Most Pennsylvanians have seen the television commercials and signs stating “We will buy your home for cash! No inspections and no commissions”.  Homeowners believe that the person or company will be the actual home purchaser, however, this is often not the case. The contract is assigned to another buyer for a profit, and this is referred to as “wholesaling”. Beginning in 2025, Pennsylvania law will require those engaging in residential real estate wholesaling to comply with new licensing requirements and grant additional protections to consumers.

The changes come about as a result of Governor Josh Shapiro signing Senate Bill 1173 into law as Act 52 on July 8, 2024. The act amends Pennsylvania’s Real Estate Licensing and Registration Act to expand the definitions of “broker” and “salesperson” to include individuals who engage in wholesale transactions and requires such individuals to disclose to consumers the nature of the sale. Additionally, the new law grants consumers the right to cancel contracts for wholesale transactions under certain circumstances.

Under the new law, a “wholesale transaction” will be defined as “[u]ndertaking to promote the sale, exchange or purchase of an equitable interest or other interest in residential property with the intent to assign, sell or otherwise transfer the interest for a fee, commission or other valuable monetary consideration without having taken title as the owner of record of the interest.” Consumers may recognize a wholesale transaction as a sale in which an apparent purchaser signs a sales contract to buy a property, then assigns its rights under the contract to a third-party purchaser.

Required disclosures to be incorporated into sales agreements or contracts for wholesale transactions will include statements that:

• (1) the document is for a wholesale transaction under which the apparent purchaser intends to “transfer the interest” in the real estate “for valuable monetary consideration without having taken title as the owner of record”;
• (2) the consumer may consult with third parties such as licensed appraisers and legal counsel;
• (3) the consumer may cancel the contract until the sooner of midnight on the thirtieth day following execution of the contract or conveyance of the property; and
• (4) all payments will be refunded to the consumer within ten business days after the consumer’s cancellation of the contract.

Such disclosures must appear “prominently” and in the manner and method that the State Real Estate Commission prescribes by regulation. Wholesalers may not cause consumers to waive their rights of cancellation. Agreements that do not comply with the requirements described above may be freely canceled at any time before the property is conveyed.

Act 52 will take effect 180 days after its passage. If you have questions about Act 52, please reach out to attorney Natalie Alexander or any member of Barley Snyder’s Real Estate Practice Group.