Novation deals are one of the most powerful tools in today’s investor toolbox, especially for creative wholesalers who want to play in the retail space without taking ownership.

But even with all the upside, novations can quickly become a nightmare if you bring the wrong people into the deal, especially the title company.

Most title companies are used to one of two things:

• Traditional retail transactions (with realtors on both sides)

• Wholesale assignments (simple A-to-B with a clearly defined fee)

Throw in a novation, and you’re suddenly speaking a foreign language. And if your title company has never done one before, you’ll need to do more than just explain it. 

You’ll need to manage expectations, clarify legal mechanics, and sometimes even educate the title rep from scratch.

This guide will walk you through how to navigate the process when the title company is unfamiliar with novations, so your deal closes smoothly and legally.

Why the Title Company Matters So Much in a Novation

Title companies aren’t just escrow holders. In a novation, they’re the gatekeepers of the deal mechanics. If they don’t understand what you’re doing, or don’t like it, they can:

• Delay or refuse to disburse funds

• Flag your paperwork as risky or non-compliant

• Raise red flags with the end buyer’s lender

• Insist you take title yourself (which kills the point of the novation)

• Blow up the deal entirely, even if the buyer and seller are both fine with it

That’s why it’s critical to get them on the same page early.

Step 1: Choose a Title Company That’s Investor-Friendly

Not every title company will work with you on creative deals, and that’s okay.

Before you pitch a novation deal or even lock one up, ask yourself:

“Has this title company closed creative transactions before?”

You’re not necessarily looking for one that’s done a novation specifically, but you do want one that’s:

• Comfortable with assignments, double closes, and unconventional structures

• Willing to read documents and consult with their legal counsel

• Not owned or operated by an agent or brokerage with a conflict of interest

• Known in investor circles or recommended by other wholesalers

If you’re in a new market, ask in local real estate Facebook groups or investor forums:

“Who’s the best title company in [City] for creative deals and investor-friendly closings?”

Start with someone who’s open-minded, even if they haven’t done novations before. That makes everything easier.

Step 2: Introduce the Concept Early, Don’t Spring It on Them

The worst thing you can do is wait until the final week of closing to say,
“Oh, by the way, this is a novation deal.”

Instead, introduce the structure immediately after opening escrow.

Say something like:

“Hey, this deal is a bit different. It’s structured as a novation. I’m not taking title. The seller will transfer directly to the end buyer, but we’ve signed an agreement that lets me manage the sale and receive a fee. I’ll send over the agreement and walk through it with you.”

That one conversation can prevent a week’s worth of confusion.

Step 3: Provide the Novation Documents Upfront

Title companies hate surprises. Don’t wait until the HUD is drafted to submit your novation agreement or marketing authorization. Send it all upfront.

Here’s what to include:

• The novation agreement between you and the seller

• The purchase contract between the seller and the end buyer

• Any marketing agreements or listing authorizations (if applicable)

• An email or memo summarizing how funds should be disbursed

Be clear about the sequence:

1. You are not taking the title

2. The seller and the end buyer are signing the final contract

3. You are being paid a negotiated amount from the proceeds

4. The novation agreement authorizes payment

Tip: Have your documents reviewed by a local real estate attorney to avoid state-specific compliance issues.

Step 4: Clarify the HUD and Settlement Structure

Here’s where most confusion happens.

In a standard assignment, your fee is listed on the HUD. Easy.

In a novation, you’re not assigning. You’re inserting yourself into the transaction, then stepping out before close. So your fee might:

• Show up as a line item on the seller’s side (“Investor Fee,” “Novation Fee”)

• Be disbursed via a separate instruction letter

• Be paid as a marketing or consulting fee (depends on state law and legal advice)

You need to clarify this early, or the title company might:

• Leave your fee off the HUD entirely

• Assume you’re a realtor collecting a commission

• Require a 1099 or additional documentation

Don’t assume they’ll know what to do. Spell it out for them.

Step 5: Get Their Attorney or Underwriter Involved If Needed

If the title officer seems confused or hesitant, it’s okay to escalate, professionally.

Say:

“Totally understand this might be new for your office. Would it help if we looped in your underwriter or attorney? I’m happy to walk through how it works and why it’s compliant.”

Lenders often have internal counsel who approve documents, especially when there’s no assignment of contract. Getting them involved early can prevent rejection later.

In some cases, they might request:

• Clarifying language in the agreement

• A notarized affidavit from the seller

• Escrow instructions outlining your compensation

Be flexible, but firm. You don’t want them rewriting your deal. You just want them to be comfortable closing it.

Step 6: Prepare for Pushback, and Stay Calm

Some title companies will push back no matter how well you explain.

They might say things like:

• “This sounds like a double close. Why aren’t you just taking the title?”

• “We’ve never done this before and don’t want to start now.”

• “This feels risky. Why isn’t the seller selling directly?”

When this happens, your job is to clarify the mechanics without sounding defensive.

Explain:

“The seller wants full price but can’t list due to the condition or timeline. I found a retail buyer willing to pay it, and we’ve all agreed I’ll manage the process. The seller is authorizing the sale and compensating me for bringing the buyer and managing the rehab.”

If they still won’t play ball, walk away.

Step 7: Always Have a Backup Title Company

Even if your main title company is on board, have a second one ready just in case.

Sometimes deals fall apart inside the title office.

Reasons this might happen:

• A different rep takes over and isn’t comfortable

• The underwriter changes policies

• Someone flags your deal as “unusual” too late in the process

If you already have another investor-friendly title company in the wings, you can pivot fast and save the deal.

Red Flags That a Title Company Will Be a Problem

Watch out for:

• “We’ve never heard of a novation before, sounds illegal.”

• “You’re not a licensed agent. You can’t be part of this transaction.”

• “We don’t allow third parties to receive funds unless they’re on title.”

• “You’ll need to close this in your name and resell to the end buyer.”

• “Let me check with my manager…” and no follow-up for 5+ days

These are signs they either don’t understand creative deals or don’t want to take the risk. Move on.

You’re the Pro, Act Like It

Working with a title company that’s never done a novation isn’t a deal-killer. It’s a leadership opportunity.

If you show up prepared, transparent, and legally buttoned-up, you can:

• Guide them through the process

• Educate them for future deals

• Build a long-term partnership in that market

• Close more profitable deals with less friction

But if you show up vague, disorganized, or uninformed, they’ll shut it down and possibly blacklist you for future transactions.

Novations aren’t shady. But they are creative. And that means it’s on you to bridge the gap.

Do that well, and you’ll be one of the few investors in your market closing retail-priced deals without taking ownership, legally, cleanly, and profitably.