Deal structure

When to use a novation agreement with an agent

You use a novation agreement with an agent when the seller is already listed on the MLS but his or her agent can't sell the property at market value. The novation allows you to secure the property from the seller and then re-list it with the original agent at a higher price after you improve its condition or terms.

October 9, 2026 · 3 min read

Identify a seller whose property is listed but struggling

The ideal scenario for a novation with an agent is a property that's already on the MLS, but isn't selling. The seller is motivated, likely because of an expired listing or a long time on market without acceptable offers. His or her agent has tried the traditional route and is now open to alternative solutions.

This situation often involves properties that need significant repairs, have title issues, or are priced incorrectly. The agent, having invested time and effort, usually wants to see the property sold, even if it means trying a different approach with you as the intermediary.

Understand the agent's role and compensation

In a novation, the original listing agreement is essentially replaced or modified. You, the investor, enter into an agreement with the seller to market and sell the property. The key is that the original agent typically remains involved and gets paid his or her commission from the final sale, often at the originally agreed-upon percentage.

This means you aren't trying to cut the agent out; you're partnering with him or her to get the deal done. The agent benefits from your ability to make the property more marketable and secure a higher final sale price, ensuring his or her commission. It's important to have clear, written communication with the agent about this arrangement, as this is not legal advice, and you should consult a legal professional.

Your agreement with the seller

With a novation, you enter into a contract with the seller that gives you control over the property's sale. This isn't an assignment where you're passing on a purchase contract. Instead, you're essentially stepping into the seller's shoes regarding the marketing and sale of the property.

Your agreement will typically outline your ability to make minor repairs, stage the home, or even re-list it at a different price point. Crucially, the seller still holds title until the final closing. Your profit comes from the difference between the price you secured from the seller and the final sale price to an end buyer.

Re-listing and marketing the property

Once you have the novation agreement, you work with the original agent to re-list the property, often at a new, higher price. This higher price is justified by any improvements you've made, the updated market analysis, or simply a fresh marketing strategy.

You manage the marketing efforts, perhaps bringing in professional photographers, staging, or even making light cosmetic repairs. The goal is to present the property in its best light to attract a retail buyer. The agent handles the traditional listing and showing aspects, just as he or she would with any other listing.

Closing the deal and profit distribution

When a retail buyer is found, the property closes in a single transaction directly from the original seller to the new buyer. Your profit, the difference between what you agreed to pay the seller and the final sale price (minus any agreed-upon agent commissions and your expenses), is paid at closing. This is not financial advice; always consult a financial or legal professional for specific details.

This structure is effective because it leverages the agent's existing relationship and his or her access to the MLS, while allowing you to unlock value through your expertise without buying the property outright. It's a win-win when executed correctly.

Questions people ask

Is a novation the same as an assignment?

No. In an assignment, you assign your purchase contract to a new buyer. In a novation, you replace the original contract with a new one, stepping in to facilitate the sale, often involving the original agent.

Does the agent need to agree to a novation?

Yes, absolutely. The agent must be fully aware and agree to the novation process, especially regarding his or her commission structure and how the property will be re-listed. Transparency is key.

What risks are involved with a novation?

The primary risk is that you might not find an end buyer at a price that yields profit, leaving you with marketing costs and time invested. There's also the risk of the seller backing out if he or she gets a better offer directly.