New Year, No-vations

Written by Nicholas Horan

As of January 4, 2025 entities involved in real estate wholesaling now have licensing requirements and must provide additional protections to consumers to cancel the transaction within specified time periods.  Consumers that are selling their property may recognize this type of activity when a purchaser signs a contract and then assigns its rights to a third-party purchaser. 

Under the Pennsylvania Act No. 52 of 2024 law, a “wholesale transaction” is 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.”

Sales agreements or wholesale contracts must include these required disclosures:

(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.

Disclosures must be prominent as directed by State Real Estate Commission regulations. Wholesalers cannot make consumers waive cancellation rights. Non-compliant agreements can be canceled anytime before property transfer.

For real estate investors, contract assignments and novations (wholesaling) are often part of their business strategy. However, Act 52 has restricted these practices, requiring investors to reconsider their approaches. Compliance is mandatory, but there may be strategies to maintain profitability under the new law. 

If Act 52 has affected your business, please reach out to our experienced real estate attorneys, Bradley Leber and John Baranski.  We will help you navigate the new legal requirements and ensure compliance while maintaining competitiveness.