Understanding the New Regulations on PA Wholesalers
Pennsylvania’s new law introduces sweeping changes to real estate wholesaling. In 2024, Pennsylvania enacted Act 52 which requires wholesalers to register with the state, obtain licensing, and follow disclosure policies. This new law will take effect January 9, 2025. The law is aimed at increasing transparency and regulation in the wholesaling market. Real estate wholesaling, a practice where individuals or companies secure a contract on a property and sell that contract to an investor without ever owning the property, has become a popular strategy. While legal in most states, wholesaling has raised concerns due to its unregulated nature and potential for misleading practices. Act 52 addresses these concerns by requiring wholesalers to register with the state, bringing accountability to the market and protecting property owners and investors.
The Act amends Pennsylvania’s Real Estate Licensing and Registration Act (“RELRA”) 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.”
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 30th 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.
As the new law takes effect, it will be crucial for brokers, agents, wholesalers, sellers, and investors to stay informed about the new rules and understand how they impact their roles in real estate transactions.
