Philadelphia Imposes New Rules And Regulations On Residential Property Wholesalers
Written by: Clementa Amazan
In real estate wholesaling, a wholesaler enters into a written agreement of sale to purchase the property with a property owner and then finds an interested party to buy it at a higher price than what the wholesaler agreed to purchase it at, and the wholesaler then keeps the difference between the two as profit.
Wholesalers generally find and enter into agreements for distressed properties.
In order to protect residential property owners from unscrupulous wholesalers, the new law requires all such wholesalers to possess a valid license which must be renewed annually.
The new law creates the following application and renewal process for such a license:
- a non-refundable application fee of $200;
- proof that the applicant possesses insurance, in such type and amount as may be required by subsequently imposed governmental rules and regulations;
- name and address of the applicant or, if the applicant is not a natural person, the name and address of a responsible natural person; and
- any and all corporate entities doing business in Pennsylvania in which the applicant has an equity interest, regardless of whether the applicant has a direct equity interest or the applicant’s equity interest is held through one or more tiers of a corporate structure.
An individual may not obtain the license if the individual has, within the past 6 years, been convicted of any crime of fraud, dishonesty, breach of trust or deceit, or has been convicted for violating the Public Official and Employee Ethics Law.
An individual applying for and maintaining a license must notify the local government in Philadelphia, in writing, of any changes in the information contained in or submitted with the application for the license within 72 hours of such change.
The new law also restricts the ability of a wholesaler to present an offer to the property owner.
Under the new law, the wholesaler must provide the residential property owner with the following written disclosure at least 3 days before presenting an offer to purchase the property:
- inform the property owner as to how to access resources that assess the fair value of residential properties in Philadelphia, including, but not limited to, Philadelphia’s Office of Property Assessment’s website and any private real estate assessment tools as may be identified by subsequently imposed governmental rules and regulations; and
- inform the property owner of their ability to hire a real estate agent, to seek legal counsel, and identify any other resources deemed appropriate by the local government in Philadelphia.
The written disclosure must be signed by the property owner.
Any written agreement of sale entered into by a wholesaler who is not licensed as one under the new law at the time of the solicitation may be rescinded at any time prior to the transfer of the title to the property at the sole option of the property owner.
If you have questions about this newly passed law and the effect it may have on you, please feel free to contact us at info@nochumson.com and an attorney at Nochumson P.C. will immediately reach out to you to schedule a free consultation.
