You have seen the signs, posted in neighborhoods, offering to buy your property and many in our communities receive letters, calls, and direct solicitation to sell for cash, as-is. The companies making these offers are often wholesalers, trying to get the homeowner to sell their property quickly and then selling the interest in the property to a third party. Many consumers did not understand the value of their property, their right to get an appraisal, or have the ability to cancel such a contract easily when they realized it was harmful to them and their family.
Philadelphia passed an ordinance in 2020 protecting homeowners from the worst of these deceptive practices. (See: Disclosure to Homeowner Required by Residential Property Wholesaler per Philadelphia Code §9-205.) In July 2024, Pennsylvania enacted Act 52 to protect all Pennsylvania homeowners from such practices more broadly. The law is an amendment to the Real Estate Licensing and Registration Act and requires such wholesalers to be licensed real estate brokers and provides rights to cancel sales agreements or sales contract for these transactions to consumers. The effective date of the act was January 8, 2025.
According the Pennsylvania Association of Realtors - Wholesaling Overview, wholesaling is a real estate transaction in which the buyer of the property does not intend to take title for themselves, but rather transfer the interest for a “fee, commission or other valuable monetary commission.” This practice has increased in recent years as real estate values have risen, with little oversight. Vulnerable consumers, subject to high pressure tactics and limited information, found little recourse when they realized they had entered into a deal that was transferring the title to the property to a third party for much greater amounts than they were paid.
The protections of this new law includes both licensing requirements, disclosures to the consumer, and rights of cancellation. First, the wholesaler must be a licensed real estate broker. If they are not a licensed broker, the homeowner can file a complaint with the Real Estate Commission or take private legal action. (See: “File A Complaint” here: https://www.pals.pa.gov/#!/page/default)
In addition, the Agreement of Sale must disclose that this agreement is a wholesale contract, and that the consumer has a right to obtain an appraisal. It also must clearly state that the consumer has thirty days after signing the agreement or until conveyance, whichever occurs first, to cancel the contract. The agreement must state that the consumer shall be refunded all payments of any kind within ten days of receipt of the notice of cancelation. The right of the consumer to rescind the contract for thirty days is extended up until the moment of closing or conveyance if the Agreement of Sale does not contain the required disclosures.
Our legal aid colleagues at Community Legal Services in Philadelphia report a decrease in calls from consumers who have been taken advantage of by wholesale transactions following the enactment of their ordinance in 2021. Pennsylvania’s new law requiring licensing, disclosures, and allowing the right to recission of the contract will go a long way to protecting Pennsylvania homeowners, particularly the least sophisticated and most vulnerable in our communities.
