Real Estate Novations Explained ✅ | Wholesaling Real Estate
October 21, 2022
So whether you're new to wholesaling or you've been doing it for a while, you probably throw away a lot of leads that you don't have to throw away because you think they're no good because maybe they want closer to retail. Well, I've got the perfect solution for you and no, it's not creative financing is something even better in a lot of cases. Stay tuned and I'll show you exactly what I'm talking about. Hey, what's up guys? My name is Graylan Stewart. Thanks for joining me today. I am a real estate investor entrepreneur, virtual wholesaler. We do innovations, creative finance, a little bit of everything fix and flips, buying holds. So, my channel is primarily about wholesaling real estate because that is to be honest, our first exit strategy in our business. That's our goal on every property is to wholesale it. If we can't wholesale it. Sometimes we pivot end up keeping the property as a rental. We might fix and flip it or we turn it into innovation deal, we might hotel it or ▪ we might try something more creative. But today's video I'm talking about specifically Novation. Okay, so you've probably heard me mention it a couple of times throughout some of my videos recently. Okay, now we started doing innovations just a short few months ago and it's definitely been a game changer. So, you may not have even heard the term because it is still fairly new as far as people talking about it. But innovations have been around for a little while, but essentially what you're doing when you're doing innovation deal, it's essentially you're selling a property on the mls, just like a traditional realtor does. But we're selling it to these, you know, actual via F. H. A. Conventional buyers. You're kind of wholesaling on the mls. It's sort of a hybrid K.
It's like a hybrid between wholesaling and actually retailing the house, like with the with the regular realtor, you know, to a regular conventional buyer. Okay, so that's kind of what it is. It's really just a hybrid K. Now, how do we do the novation deal? Really, it's all in your conversation. So, the criteria is you're really being more upfront with the seller. You're kind of telling them like, hey, you know, this doesn't really work for us. Obviously, you know, for cash, we have to be at $55,000 and I know that you won't drop below 75,000. So, really cash option just won't work for you or for me either one, right, But we do have another solution. It's a solution that Gives you your price at $75,000. And on top of that, it allows us to just take over the entire process for you to where you literally just have to sit back and wait for the closing date to get your check. Okay, now the way it works is we will actually get three contracts signed up front from the seller and then we'll get one more signed once we find a buyer.
So, there's actually four contracts for agreements or documents that you have to get signed in innovation deal. Okay. So, what it really is your, your wholesaling on the mls legally. And we are acting as the seller on behalf of the seller because they sign either a power of attorney or attorney. In fact agreement allowing us to sign on their behalf. So we're signing on their behalf. We're negotiating with, other realtors and things like that. But I get this question often and we even get it from our sellers not necessarily from our sellers, but we get it from like my acquisition managers, especially when we first started doing them. They're like, well, why wouldn't somebody just go list their house if that's all we're doing for them. Okay. So here's the difference and it's all in your presentation and how you present it obviously.
But really what innovation deal is just a legal way for us to list the house on the mls for top dollar. Okay. But the criteria is obviously you're having a different conversation. You're more up front with them. But I wrote some notes down here. The properties are typically in pretty decent condition. So it's livable. Right? These aren't the hoarder houses or the super junker houses that are boarded up, falling in roofs or any of that. Okay. They're usually a little bit nicer house. They might need some repairs, like some paint cosmetics, but typically nothing super major. All right. And then the time commitment from the seller is important because usually a wholesale do a part of that part of the reason they these sellers gravitate to wholesalers or people offering cash for homes and things like that is because of our time. Okay. We're telling them we're gonna pay cash and close fast, right? And that is what intrigues them. They need the cash and they want it fast, right? But when you're doing innovation deal, time is not necessarily a factor for them. They're like, yeah, we can wait a little bit because I'm not dropping below by 75,000. I need that. Let's just use 100,000. I always use that as an RV because it's simple math, $100,000 house. We oftentimes want to be in the 40 to 50 range probably. But let's just say we were trying to offer 55 because it's not horrible shape, but it does need some work and they just flat won't come off of 75.
