How To Use Novations To Grow Your Wholesaling Business

Everybody uses novation agreements a little bit differently. The way I use them is not the same as how Pace Morby will use them. At its core, a novation agreement allows us to substitute our original purchase agreement in favor of a new agreement, provided specified terms in our original agreement stay the same, i.e., the purchase price. The way I use novations is to allow me to sell my wholesale deals to retail buyers using conventional loans. Now, here's what I mean by that. In a traditional wholesale deal, you simply assign your contract to an end buyer for a higher price. The end buyer is paying with cash or hard money, and you get paid an assignment fee at close of escrow. The problem with assignment fees is that banks won't pay them, so you can't assign your contract to somebody using bank financing. This is important because the thing about people using bank financing is that they're the people who will pay the most for houses. These people don't really care about what the ARV is or anything like that. They're just looking to get a good deal on a home for them and their family. My Novation strategy allows us to sell our wholesale deals to these types of people. Now here's how. Number 1, we're going to sign the normal cash contract that we use for our wholesale deals. This solidifies the price we are getting the seller, the close of escrow date, the title company, and the terms of the inspection period. Number 2, we sign a Novation agreement that will allow us to find a third-party buyer that can buy using bank financing. Lastly, we sign a power of attorney that allows us to list the property on the MLS and facilitate the transaction. Once we have these agreements signed, we will promptly get the house listed on the MLS. When listing, we aim to undercut all the other comparable properties to ensure a quick sale. Once we receive an acceptable offer, we get the offer sent over to the title company, and we will file a lien on the property. The reason we file a lien is because this is how we get paid in the transaction. At close of escrow, we will release the lien, the house will get funded, and the seller will get paid the amount we originally agreed upon. This strategy is the best way to flip houses in 2023 because not only does it allow us to wholesale deals in any market across the nation without a robust buyers list, but it also allows us to pay substantially more for the properties. Because we are able to sell the properties for so much more money, we don't have to lowball sellers as hard. Yes, we still need to be getting a discount, but it's much less of a discount than what is needed for a wholesale deal. In addition to that, since we're able to leverage the power of the MLS, we can move properties in much smaller markets than we ever could before. One of the worst parts about my initial nationwide marketing campaigns was we were getting these super hot leads that were just in the middle of nowhere. The sellers were willing to sell at a discount, but due to the market being so small, we were unable to find an investor to buy these properties, even at 20 or 25% of ARV. The MLS and retail buyers change all of this. Now we can get properties sold almost anywhere. Our sellers are elated because we were actually able to fulfill on the transaction when all the other wholesalers they worked with couldn't. The buyers are stoked because they're getting a great deal. When it comes to inbound marketing sources like Google pay-per-click, Facebook and Instagram ads, and YouTube ads is that they can be very expensive, especially if you're targeting competitive markets like Phoenix, Los Angeles, Dallas-Fort Worth, etc. Because we can sell these properties in smaller tertiary markets, We can make money buying the cheapest leads that nobody else wants. Another great part about our Novation strategy is that it opens the door for us to be so much more transparent with sellers. When I first got into wholesaling, I was taught you were to pretend like you were going to be the buyer for the property. And then when you schedule the actual end buyers to walk through the property, you just tell the sellers that those are your contractors or something like that. This always felt kind of seedy to me, and I didn't really like operating at that low level of integrity. With this new strategy, we are completely upfront with the sellers about what is going on. We let them know from the get-go we aren't your buyer, and that instead we are going to leverage our network of investors and the MLS to find them the buyer who will pay the most for their property. When you are this transparent from the beginning, it makes the entire transaction run so much smoother. Now sellers are much more inclined to have buyers walk through the property because they know that is who's getting them paid. It's not some random contractor. Now, the absolute best part about this novation strategy is that anybody can do it. You don't need a real estate license or anything special like that. It's essentially the same process as wholesaling, except you're able to get sellers way more money for the houses. The way you get paid is a bit different, and you're able to easily do it in every single market across the country. If you're a wholesaler who is tired of having to lowball sellers, tired of getting deals locked up and not being able to sell them, and looking to learn a strategy that can turn their business into one that can consistently and predictably spit off cash send me a DM on Instagram. I'm helping qualified candidates learn my Novation strategy and inject it straight into their business. I will warn you, it's not gonna be cheap and it's not gonna be easy, but the return you will get from learning this strategy will eclipse anything you can get elsewhere. Send me a DM @tyson_smith on Instagram to see if you qualify. Now, as always, guys, thank you for watching, and I'll see you guys on the next video.