How a real estate novation works

The basic structure

In a typical novation arrangement, you sign an agreement with a company that agrees to pay you a set amount, or a set net, for your house. The company then prepares the property and markets it to retail buyers, often through a listing. When a retail buyer is found, a new purchase contract is signed directly between you and that buyer, replacing the original agreement. At closing, you receive the agreed amount and the company receives the remaining proceeds as its compensation.

Because you stay the owner until the retail sale closes, the company is not buying the house with its own money first. That is the main difference from a cash sale, where the buyer takes ownership and the risk at closing.

Step by step

Details vary by company and state, but the process often follows a similar order.

• Evaluation of the property, its likely retail value, and needed work
• A written agreement stating your amount, the term, who pays for repairs, and how either side can cancel
• Repairs or cleanup, sometimes funded by the company and repaid at closing
• Marketing, often through a licensed agent and the multiple listing service
• A retail contract between you and the end buyer, usually with buyer financing
• Closing through a title or escrow company, with proceeds split as the agreement and settlement statement show

Title, recording, and your obligations

Title stays in your name during the marketing period. Some companies record a memorandum of the agreement or a lien to protect their interest, which can make it harder to sell to anyone else or refinance until the agreement ends. Ask whether anything will be recorded and how it will be released if the deal does not close.

You also keep the owner's responsibilities while the house is marketed: mortgage payments, property taxes, insurance, utilities, and HOA dues, unless the agreement says otherwise. Check that your insurance remains valid if the house is vacant or under renovation. Seller disclosures to the retail buyer usually remain your obligation as owner.

Proceeds and the marketing period

Your proceeds depend on the agreement. Some set a fixed amount you receive at closing; others share the result above a threshold. The company's share comes from the difference between the retail price and your amount, minus repair costs, agent commissions, and closing costs. Ask for a written estimate showing every deduction and who pays it.

Retail sales take longer than cash sales. The marketing period can run weeks or months depending on the market, repairs, and buyer financing, and a retail buyer's loan or inspection can fall through. Read what happens if the house does not sell within the term: whether the agreement ends, whether the company can lower the price, and whether you owe anything for repairs already made.

The licensing caveat

Marketing a property you do not own on behalf of someone else can be treated as real estate brokerage in some states, which requires a license. Some regulators have scrutinized novation and similar models, and rules differ by state. A legitimate arrangement typically involves a licensed agent for the listing and clear disclosure of the company's role and compensation to both you and the retail buyer.

Ask who will list the property, whether they hold a license in your state, and how the company's compensation will be disclosed. A real estate attorney can review whether the agreement fits your state's rules before you sign.

When a cash sale or a listing may fit better

If you need a certain closing date or want to be done with the house quickly, a cash sale is usually simpler because there is no marketing period and no retail buyer's loan to wait on. If your house is already market-ready, listing it yourself with an agent may give you the full retail result without sharing it.

Prominent Cash Offer's primary service is buying houses for cash, nationwide and in any condition, with no fees or commissions, closing costs paid on cash purchases, and a closing date you choose. Novation and other flexible arrangements are evaluated case by case, and not every property, seller, or state qualifies. Asking for a written cash offer alongside any novation proposal lets you compare certainty with potential upside.