

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Our Model (The "Novation King" Method)

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2. Why Use Novations?

The Strategic Advantages

If traditional wholesaling is easier, why bother with this? Because the rewards are significantly greater.

Advantages

Advantages

Advantage 1: MORE DEALS EVERY MONTH

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Advantage 2: BIGGER SPREADS

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Advantage 3: A TRANSPARENT PROCESS

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3. The Mechanics: How the Novation Process Works

This is the most critical section. This is where the theory becomes action.

The Central Challenge: Bank lenders, the gatekeepers of retail home sales, hate wholesalers. They see assignment fees as a red flag and will often kill a deal over it. Our entire process is engineered to legally and ethically navigate this obstacle.

The Step-by-Step Playbook:

1.The Original Contract: You sign a purchase agreement with the homeowner. This contract must contain a novation clause, giving you the right to market the property and substitute a new buyer.

3.The Buyer's Offer: A retail buyer (let's call her Sally Mae) submits an offer to purchase the home.

5.Closing the Deal:

The Lender's View: The lender sees a simple, clean transaction: John Smith is selling his house to Sally Mae. There are no assignment fees. There is no "wholesaler" visible in the primary paperwork. As Richard says, "They are nerds in the bank...they don't need to be all up in our pocketbook... Everything is best on a need-to-know basis."

2.Marketing on the MLS: You partner with a realtor to list the property on the MLS, just like any other home for sale. You market it to the largest pool of buyers possible: retail buyers with loan pre-approvals.

4.The "Substitution" - The Novation in Action: Here is the key move. The original seller (John Smith) signs Sally Mae's purchase offer directly. A novation agreement is executed that extinguishes the original contract between you and the seller and replaces it with the new one between the seller and the end buyer.

Your Profit: Your profit (the spread between your initial contract price and the final sales price) is paid out on the settlement statement as a separate line item, often structured as a marketing or consulting fee, as agreed upon in the novation documents.

There are no rows in this table

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The Mindset: This process must be executed perfectly. Richard Wonders is blunt about the learning curve: "I had to learn the hard way... you can learn from my mistakes, and you don't have to go and lose the hundreds of thousands if not millions of dollars in deals that I've had to go through."

This isn't a game for amateurs. You must have the correct paperwork and understand the process to avoid the "snake pits and landmines."

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4. Instructor's Philosophy & Final Directives

To succeed with this strategy, adopt the mindset of its creator.

Be a Communications Expert: R

"It's a passion of mine. I love communication. I love solving seller's problems and I love teaching it."

Your ability to communicate clearly and bichard Wonders still runs live seller calls daily, even with a large team.

Why? uild trust is your primary weapon.

Embrace the Blueprint: Don't try to reinvent the wheel. This strategy has been battle-tested. There's a right way and a wrong way. The wrong way leads to dead deals and potential legal trouble. Follow the proven path.

This playbook provides the framework. Success is a function of your discipline in executing it.

If you’re looking for novations, Prexium is where you’ll find the right leads to close more deals.Start today 👉

The Cowboy Marketer⁠

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