Hi all, Rob here, a Louisville agent who works mostly with investors.

You know the house. Three bedroom in Fern Creek, dated but clean, needs paint and carpet and a countertop. No investor will pay you a finder's fee on it, because there's no big repair job for them to make money on. And the seller can't take your cash offer, because your cash offer is 70 cents on the dollar for a house that's worth 100 and only needs six grand of work. An assignment dies right there. A novation is how you get paid on the house that doesn't need you.

How it works:

1. You and the seller agree on a number, what the seller walks away with after the sale, guaranteed. That's their net.

2. Instead of buying the house, you sign a contract with the seller that includes novation language, wording that lets someone else take your place in the deal later. At the same time you both sign a separate fee agreement, a written promise of what you get paid and how.

3. The seller keeps their name on the deed the whole time.

4. You pay for the fix-up: paint, carpet, countertop, staging, and the carrying costs like utilities, insurance and taxes while it sits.

5. A licensed agent lists it on the MLS at full retail price.

6. A regular buyer, someone who's going to live there with a normal home loan, makes a regular full-market offer.

Then the swap happens. Your contract with the seller gets replaced by a brand-new contract between the seller and that buyer. You step out. At closing the seller gets the net you promised, and you get paid your fee out of the sale money.

The math works because you're selling to regular buyers instead of investors. Investors need a discount, that's how they make money. A family buying a home to live in will pay full market price. That gap is where your paycheck comes from.

Run it. The seller nets $200,000. The house sells for $255,000. That's a gross spread of $55,000, and gross is not your profit. Out of that: the agents' commission, call it $7,500 to $15,000. Closing costs, around $5,000. Repairs and staging, $6,000. You're left with roughly $29,000 to $36,000, on a house you never owned, never borrowed money on, and never paid transfer tax on.

The tradeoff is time and risk, and both are real. An assignment closes in two to three weeks. A novation takes 45 to 90 days, because now you're waiting on a regular buyer's bank: the appraisal, the inspection, and underwriting. And once the novation executes, you have nothing. No ownership rights in the deal, no claim on the house, no contract you could sell to someone else if the buyer walks. All you have left is whatever you got in writing before you signed. That's why the fee agreement gets signed at the same time as everything else. Never after.

Use it when the house is livable and only needs cosmetic work, where the seller can wait a couple of months. Skip it when it needs heavy repairs, when the seller needs out this month, or when the end buyer is paying cash anyway. Assignment is the default. Novation is the exception. Anybody teaching it the other way around is selling a course.

The Kentucky part. KRS 324.020 makes it illegal for someone without a real estate license to advertise a purchase contract for sale. A novation means marketing a house to the public, so the marketing has to be done by a licensed agent under a written listing agreement signed by the owner. The owner here is the seller, who's still on the deed, which is exactly why the structure works. And KRS 324.020(4) says an agent can't split their commission with someone who isn't licensed, so the investor's payout has to come from the seller's side, out of the sale money, under that separate fee agreement. It is not a slice of the agent's commission. The settlement statement will show which one you did. Label the fee, disclose it, and don't get cute. Underwriters read every line, and a vague fee paid to a company nobody can explain is how deals die in the last 72 hours.

And the honest answer to "why don't I just list it?" is that you can. The novation only earns its money if the investor pays for the repairs, covers the bills while it sells, and takes the hit if it falls apart. If the house needs nothing and the seller can wait, they should list it and keep the whole thing. Say that out loud. It builds more trust than any script.

Not legal advice, have your attorney and title company look at the paperwork before you start.

Has anyone here closed a novation in Kentucky or Indiana? What did your title company need to see before they'd close it?