- Learn from Corey at https://seattleinvestorsclub.com/NovationNation
- Instagram: https://www.instagram.com/thecoreygeary/
- Podcast with Jeff Watson https://seattleinvestorsclub.com/63
Show notes: Corey Geary Explains How To Make Money With Novation!
- Corey’s life story
- Corey bought 4 houses
- What the heck is Novation
- Julie is studying CE
- How do you get paid
- Why did you think about doing this
- What happens to set the stage for a Novation
- Why wouldn’t someone do this themselves
- It serves a purpose
- As a realtor it can work both ways
- What happens if someone agrees
- The B – C agreement
- Legal loophole
- Listing docs
- Potential repairs
- Who does the signing
- When do you record
- What about the buyers agent
- How does the buyers agent know it’s not a regular listing
- What happens if you can’t get it sold
- Has the seller ask if you tried to sell
- Is there a contingency to get out of contract
- Who signs final closing statement
- Completely transparent
- The seller sees how much you’re making
- Our intention is to make a profit – but don’t get spread
- Corey is the do it the right way guy
- Julie points something out for wholesaling
- Novation Flips
- What kind of upsides or profits are you looking at with Novation’s
- Are you worried about the market
- Are you using flat fee brokers?
Corey’s life story
Corey is the founder of Novation Nation, and you’re going to LOVE it!!
Corey was a blackjack dealer when he stumbled into real estate, and hovering around 6 figures. He saved up some money and was watching Flipped or Flopped, and his girlfriends asked why he didn’t flip a house, so she could list it.
Corey bought 4 houses
The contractor took him to the cleaners, and he lost all his money.
Then he found Sean Terry and it took 10 months for him to find his first wholesale deal.
He thought the only way he was going to get his money back was to push forward. He needed to go out and do something.
What the heck is Novation
You are trumping the original contract with a new contract. It’s very common in the commercial space and rental space. It’s not so common in the single family residential.
It’s always been around but no one has been practicing it.
Julie is studying CE
And there is a section on Novation. Smart guys like Corey Geary have figured out how to use this in a new way.
Wholesalers don’t realized that you are assigning a contract and not legally on the hook when you assign it.
With Novation, once the deal is Novated you are off the hook!
How do you get paid
You get paid on a lien. You get paid off from the lien. There are all kinds of liens that will get paid off on the HUD.
Why did you think about doing this
After Corey started wholesaling and quit job, he was part of masterminds. He learned about nationwide wholesaling. So he went nationwide and it was painful at first. Then turned local marketing off, which he doesn’t recommend. They were in the red for multi months.
During a mastermind one day he heard someone mention Novation’s. Corey knew that if he could crack that code he would make a ton of money!
He had his attorneys work with him to figure out what to do with Novation’s nationwide. 8 out of every 10 contracts are Novation’s for Corey’s business.
It was all about fixing a pain point.
What happens to set the stage for a Novation
He says no matter what exit you’re trying to do… you really need to be leading the conversations with cash offers. Finding out the sellers pain points. Anchor them there!
If the cash offer doesn’t fit…. Then they go to Novation. Because they aren’t the buyer. They can partner with other buyers. They talk about a “need” price.
If a cash offer does work… then they pitch Novation’s on the back end. They say they can get a little bit more money with Novation.
The value add is offering conveniences. They handle title, repairs, and anything else that needs to happen. The seller signs the final deed and sit back and collect the check.
Why wouldn’t someone do this themselves
We would say they should if it’s the best fit for them. With their service they are offering a white glove service. They handle everything!
The seller might be making a little more with a realtor but maybe not.
It serves a purpose
There’s a price we pay for speed and convenience. We will pay for that.
As a realtor it can work both ways
There is a lay of sellers that way this type of solution. If they don’t want to work with you after all these solutions… they just have a brother/sister that’s a realtor.
