A wholesale investor explains how to use novation agreements to sell contracts to bank-financed buyers. The strategy involves signing a cash contract, transferring it via novation to a third party, listing below market value, and filing a lien to collect the assignment fee when an offer comes in.
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're 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.
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