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Compare · Novation vs. Wholesaling

Both novation and wholesaling start with you signing an agreement with a company, but what happens next is very different. In a novation the house is usually improved and sold on the open market; in wholesaling the contract itself is usually passed to another investor. Knowing which one you are signing helps you ask the right questions.

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Novation vs. Wholesaling

Novation compared with Wholesaling
What changesNovationWholesaling
How it worksYou agree on terms with a company that prepares and markets the house, then a retail buyer purchases it from you through a new or replacement agreement.You sign a purchase contract, and the wholesaler assigns that contract to another buyer, usually an investor, for a fee.
PriceAims for a retail-level sale price; your share is whatever the agreement sets after the company's costs and margin.Typically a discounted, as-is price, since the end buyer is an investor who also needs a margin.
TimingUsually longer, because repairs, listing and a retail buyer's financing take time.Can be quick if an end buyer is found, but depends on that buyer appearing.
CertaintyDepends on the house selling to a retail buyer; the market and appraisals can move the outcome.Depends on the wholesaler finding someone to take over the contract; some deals fall apart if nobody does.
Your responsibilitiesSigning documents, allowing access for work and showings, and often keeping up payments, taxes and insurance until closing.Signing the contract and allowing access for the end buyer's inspection.
CostsSet by the agreement; may include repair costs, marketing costs and the company's share, so read the payout terms closely.The wholesaler's assignment fee is usually built into the gap between your price and the end buyer's price.
Ongoing obligationsYou remain the owner until the retail sale closes.You remain the owner until closing with whoever holds the contract at that point.
Main risksA sale that takes longer or brings less than projected, unclear payout terms, and marketing by an unlicensed party where a license is required.A contract that is assigned to someone you never met, a buyer who never closes, and practices that some states now regulate.
LicensingMarketing someone else's property for sale may require a real estate license, depending on the state.Some states, such as Illinois and Oklahoma, treat a pattern of wholesaling as licensed activity.
Who it may suitOwners with a house that could sell for noticeably more after updates, who can wait for a retail sale.Owners who want a quick as-is sale and understand their contract may be assigned.

Two different ideas

A novation is built around a retail sale. The company you sign with typically pays for or manages updates, markets the home to the public, and the retail buyer ultimately buys from you. Your payout is usually defined in the agreement.

Wholesaling is built around the contract. A wholesaler signs a purchase agreement with you and, instead of buying the house, sells their position in that contract to another buyer. You end up closing with someone you may not have met.

Why licensing comes up

Selling or marketing real estate for another person is generally licensed activity. Because a novation involves marketing your house to the public, ask whether the company or a licensed agent is handling the listing in your state.

Wholesaling has drawn attention from regulators. Illinois' Real Estate License Act includes a pattern of dealing in assignable real estate contracts within its broker definition, and Oklahoma's Real Estate Commission says wholesalers there must hold a real estate license. Rules vary, so check your own state.

Questions to ask before you sign

For a novation: What is my minimum payout, and how is it calculated? Who pays for repairs if the house does not sell? Can I cancel, and what happens to money spent on the house if I do?

For a wholesale contract: Can this contract be assigned? Who is the actual buyer at closing? Is there earnest money, and what happens if the buyer does not close? Having an attorney read either agreement is a sensible step.

When a straight cash sale may be simpler

If what you want is a firm buyer, an as-is purchase and a date you control, a direct cash sale avoids both the waiting of a novation and the uncertainty of an assigned contract.

Prominent Cash Offer buys houses nationwide for cash in any condition. There are no fees or commissions, Prominent pays the closing costs on cash purchases, and you choose the closing date. The written offer carries no obligation.

Where Prominent fits

Cash purchases are Prominent's primary service. Other arrangements, including novation-style agreements, are evaluated case by case where they may serve the seller better.

Not every property, seller or state qualifies, and nothing on this page guarantees a price, proceeds, a structure, timing or availability.

Authoritative sources

These official resources are starting points for records or public guidance. They do not replace property-specific professional advice.

Keep the decision yours.

This material is general education. Contract, legal, tax, title, probate, foreclosure, tenant, insurance, safety, and property-condition questions may require qualified professional advice.

Selling options

More than one way to sell.

Cash offers are Prominent's primary service. Other arrangements are considered case by case, and not every property, seller or state qualifies.

Frequently asked questions

Questions about selling your house

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Is novation the same as wholesaling?

No. A novation is usually aimed at a retail sale of an improved house, with your payout set by the agreement. Wholesaling usually means your purchase contract is assigned to another buyer, often at an as-is price.

Is wholesaling legal?

It depends on the state and how it is done. Some states, including Illinois and Oklahoma, treat wholesaling as activity that requires a real estate license. Check your state's real estate commission.

Which one usually pays more?

A novation may produce a higher sale price because it targets retail buyers, but repairs, marketing and the company's share come out of it, and it takes longer. Compare the net amount you would receive and how certain it is.

How can I tell if my contract can be assigned?

Look for words such as 'and/or assigns' next to the buyer's name or a clause about assignment. If you are unsure, ask the buyer directly and have an attorney review the contract.

Keep exploring

Other ways to sell

Selling options

Compare your options on your own property.

  • A cash offer is always an option
  • No obligation to accept
  • Every arrangement reviewed case by case

Get your cash offer

Start with the property

Private by default

A clear first step.

Step 1 of 520%

We use the address to understand which property you mean. No offer is generated on this step.

A written offer conversation is always optional.

No obligation. Not every property qualifies for other terms.