What happens if someone agrees
You still need your purchase agreement with a Novation clause. Even though it doesn’t need to be there. And it also has assignment language. Every contract is legally Novation’able and assignable, but you want to be transparent.
The B – C agreement
This is a 3-4 page document that explains exactly what they are doing. It instructs that title company and protects everyone. Then we have the Attorney and Fact contract. Gives you permission to sign listing agreement and offers on sellers behalf. No control over real estate.
What is that exact distinction to not have power of attorney? Corey isn’t sure.
They are in the sellers name with Corey’s name AIF. You would change this if you need to take title in certain states.
This is different than a memorandum
You just have an interest in the property. Like a mechanics lien to cloud title, and protect interest. They might pay for cleanup or repairs, and allows them to get paid when the closing happens.
The title company sees the lien and asks how much it takes to be released.
We are getting the word of the seller, and we send out a realtor that’s a badass in that market. The realtor will understand the value better than you do.
Find a trade that will do the work and get paid at closing.
Who does the signing
Every county has their own stipulations, it’s crazy!
When do you record
They didn’t want to record a notice of interest, but they can just release them.
What about the buyers agent
They do get some pushback sometimes. But a lot less from buyers brokers. The buyers think the liability falls on sellers side. Sometimes you get county’s or states that they choose the title, so they try to pick the title company.
How does the buyers agent know it’s not a regular listing
They don’t. The sellers name shows up on the listing agreement. Sometimes they will ask about the AIF, then they break it down for them.
What happens if you can’t get it sold
They analyze their deals very throughly during their meetings. They price drop the property accordingly. If there’s not spread left or more repairs. Then they call the seller and have the tough conversation. It works out about 50% of the time because you were very upfront.
Has the seller ask if you tried to sell
Yes, but it’s very rare.
Is there a contingency to get out of contract
Yes, we do a 90 day inspection contingency. The transparency is SO nice with Novation’s! It’s so great!
Who signs final closing statement
The seller signs the final HUD and deed. Because they aren’t taking power over the property.
Wholesaling is getting cracked down on, but Novation is good for everyone!
The seller sees how much you’re making
YES!! It does! We say that it covers my fees. Realtor fees, title fees, marketing fees. Their cost per deal is around $3500. 90% of the time that squashes the objections. In the 10% we break it all the way down to just the net fees that they get, and sometimes it will get split with the seller. On the HUD it might show $40k, but after breaking it down they will see that it’s much lower with the net income. They’ve really only had to do that twice after hundreds of deals.
Our intention is to make a profit – but don’t get spread
You have to be careful with those types of things. If you only get one offer and only make $2k, we did this last week. We still try to renegotiate but if you can’t… just do the deal.
We are in the business to help the sellers! It’s a service.
Corey is the do it the right way guy
And educating the agents. He could make a checklist to give to the agents and do it the RIGHT way!
Julie points something out for wholesaling
You are allowed to list wholesales on the MLS with the right info in place. With Novation it’s legally terminating the wholesale contract that nobody likes.
You don’t have the carrying costs and seasoning. You use the same agreements, and you put the money into the rehabs.
What kind of upsides or profits are you looking at with Novation’s
They try to make at lease $20k on each Novation, but the average for wholesaling is $17k. That’s nationwide. The average Novation fees is MUCH higher! That’s because it gets bid up on the MLS.
In Novation’s you’re looking at the true as is value. You have to think of yourself as an appraiser. You minus out realtor and title fees, and you want to make a profit, and repairs and buyer fees. That’s where you shoot for $20k. Most of the time you’re able to pay more than wholesaling. Most of the time. There’s a need price and an ask price. You need to be always negotiating. You have to be good at negotiating!
Are you worried about the market
You have to learn how to pivot if we go into another correction. They are learning a lot about seller financing. You have to make sure your pricing is right!
Are you using flat fee brokers?
Not any more. It became a huge headache. His team members were pulling their hair out. It’s so much easier when using local realtors. They become part of your team.