Anyone still structuring novation in Houston?

[Donald Lee Reed]

Trying to understand how investors are handling deals that don't fit traditional MAO formulas but have strong financing advantages.

Example scenario:

• Seller needs higher price than flippers allow

• Profit created through resale structure instead of discount purchase (novation)

Are investors still executing these or has market shifted back toward deep discount acquisitions?

[Daniel Tanasa]

Quote from @Don Konipol:

Quote from @Donald Lee Reed:

Trying to understand how investors are handling deals that don't fit traditional MAO formulas but have strong financing advantages.

Example scenario:

• Seller needs higher price than flippers allow

• Profit created through resale structure instead of discount purchase (novation)

Are investors still executing these or has market shifted back toward deep discount acquisitions?

Think thru VALUE of an novation deal.  Especially when it ends up on MLS.  Why can’t the seller hire a broker directly?  How does adding the “novators?” fee to the brokers fee add value for the seller, or buyer.  Does the person marketing their “novation” services to home owners explain something like “you could make a phone call to a broker who will do all the work and just pay the broker; or for $5,000 I will make the phone call for you”?  And IF the provider of this service takes on something more, like suggesting pricing, marketing , etc, are they acting as an u licensed broker?   

I’m not arguing whether or not they have a “equitable” interest in said property; that’s something that the state real estate commissions will have to pursue.  I’m merely questioning how they “add value”.  

 Hi Don, 

I think the value add is that in most of the cases the investor and the home owner are partnering up on the deal. The investor comes with capital to fix and improve the property before listing it on MLS (capital that the homeowner doesn't have) and because of that selling the house at a higher price, making it a win win scenario.