So, in that scenario we're like, well we have another solution for you, that we can help you out with, you know, we kind of explain the process. All we need is a little extra time since you're not really in a super hurry and you want your price, we can give you your price, but we need a little more time. You know, not our typical 30 day close, but you know, maybe even up to 90 days, 60 to 90 is what we're asking you to commit to. So, give us time and also allow walk through is because we are going to shop this to our pool of cash buyers being totally upfront like I said, and we're gonna put this on the mls and all other websites for the world to actually see this property. And they're like, sometimes they do ask, well why wouldn't I just list this myself if you're doing that? Well here's the difference Mr seller. Now we're offering this service to where you have your price up front and you literally sit back and wait for closing date, show up at closing and sign some documents and get your check. Okay? Now if you're gonna list us on the mls, you're gonna be dealing with the realtor back and forth, they're gonna be calling you all the times is this time okay for showing is this time okay?
You know, then they're gonna get to the inspections and tell you you gotta fix this, gotta fix this, gotta fix this. Then you gotta pay for all those things and wait, go through the hassle of finding your own contractors to do those things. Then you're going to finally get to closing and you've got your closing costs, you're gonna pay realtor fees, you're gonna pay all these different fees and headaches right? So, the difference with us as opposed to you going through all of that mess. Just let us handle all that for you. We give you your price up front. You get your 75.
Now we might sell this this house for 80,000 and they might ask for $5,000 in repairs. So we're taking all the risk. We're obviously breaking even or probably losing because we're also paying realtor fees and closing costs for you. So that's why when you're when you're doing these deals you do have to get these at the right price still but you can't pay more we can probably pay 75 at the house is in decent condition. Just needs cosmetics because we're gonna list it for 100 at the A. R. V. Right? And let's just take off 10% for all those fees. Smaller repairs after the tr r which is the repair list after inspections. The closing costs and realtor fees. Now we typically list it with a flat fee realtor that'll charge a couple 100 bucks to list it. So, we're really only paying 3% on the back end to you know a buyer's realtor. Okay so we're paying 3%. They're usually closings close to 3% and we factor in a couple of percent for the repairs. Okay? So we just knock off 10 grand from the get go. So, you got $100,000 house, we're probably gonna list it, at $100,000 but we're already kind of deducting 2 90 as our fees that we're gonna have to end up paying on the end. Okay. So, we have a $15,000 spread built in of profit because we're gonna take our 10,000 out for potential fees that we're gonna have.
So therefore, in in a recent, you know, previously we would have just said, well, you know, we would have maybe pitched the creative finance, you know, we'll take up our payments or, you know, we, we can give you your price if you give us the right terms, you know, and a lot of times they don't want that, they just want their money. Right? So in that case we'd have through the lead away because they can't get to our 55 at our max offer. and they're stuck on 75, you know, that's 20,000 are gap that we just can't close. But now with innovations that $100,000 house, we're gonna sell for maybe 98 you know, negotiate a little bit with the buyer and then we're taking 10 off. So, we got 88 ▪ we got it at 75. So that's a $13,000 spread that we got there. So that's essentially the wholesale fee that we typically, I would have just thrown in the trash before, but now we're, we're basically pulling $13,000 out of the air where we just brought a dead lead back to life, if that makes sense. So, innovations are powerful. Y'all, it's, it's definitely changed our business. We've got, I was just looking this morning, 24 deals in escrow and 10 of those are innovation deals. So that is a game changer. That's 10 leads that we threw in the trash, literally that were no good at all that. And now we're probably gonna make 10 to 20 even 30 grand on some of those. so, it's the same deal. We, we still want to make a minimum of 10, 15 grand on a deal. but we can just pay a little bit more.
So therefore, you don't really have a lot of competition because all the other cash buyers and wholesalers and fixing flippers and landlords are offering people these same people around the same price. We probably did 55 they might get up to 60 but nobody was ever able to give them their 75 unless they did creative financing, which they didn't want because they're gonna get their money over time.
But if they want their money now, it's in decent condition and they're willing to wait a little bit and let us show the house here and there, then boom, you got innovation deal profit ready to happen. So anyways, hopefully all that made sense. Drop me some comments, I'll do some other videos on innovations, I'm definitely gonna make a mini course innovations just to kind of share more value for the ones that that want that, you know, totally optional, obviously, but hopefully this is beneficial, dropping a comment. Let me know your thoughts like subscribe share. Do all those things to help me out so I can keep bringing you free content. Thanks a lot. And I'll see you in the next one.