If you're doing novation deals, you're walking a legal tightrope. It's powerful, you're selling a property you don't own, for retail price, without using your own cash or credit.

But one missed clause… and you could be:

• Exposed to legal risk

• Cut out of the profit

• Accused of misrepresentation

• On the hook for repairs you never agreed to

That’s why a clear, protective novation addendum is non-negotiable.

This article breaks down what to include, what to avoid, and how to structure your addendum so that both your interests are protected and your seller is clear.

Wait. Isn’t the Novation Itself the Agreement?

Technically, yes. But most wholesalers and investors add the novation language as an addendum to their existing purchase agreement.

Why?

• It keeps your process consistent.

• It builds on your current contracts.

• It makes novation a flexible option, not a whole new legal workflow.

So when we say “novation addendum,” we mean: the part of your contract that introduces and explains the novation terms.

Essential Clauses Every Novation Addendum Should Include

Let’s break down what you need to protect yourself before the deal closes.

1. Authorization to Market and Assign

This clause allows you to:

• List the property (on MLS or off-market)

• Market it to buyers and agents

• Assign or replace yourself with a new buyer (subject to terms)

Sample clause:
“Seller grants Buyer permission to market the property, including but not limited to MLS listings, third-party platforms, and direct buyer communication, for the purpose of executing a novation.”

2. Repair and Access Rights

Even if you're not doing major work, you’ll likely need:

• Access for showings or inspections

• The ability to coordinate contractor walkthroughs

• Permission to do minor clean-up or staging

Protect yourself with language like:
“Seller grants Buyer and their representatives reasonable access to the property to facilitate marketing, inspection, appraisal, minor repairs, and buyer due diligence.”

3. Seller Acknowledgment of Novation

Make sure the seller knows and agrees that:

• You're not buying the property personally

• You intend to find a new buyer

• The final buyer will be someone else, under new terms

This transparency protects you from being accused of deception later.

Example phrasing:
“Seller acknowledges and agrees that Buyer intends to secure an end buyer who will complete the transaction and that Seller’s agreement may be novated to said party upon execution of the closing process.”

4. No Commission or Agency Relationship

You are not acting as an agent or broker, and the addendum should reflect that.

Sample clause:
“Buyer is acting in their own interest and not representing the Seller as an agent, broker, or fiduciary. No agency relationship is created by this agreement.”

5. Profit Acknowledgment Clause (Optional)

Some wholesalers include a clause that discloses:

• They may make a profit

• That profit is unrelated to the seller’s agreed net

• The seller is only guaranteed the price in the agreement

This is especially helpful in retail novation deals, where your spread could raise eyebrows at the closing table.

Sample clause:
“Seller understands that Buyer may realize a profit through resale, and that this profit is not owed to Seller nor does it impact Seller’s agreed net proceeds.”

6. Contingency Window or Extension Option

Give yourself room if:

• The property takes longer to dispo

• The retail buyer’s lender drags their feet

• A minor repair becomes necessary

Build in a reasonable extension clause to prevent scrambling.

Example language:
“Closing may be extended for an additional 15 business days at Buyer’s discretion to facilitate resale or financing contingencies.”

Other Protective Elements to Consider

Seller Cooperation Clause

Gives you confidence that the seller won’t stonewall appraisers or buyers.

“Seller agrees to reasonably cooperate with Buyer and any third-party professionals necessary to facilitate closing, including appraisers, inspectors, or buyers.”

Clear Default Language

Spell out what happens if either party defaults, including failure to close, refusal to sign paperwork, or unpermitted property changes.

Indemnification Clause

Protects you from liability related to the buyer’s actions, insurance lapses, or title issues.

Mistakes to Avoid

Even experienced investors mess these up:

• Forgetting to include the addendum at all

• Using vague language like "Buyer may assign" instead of clarifying the novation structure

• Promising repairs or features you can't deliver

• Failing to include cancellation terms if the resale buyer falls through

• Using legalese that confuses the seller and backfires

FAQ: Novation Addendum Logistics

Do I need a separate novation contract or just an addendum?
An addendum is usually sufficient if it includes everything above. But in states with strict rules, you may want a standalone novation agreement drafted by an attorney.

Should I get it notarized?
Not usually required, but notarizing can be smart if you're expecting pushback later or want to document seller awareness.

What if the seller backs out after signing?
If your addendum is solid, you may be able to enforce the agreement, or at least protect your costs. That said, always be ready to walk if the relationship turns hostile.

Protect Your Spread the Right Way

The novation strategy is gaining steam in 2025, but that also means more scrutiny from sellers, buyers, and closing attorneys.

If your paperwork is messy, your entire deal is vulnerable.

But with a clear, written, seller-signed novation addendum, you can:

• Protect your rights

• Set clear expectations

• Keep your profit

• Sleep better at night

Don’t skip this step. Your margins depend on it.