Wholesaler Articles
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A novation contract in real estate is a legal agreement that replaces an existing contract with a new one, transferring the rights and obligations from one party to another. In simple terms, it’s like swapping out one person for another in a deal while keeping the terms mostly the same. For real estate investors, especially those involved in wholesaling, novation is a powerful tool that allows a wholesale contract to be converted so a retail buyer can purchase a home that was initially under contract with a wholesaler. To understand novation, let’s first look at how wholesale real estate contracts work. A wholesaler finds a property under market value, negotiates a purchase agreement with the seller, and then either assigns the contract to another investor for a fee or closes on the deal themselves before reselling it. The challenge arises when the property is in poor condition or the market conditions favor retail buyers—people who intend to live in the home rather than investors. Many retail buyers need financing, such as an FHA or conventional loan, which often requires the seller to be the legal owner of the property at the time of sale. This is where a novation contract…Read More
Category : Wholesaler Articles