Novation agreements with real estate brokers

Member since 2022 · 37 posts · 19 votes

When trying to work out a novation contract how do you bypass a real estate broker. Obviously a real estate broker is gonna want their agent to get a listing agreement But from what I understand with novations, I use a typical purchase and sale agreement and have a novation contract in place and what allows me to list the property is an attorney in fact. Any tips on this? I Don't want to piss off my real estate broker.

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Kevin Sobilo
Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes
1y
@Hector Escobar, it sounds like you didn't talk to your broker about doing wholesaling. There is your mistake right there.
First off, a broker may be want to be compensated if you are using a lead the brokerage generated.
Second, the brokerage may require you to do certain work such as generate a file and document the fact that you disclosed your license status to this lead.
The brokerage has liability with you working at wholesaling because you could easily through poor communication or misunderstanding have the seller believe you are "representing" them as a client rather than as a wholesaler. They may not understand the difference. That could create potential liability for the brokerage.
Because of this added potential liability, the brokerage may not permit you to wholesale and also remain as an agent of theirs. They stand to make no financial gain while taking on additional potential liability.
Why not work these deals as "net listings" where the seller agrees to the minimum amount they want to receive and the commission is anything you get for them above that amount. That commission you can split with your broker. It has basically the same net effect as a wholesale deal BUT where you give the seller representation, the broker is compensated, and you are also protected more with your errors & omissions insurance.
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- Hector Escobar
  OP
  Member since 2022 · 37 posts · 19 votes
  1y
  @Kevin Sobilo my current broker knows I wholesale and he's cool with it because I'm the one hunting this business and generating my own leads. I haven't talked to my broker about novations just yet but I will. Thank you for your input. I'll most definitely look into "net listings". I'd love to help my broker make some profit as well.
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Stephen MoralesBusiness Member
Jacksonville, FL · Member since 2025 · 402 posts · 205 votes
1y
Hi @Hector Escobar,

Where are you located? When we do novations deals we normally just do net listings unless we actually plan on making improvements to the property before putting it on the market. Net listings are 100% legal here in FL and it's a much simpler process than working a novation out.

I would highly recommend doing that in your situation if you can. At the very least, I would make sure your brokerage is acting as a transaction broker in any of your novation deals.
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