Why Novation Are Better Than Wholesaling

Question

Here’s why I’ve started using novations over wholesaling.

1. Sellers Get More Money

With wholesaling, sellers often need to take a low cash offer. With novations, I can offer closer to market value by selling to retail buyers, making it easier to get deals accepted.

2. Bigger Assignment Fees

Instead of selling to investors looking for steep discounts, I market to end buyers willing to pay market price. This means I make more per deal than a typical wholesale assignment.

3. No Double Closings or Hard Money

Since the seller stays on title, I don’t have to use hard money or worry about double closing fees. I just facilitate the sale and collect my fee at closing.

4. More Buyers, Less Competition

Wholesaling relies on a limited pool of cash buyers. Novations open up the MLS and conventional financing, bringing in a larger pool of buyers and reducing competition from other wholesalers.

5. Easier to Scale

With less reliance on deep-discount deals and cash buyers, I can scale novations faster than traditional wholesaling.

Final Thoughts

I’m not saying wholesaling is dead, but novations have helped me close deals I would’ve lost before. Anyone else using novations? What’s been your experience?

Don Konipol · Answer

Hey guys, it’s basic “guruism” 1. Start with a technique or strategy used successfully by KNOWLEDGABLE, EXPERIENCED investors on a rather limited basis (because it’s only OCCASIONALLY applicable2. Create a methodology which uses this technique or strategy in 10 X the number of situations where it’s appropriate, and only report the few successes, never acknowledging the failures or the risks3. Write a book about it, utilize paid internet ads to drive book sales, follow on with YouTube videos, webinars, blog casts, on line tutorials, and sell a few one on one coaching sessions.4. Partner with a real estate marketing company out of Las Vegas or Provo, Utah to market, promote and advertise the “mentorship” system consisting of the free seminar, followed by the modest fee weekend workshop, followed by the $15,000 - $40 000 full mentorship program.Here are the usual results1- 99% of “students” never earn back the cost, despite 1000s of wasted hours2- students learn nothing of real estate principles, real estate finance and real estate law which are the necessary foundation blocks of knowledge necessary for a SUSTAINABLE career in real estate investment 3- with hundreds or thousands of “students” unleashed on the real estate selling public they’re AT BEST an annoyance of trying to do “unrealistic” deals, AT WORST lead to a disastrous result for vulnerable homeowners.4 - The career real estate investors, service providers, brokers, lenders, etc are so disgusted with all of it and the outcomes they see that that can’t even comprehend that the subject technique or strategy does have a legitimate use when utilized (1) by and experienced and well capitalized buyer and (2) full disclosure is provided all parties with legal representation.  Governmental agencies do get involved, often very late in the game and often just having the guru agree to a “cease and desist” order.  (  I did nothing wrong and agree never to do it again”).  One particularly peculiar case involved John Beck. Full disclosure - I knew John back inthe late 1970s early 1980s when he traveled the guru circuit of those days as guest speaker at REI clubs selling “books and tapes” at the back of the room.  He was a good guy” and his information  on buying at tax or foreclosure sales was realistic and doable. Fast forward 25 years later and John decided he wanted the riches associated with the gurus backed by the Vegas/Provo real estate marketing companies. But John got greedy, and went with a fly by night outfit because they offered him the “best” deal.  Anyway, the program was such an obvious BS fluff that an overwhelming percentage of students demanded their money back claiming they were defrauded.  The outrage was such that the AGs of 4 states jointly sued John and the real estate marketing company and won a $400 million judgement!.  (Interesting, because the best guess I’ve seen is that John maybe personally grossed no more than $10 million from this mentorship over a 8 - 9 year period of time). Nevertheless, John walked out of the courtroom after the verdict was delivered, walked by his car, continued walking and has NEVER been seen or heard from again!  This was 18 years ago.

Dawson Brewer · Answer

@Don Konipol i never did a net listing, but from what i understand of what it is, yes the result is the same.

Pegah Yazdanshenas · Answer

Avatalk as the first and only AI-powered digital business card, worth checking it out

James Wise · Answer

lol..........I should have known that this nerd would be involved with this B/S.

James Wise · Answer

So wholesaling but we changed the name?

James Wise · Answer

What in the holy hell is a novation?

Cornelius Garland · Answer

I wouldn't argue one strategy is better than another. When you've been around for a while, you develop an exit strategy "tool belt" of sorts. I wholesale some properties, and others make sense to take down as rentals. Also, novations are nothing new. This is a catchphrase that people started using a few years back. I was essentially doing "novations" way before it ever became a thing, with a limited durable power of attorney, back in 2016. One of the first deals I did was take down a 26-parcel deal in a highly distressed neighborhood and listed it on the MLS. The POA gave us the ability to list it. I'm not a fan of novations where you don't get the purchase agreement notarized and filed at the courthouse. It's too flimsy otherwise. If you're going to go that route with listing it, do it the right way or else you may find yourself in legal trouble, or a buyer may snake the deal from you.Again, novations aren't anything new, and most experienced investors are shying away from them these days because they're operating in a legal "grey area". I never want to place a Realtor in a compromising situation, so I always get a notarized POA and file it at the courthouse. This helps the process move much quicker on my virtual deals. In Cleveland, I'm taking down duplexes as rentals and Cuyahoga county requires us to communicate with 3 - 5 departments just to get payoffs. If I had to wait on the seller to do this, it would drag out my closings for months, potentially. There are multiple benefits of using a POA to list the property rather than getting a purchase agreement e-signed with a "listing clause" in it.

Why Novation Are Better Than Wholesaling

Most Popular Reply