Creative real estate investing continues to grow in popularity across Florida, as more investors search for flexible and innovative ways to buy and sell properties. Two of the most widely discussed methods are novations and wholesaling. Each of these options offers unique advantages, but also distinct challenges when it comes to title work, legal compliance, and closing procedures.
Understanding how these strategies work and how they affect ownership, title insurance, and closing timelines is essential for anyone looking to invest or sell property in Florida.
What Is Wholesaling?
Wholesaling is a very common entry-level investing strategy. It involves an investor, known as a wholesaler, entering into a purchase contract with a seller, typically at a discounted price.
The wholesaler then assigns that contract to another buyer for a profit, known as an assignment agreement. With wholesaling, the wholesaler often never actually owns the property. Instead, they assign their contractual rights.
For example, a wholesaler might agree to buy a home for $200,000 and then assign that contract to an investor for $210,000. The $10,000 difference becomes the wholesaler’s profit.
Some wholesalers will actually take title and then immediately re-sell, which is often referred to as a simultaneous or double closing. This is typically done to avoid the disclosure of the wholesaler’s profit to the end buyer.
How Wholesaling Affects Title and Closing
While wholesaling may seem straightforward, there are nuances that must be complied with. Since the wholesaler is listed as the buyer in the original purchase contract, the assignment must be properly documented and contain the essential terms of the agreement between the wholesaler (the “assignor”) and the investor (the “assignee”). The title company must ensure that both the seller and end buyer are aware of the arrangement, and that the closing documents reflect the assignment fee correctly.
Common challenges include:
- The seller not fully understanding that the wholesaler will not actually buy the property.
- Title companies being hesitant to process assignment contracts due to liability risks.
- Confusion over how or when the assignment fee should be paid.
- Clauses in the original contract that restrict or forbid assignment.
If these issues aren’t handled properly, they can delay or even derail the transaction right before closing.
How to Avoid Common Wholesaling Issues
Transparency is essential to avoid misunderstandings in wholesale transactions. The wholesaler should disclose, in writing, that they may assign the contract to another buyer. Additionally, choosing a title company experienced in wholesaling ensures that the transaction complies with Florida law, all fees are correctly handled, and the closing documents reflect the full chain of agreements.
What Is a Novation Agreement?
A novation is significantly different from a wholesale deal. Instead of assigning an existing contract, a novation replaces the original agreement entirely with a new one, substituting a new buyer in place of the original buyer. All parties, including the seller, original buyer, and new buyer, must agree to this replacement.
Once signed, the original buyer is fully released from any obligations under the old contract. In this setup, the new buyer takes over all responsibilities and rights, creating a direct relationship with the seller.
How Novations Affect Title and Closing
From a title perspective, novations are slightly more complicated than assignments. As the old contract is replaced, the title record shows only the seller and final buyer. There’s no assignment fee to disclose, and no confusion about which buyer owns the rights to close.
However, a novation agreement must be carefully drafted to be valid. Proper novation documentation should be signed to show that the original contract is terminated (even if only conditionally). The novation fee should also be disclosed. If these steps aren’t completed properly, the novation may be considered unenforceable.
Key title considerations for novations:
- Confirm that the parties agrees in writing to the new contract.
- Ensure that the original contract is released (even if only on a conditional basis).
- Reflect the updated terms and buyer information in all closing documents.
- Check for any liens or title defects that could complicate the new deal.
- Confirm that the novation fee is paid from the seller’s proceeds on the closing statement.
Because novations involve replacing legal contracts, working with a real estate attorney is essential to ensure all terms meet Florida’s legal standards.
Novation vs. Wholesaling: Which Impacts Title More?
Both novations and wholesaling affect title and closing differently. However, both methods of real estate investing can offer significant returns so long as they are structured properly.
| Factor | Wholesaling | Novation |
| Type of Transfer | Assignment of contract | Replacement of contract |
| Title Complexity | Medium – the title company must have strong expertise on working with multiple parties and properly reflecting the assignment fee. | High – the title company must understand the legalities of replacing with purchase contract with another and property disclosing the novation fee. |
| Legal Risk | Moderate (depends on disclosure) | High if documentation is incomplete |
| Best For | Quick flips, low or no-capital deals | Properties that are in better condition and can be listed on the MLS to attract a retail buyer |
Why the Right Title Company Matters
Not every title company is comfortable handling wholesale or creative real estate transactions. Some refuse to even take on wholesaling or novation transactions due to risk or lack of familiarity. Partnering with a knowledgeable, investor-friendly company can make all the difference.
A title company like Marina Title helps clients:
- Conduct detailed title searches early to identify potential issues.
- Verify that contracts and assignments meet Florida legal standards.
- Coordinate with every party involved for a transparent closing.
- Provide consistent communication and legal clarity throughout the process.
By anticipating challenges before they arise, experienced title professionals ensure each deal closes smoothly, even when the structure is complex.
Final Thoughts
Both novations and wholesaling offer unique ways to structure real estate deals creatively in Florida’s competitive market. However, each comes with its own set of title and legal challenges. Wholesaling allows investors to move quickly with minimal capital but often introduces complications around disclosure and title transfers. Meanwhile, novations offer a bigger pool of buyers but require precise legal execution.
The key to success lies in transparency, preparation, and working with experts who understand Florida’s unique real estate laws. With support from an experienced Florida real estate attorney and a trusted title partner like Marina Title, investors and sellers can confidently navigate even the most complex creative transactions.
Call us today at 1-855-513-5880 or send us a message via our Secure Contact Form to learn more about our real estate and title services for buyers, sellers, and investors. We provide title, escrow, and closing services throughout the State of Florida.
