What is novation?

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A novation isn't a magic bullet, but it is an essential and brutally effective weapon for your real estate arsenal. It allows you to solve problems for sellers who want more than a lowball cash offer, create incredible value for buyers looking for a deal, and generate higher, lower-risk profits for yourself.

What the Hell is a Novation?

Forget the fancy legal jargon for a second. At its core, a novation is simply a different—and often more profitable—way to move a property you have under contract.

It's just "another marketing tool."

Think of it this way:

Think of it this way:

Traditional Wholesaling:

Column 2

Novation Strategy:

Column 2

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This strategy bridges the gap between wholesaling and flipping. You control the property via a contract, but you find a retail buyer who will close on it, allowing you to capture a much larger assignment fee without ever taking ownership.

Chapter 1: The 'Win-Win-Win' Scenario

This isn't just about you making more money. A properly executed novation creates a winning outcome for every single person involved. Speaker Courtney Scott breaks this down perfectly.

WIN #1: The Seller

The homeowner gets to sell their property without making repairs, but they get a much better price than a lowball cash offer from a wholesaler or flipper. Because you're marketing to a retail audience, you can offer the seller a higher purchase price, making your offer far more competitive.

WIN #2: The End Buyer

The buyer gets a home for a significant discount. They can buy a "livable" house that needs cosmetic work (e.g., an outdated kitchen) and put their own touch on it. They get to build sweat equity immediately.

Example: "I would rather buy a home, get it for cheap... and actually put the work into it and build it how I want to... I'd rather get this at a 100k discount." He mentions buying a ranch for $150,000 off the retail price. That's a massive win for a buyer who isn't afraid of a project.

WIN #3: You (The Investor)

This is the best part. You get the upside of a flip without the risk or capital.

More Profit: You tap into a bigger market of buyers who can pay more, which means a larger spread for you.

No Risk: "If the house don't sell, guess what? You could just walk away. You don't gotta put no dime into it. So it's no risk and you make more money."

You aren't buying the house. If you can't find a buyer in time, you can cancel the contract (assuming you have the right clauses). You haven't sunk $200k into a purchase and renovation.

Chapter 2: The Battle Plan

Understanding the strategic differences is key to knowing when to deploy this tool.

Novation vs. Traditional Wholesaling

Novation vs. Traditional Wholesaling

Target Property

Distressed, often uninhabitable properties.

Livable homes that need cosmetic updates. Structurally sound but dated.

Buyer Pool

Limited list of cash investors.

The entire MLS: retail buyers, financed buyers, agents, and investors.

Marketing Engine

Direct calls, emails, Facebook posts.

The MLS, leveraging the reach of thousands of real estate agents.

Profit Margin

Typically smaller, fixed wholesale fee.

Potentially 2-3x a typical wholesale fee by capturing near-retail value.

Key Risk

Finding a cash buyer in time.

Finding a qualified retail buyer whose financing will be approved for the home's condition.

There are no rows in this table

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Chapter 3: Execution - Avoiding Landmines

While powerful, this strategy isn't foolproof. You need to be smart.

Pick the Right Property: This is critical. A novation is NOT for a full gut job. If a buyer comes in with certain types of financing (like an FHA loan) for a "really run down house, it's not going to get approved. The ideal property is livable but screams "opportunity"—think 1990s kitchens, old carpet, and dated bathrooms.

Vet Your Buyer Relentlessly: You have to be, in Gunnar's words, "wise of which type of buyers you choose." A buyer with a conventional loan has different property condition requirements than one with an FHA loan. Understand their financing before you accept their offer. Your job is to match the right buyer and the right loan product to the property's specific condition.

Don't Do the Repairs: A common question is whether you, the investor, should fix things. Gunnar's answer is blunt: "Not generally." The value proposition for the end buyer is the discount they receive in exchange for doing the work themselves. You are selling the potential, not a finished product.

Conclusion & Next Steps

Novation Course provides a full introduction. If you're ready to move past the basics and learn the mechanics, seek out that material. The next step is to understand the specific contract language and transactional steps to execute this strategy flawlessly.

Novations work when you have the right leads—Prexium brings them straight to yo. Start today 👉

The Cowboy Marketer⁠

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