Why use Novations

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Course Module: Novation Agreements

Objective: To provide a comprehensive understanding of why and how to integrate novation agreements into a real estate investment business to drastically increase deal flow and profitability without increasing marketing expenditure.

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Section 1: The Case for Novations - Beyond Wholesaling

Traditional wholesaling forces you into a very small, specific box. You're hunting for the most distressed properties from the most desperate sellers, aiming to secure a contract at a deep discount (e.g., 50 cents on the dollar). This model forces you to discard a huge volume of perfectly good leads.

Novations are the strategic tool to break out of that box. They allow you to monetize the vast majority of leads that don't fit the wholesale criteria—sellers who are motivated but whose properties aren't complete disasters. This isn't about replacing wholesaling; it's about adding a powerful and highly profitable strategy to your arsenal to ensure no lead goes to waste.

Core Principle: Monetize, Don't Trash

The fundamental reason to use novations is to do more deals every month from the marketing you're already paying for.

The "Wholesale Box" Is Too Small: With any inbound marketing, especially high-intent online ads, you attract a spectrum of sellers. The traditional "wholesale box" only serves the absolute bottom 10-25% of the market—the truly beat-up properties.

Wasted Leads = Wasted Money: The remaining 75-90% of motivated sellers, who are raising their hands and asking to sell, are typically discarded because their house isn't trashed enough. Novations allow you to service this massive, underserved segment. These are sellers who want the convenience of an off-market sale but have a decent property.

The Win-Win Scenario: You provide a hands-off, convenient solution for the seller, they avoid repairs and agent hassles, and you unlock a deal that would have otherwise been a dead end.

Section 2: The Financial Engine - Engineering Bigger Spreads

Novations don't just add more deals; they add significantly more profitable deals. The structure of a novation deal is fundamentally different, allowing for much larger assignment fees or "spreads."

Average Deal Size: The average profit on a novation deal is cited as over $40,000.

Minimum Target: The operational minimum spread to pursue a novation is $30,000. While some deals may end up smaller due to unforeseen issues ($15k-$20k), many will be significantly larger (over $100k), creating a powerful average.

How are these spreads possible?

How are these spreads possible?

Leveraging the MLS (Multiple Listing Service):

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Targeting Retail Buyers:

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The "Buy Low, Sell Low" Velocity Model:

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Section 3: The Operational Blueprint & The Ethical Mandate

This strategy is powerful, but it comes with significant responsibility. You are not just flipping paper; you are intervening in the lives of families, the elderly, and people in tough situations.

The Process: Outsourcing to Experts

Realtors as Your Best Friends: The traditional wholesale mindset often views realtors as obstacles. In novations, they are your essential partners. You must shift this perspective.

The Division of Labor:

Your Job: Focus on getting the contract signed.

The Realtor's Job: They handle the "dirty work"—late-night calls, negotiations with buyers' agents, managing complex paperwork (especially across different markets), and navigating the closing process.

The Ethical Warning: You Are Playing with Fire

Your ability to use powerful sales tactics to get these contracts signed is a double-edged sword. It requires a strong moral compass.

High-Stakes Scenarios:

You are dealing primarily with owner-occupants. They are trusting you with their single largest asset during a stressful time. This is not a transactional deal with a seasoned investor who owns a portfolio of rundown properties.

Reputation and Trust:

The seller's trust is paramount. If you operate with integrity and a genuine desire to solve their problem, they will sense it. This isn't just "good karma"; it directly impacts your conversion rate. A seller is more likely to sign with someone they believe has their best interests at heart over someone with dollar signs in their eyes.

The Mandate

You must take this responsibility seriously. You are not just creating profit; you are providing housing for hardworking people and solving complex problems that they cannot handle on their own. Do not be the person who leaves a trail of financial destruction to make a buck. A successful novation creates three winners: the seller, the end buyer, and you.

There are no rows in this table

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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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