In the world of creative real estate investing, few topics create more confusion or spark more debate than novation vs. double close.

Investors, wholesalers, agents, and even title companies often conflate the two, but understanding the difference is critical if you want to protect your deals, your reputation, and your profit margins.

This guide breaks it down clearly and practically. You’ll learn:

• What each strategy really is (without the fluff)

• The key legal and financial differences

• When to use one vs. the other

• Real number examples to see exactly how they work

• Mistakes that cost investors money (and how to avoid them)

Let’s break it all down, without the jargon.

What Is a Double Close?

A double close is when you buy and sell a property on the same day (or within a short period), using two separate transactions. You purchase the property from the seller, then immediately resell it to your end buyer.

Example in Action:

Let’s say:

• You contract to buy a house from Seller A for $120,000

• You find an end buyer willing to pay $150,000

• You schedule both closings on the same day (or back-to-back)

At the closing table:

• You buy the house for $120,000 (transaction #1)

• You sell it to the buyer for $150,000 (transaction #2)

You walk away with a $30,000 gross profit (minus closing costs).

Why use a double close?

• The end buyer sees the true purchase price of $150,000

• The original seller never knows what you sold it for

• Your fee is baked into the resale, not shown as an assignment

What Is a Novation?

A novation is when you are replacing the original purchase contract with a new one between the seller and your end buyer. In other words, you're stepping out of the deal legally, and the buyer steps in with a new agreement.

Example in Action:

Let’s say:

• You lock up a deal with Seller A for $120,000

• You find a retail buyer who agrees to buy it for $150,000

• Instead of assigning or closing twice, you draft a novation agreement

This agreement says: “The original contract is canceled, and replaced by a new contract between the seller and the buyer.”

The buyer closes at $150,000, and you get paid your $30,000 as a line item on the settlement statement.

Key Differences: Novation vs. Double Close

Here’s how they compare side by side:

Real Numbers: Side-by-Side Example

Let’s walk through both strategies using the same numbers, so you can see how they play out.

Property:

• Distressed home under contract for $120,000

• End buyer willing to pay $150,000

• Closing costs = $2,000 per transaction

Double Close Breakdown:

Transaction #1 (You buy):

• Purchase price: $120,000

• Closing costs: $2,000

• Total out-of-pocket: $122,000

Transaction #2 (You sell):

• Sale price: $150,000

• Closing costs: $2,000

Your Profit:

• $150,000 – $122,000 – $2,000 = $26,000 net
  
  
  

Novation Breakdown:

• Buyer closes directly with seller at $150,000

• The novation agreement allows you to receive $30,000 as a fee

• Closing costs: Paid by buyer and seller (your fee is untouched)

Your Profit:

• Fee paid directly from closing = $30,000 net

But here’s the tradeoff:

• Seller sees final sale price

• If they feel $30,000 is “too much,” they may resist or renegotiate

When to Use Each Strategy

Use a Double Close When:

• You don’t want the seller or buyer to see your spread

• You’re flipping to another investor or cash buyer

• You have transactional funding or your own capital

• The margins justify the double set of closing costs

Best for: Investor-to-investor deals where speed matters

Use a Novation When:

• Your buyer is getting financing (FHA, VA, etc.)

• You want to avoid owning the property (and paying holding costs)

• You’re okay with full disclosure of your fee

• The seller is cooperative and understands the benefit

Best for: Retail buyers, creative finance exits, or when you want to avoid funding

Common Mistakes That Kill Deals

1. Thinking novation is just another word for assignment

Wrong. Novation is a legal substitution of the buyer in the original contract. An assignment is a transfer of rights, you’re still on the hook. Title companies treat them very differently.

2. Trying to hide your fee in a novation

A true novation is transparent. Your fee shows up on the closing statement. If you try to sneak it in or act like it’s an assignment, the deal might fall apart when the lender or title company flags it.

3. Failing to get seller consent in writing

A novation isn’t valid unless the seller agrees to it in writing. You must explain the structure clearly and ensure they’re onboard, ideally with legal review.

4. Doing a double close without funding lined up

Unless you’re using a same-day transactional lender, you’ll need to fund the first purchase. Many new investors get caught without capital and lose the deal.

5. Using the wrong title company

Not all title companies will close novation deals. Some will require special language, disclosures, or escrow handling. Always vet your title partner early.

How to Choose the Right Strategy for Your Deal

Ask these questions:

• Is the end buyer getting financing?
  If yes, novation might be better.

• Do I want to hide my profit margin?
  If yes, double close is safer.

• Can I get access to transactional funding?
  If yes, you can do a double close with no risk.

• Is the seller flexible and willing to sign extra documents?
  If yes, novation could work.

• Do I want to limit liability and never own the home?
  Novation allows that (you’re never in chain of title).

There’s no one-size-fits-all. Smart flippers and wholesalers know how to use both, and when to switch if the deal shifts.

Bonus Tip: Hybrid Close Strategy

In some markets, savvy investors use a hybrid model:

• Start with a traditional purchase agreement

• Get seller buy-in to allow for novation if needed

• If novation doesn’t work, fall back to double close

This way, you keep your options open without jeopardizing the deal.

Final Takeaways

The difference between novation and double close isn’t just legal, it’s strategic.

• Double close is fast, discreet, and gives you control, but comes with extra costs and funding requirements.

• Novation is flexible, transparent, and capital-light, but demands trust, paperwork, and the right title company.

Wholesalers and flippers who master both structures can close more deals, structure better margins, and stay compliant in evolving markets.

Don't pick one method and forget the other. Learn both. Use both. Win more.