Novation deals already require more moving parts than a standard purchase and sale.

You’re essentially stepping into the seller’s shoes, agreeing to take over the contract, and often taking on repair responsibilities before reselling the property to an end buyer.

Because you’re managing multiple parties, sellers, buyers, agents, and contractors, payment structures become critical.

If you don’t set expectations and document how everyone gets paid, you risk disputes, delays, or worse, a broken deal. Clear payment planning is what separates smooth novations from chaotic ones.

The Players Who Expect Payment

Inside a typical novation, three groups expect compensation:

• Real estate agents: often representing the seller, sometimes the buyer

• Contractors: handling repairs or updates needed to make the property market-ready

• You, as the investor/partner: are  taking on risk and expecting a margin after resale

Each of these parties has different interests, timelines, and expectations. Understanding how to align them keeps everyone motivated and cooperative.

Agents And Commissions In A Novation

Agents don’t disappear just because a novation is creative. If a licensed agent listed the property, they’ll expect their commission once the property closes, whether the end buyer is your retail buyer or someone else.

Key points to clarify:

• Who is paying commission: commissions usually come out of the final sale proceeds, not upfront

• When commissions are due: at closing, with the title company disbursing funds

• Which side does the agent represent: seller’s agent, buyer’s agent, or dual agency

If you’re negotiating with the seller and their listing agent, make sure everyone understands: “Your commission will be paid at closing when the property sells to the new end buyer.” This prevents misunderstandings when you’re controlling the repairs and marketing.

Negotiating Agent Cooperation

Some agents misunderstand novation and think it cuts them out. The reality is, their role is preserved. You’re not eliminating them; you’re stepping in to help their seller get the property sold.

You can frame it this way: “You’ll still earn your commission at closing. What we’re doing ensures the property becomes marketable so your seller doesn’t have to come out of pocket for repairs.”

Agents who trust the process stay cooperative. Those who feel threatened may obstruct it. That’s why setting payment clarity early is crucial.

Contractors And Repair Payments

Contractors are often the trickiest group to manage in a novation. You’re fronting work and expenses on a property you don’t yet own, which creates risk. The way you pay contractors can protect or endanger your profit.

Common Contractor Payment Structures

• Deposit + final payment: small deposit upfront, balance on completion

• Draw schedule: payments released at milestones (demo, rough-in, finish)

• Paid at resale: rare, but possible if the contractor trusts you and wants steady work

Most contractors expect money as they go. Very few will agree to “get paid when the house sells.” That’s why it’s smart to have reserves or financing to cover work during the novation period.

Protecting Your Position

When paying contractors inside a novation:

• Get detailed written bids with line-item costs

• Require proof of insurance and licenses

• Tie payments to completion milestones, not vague timelines

• Keep receipts and photo evidence of all work completed

This not only protects you but also reassures the end buyer and their lender that repairs were professionally handled.

How Payment Flows At Closing

In a well-structured novation, closing day solves most payment logistics. Here’s the flow:

1. End buyer’s funds hit the closing table

2. Title company pays off existing mortgage (if any)

3. Seller receives any agreed-upon portion of the proceeds

4. Listing and buyer agents receive their commissions

5. You, as the novation investor, receive your margin

6. If agreed in writing, contractors can also be paid directly from closing

This “paid from proceeds” model is the cleanest because it keeps everyone from scrambling mid-deal. However, not all contractors accept deferred payment. That’s why you often need to balance between funding repairs upfront and recouping costs at closing.

Disclosure And Documentation Requirements

Payments aren’t just practical, they’re legal. Everyone’s compensation must be disclosed in the closing statement. Failure to do so can raise red flags with lenders, title companies, or even regulators.

• Agent commissions, disclosed on the settlement statement (HUD-1 or Closing Disclosure)

• Repair costs, usually built into your investor margin, but if contractors are paid from proceeds, they must be listed

• Assignment/novation fees, reflected as a separate line item, often “novation fee” or “assignment fee”

Transparency protects the deal. If you try to hide payments, you risk compliance issues and a collapsed closing.

Avoiding The Biggest Payment Mistakes

Here are the most common errors professionals make in novation deals:

• Promising agents “full commissions” but not confirming where the funds will come from

• Hiring contractors without written agreements or milestone-based payments

• Expecting contractors to wait until resale when they need cash flow

• Forgetting to disclose compensation on the closing statement

• Assuming the title company “will figure it out” instead of giving them clear instructions

Every one of these mistakes can delay or kill your deal.

Example Payment Scenario

Here’s a simplified look at how a novation payment structure might work:

• End buyer pays $310,000 at closing

• Seller’s mortgage payoff is $245,000

• Listing agent earns 3% ($9,300)

• Buyer’s agent earns 3% ($9,300)

• Contractor is owed $12,000 for repairs (already paid, reimbursed from proceeds)

• Novation investor receives $34,400 as net profit

All of this is itemized on the closing statement, so there are no surprises.

Keeping Sellers At Ease

Sellers often worry about “who is paying for what” when they hear contractors and agents involved. Keep your message simple:

• They won’t pay out of pocket for repairs

• Their agent’s commission is safe

• Their mortgage will be cleared at closing

• They’ll receive the agreed-upon proceeds once the property sells

This reassurance keeps sellers engaged through the longer process of novation.

Using Tools To Track Payments And Tasks

When multiple payees are involved, it’s easy to lose track. A missed invoice or commission dispute can stall a closing. That’s why pros rely on deal management tools.

Tools like Goliath Data not only surface motivated seller leads, they also help track deal progress, reminders, and outreach. With automated follow-up and task management, you won’t forget to confirm contractor invoices or agent commission splits. Instead of juggling texts and sticky notes, everything is organized inside one workflow.

Action Steps To Simplify Payment Management

To avoid headaches in your next novation:

• Set agent commission expectations in writing at contract signing

• Use written contractor agreements with milestone payments

• Decide upfront whether repairs are funded now or reimbursed at closing

• Work with the title company to disclose all compensation properly

• Track invoices, receipts, and contracts in one place

Do these five things, and you’ll prevent most novation payment disputes before they start.

The Bottom Line

Paying agents and contractors inside a novation deal isn’t complicated if you’re proactive. Commissions come from closing

Contractors need structured agreements, and every dollar must be disclosed. The investor’s role is to align everyone’s interests so the deal closes smoothly.

Get this right, and novations stop feeling like a risk. They become another professional tool for solving seller problems and creating profitable outcomes.

If you’re ready to spend less time chasing paperwork and more time closing, Goliath combines AI data and automation so you can manage leads, follow-ups, and deal tasks, including payment tracking, all in one dashboard.

Get More Prospects.