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A Novation agreement is a strategy for flipping houses without upfront cash. The speaker illustrates this with an example of negotiating a car purchase on Craigslist. They inquire if the seller would accept $8,000 for a $9,000 vehicle, even though they don't have the money. Their plan is to find someone else who does to finalize the deal through a Novation agreement. Although Novation agreements are discussed as innovative, the speaker prefers buying properties subject to existing financing. They believe the likelihood of negotiating a better price is high, emphasizing the practicality of securing deals in real estate.
