Pennsylvania Real Estate Contracts: Exam Study Guide

Contracts Are Central to the Pennsylvania Exam

Contract questions are present throughout both sections of the Pennsylvania salesperson exam. The national section tests universal contract law principles that apply in all states. The Pennsylvania state section tests how Pennsylvania law shapes specific contract provisions — including seller disclosure, transfer tax allocation, and attorney review customs.

Universal Contract Law (National Section)

Six essential elements of a valid contract:

1. Offer and acceptance — mutual assent to identical terms
2. Consideration — something of value exchanged by both parties
3. Competent parties — legal age and mental capacity
4. Legal purpose — the contract cannot be for an illegal act
5. Consent — free from fraud, misrepresentation, duress, or undue influence
6. In writing — the Statute of Frauds requires real estate contracts to be written

Offer and acceptance mechanics: - An offer can be revoked any time before acceptance - A counteroffer rejects the original offer and creates a new one - Acceptance must be unconditional and communicated to the offeror

Contingencies — conditions that must be satisfied for the contract to close: - Financing contingency — buyer must secure a mortgage commitment by a specified date - Inspection contingency — buyer has the right to inspect; may negotiate repairs or void the contract - Appraisal contingency — property must appraise at or above the sale price - Sale of buyer's property — contract is contingent on buyer's current home selling

Earnest money — a deposit demonstrating buyer's intent. Held in a broker's escrow/trust account. Applied to purchase price at closing. If the buyer defaults without cause, the seller may claim it as liquidated damages.

Time is of the essence — when included, all deadlines are strictly enforced. Missing a financing contingency deadline without an extension can void the contract.

Pennsylvania-Specific Contract Provisions

Pennsylvania Seller's Disclosure

Pennsylvania's Seller Disclosure Law (68 Pa. C.S. § 7301) requires sellers to provide a Seller's Disclosure Notice to buyers before or contemporaneously with signing a purchase agreement for residential properties of 1-4 units.

Key rules: - The seller fills out the notice — not the agent - It covers the seller's known information about the property's condition: structural defects, roof, plumbing, HVAC, environmental hazards, insurance claims - Buyer has the right to rescind within a defined period after receiving a disclosure that was not provided earlier - Failure to disclose known material defects can constitute fraud

Transfer Tax in the Purchase Agreement

Pennsylvania's 2% transfer tax (1% state + 1% local) must be addressed in the purchase agreement. While the 50/50 split between buyer and seller is customary, the agreement can specify any allocation. Agents must ensure the purchase agreement clearly states who pays what share to avoid closing disputes.

Attorney Review

Attorney review is common in Pennsylvania real estate transactions, particularly in the Philadelphia metro area. Unlike New Jersey (where attorney review is mandatory), Pennsylvania does not require it by law — but many buyers and sellers retain attorneys to review the purchase agreement. Agents should be aware that attorney-requested changes after signing may constitute counteroffers.

Agreement of Sale

Pennsylvania uses a standardized Agreement of Sale form developed by the Pennsylvania Association of Realtors (PAR). Key sections include:

• Identification of parties and property
• Purchase price and financing terms
• Settlement date and possession date
• Contingencies
• Agency confirmation
• Transfer tax allocation

Breach and Remedies

If a party breaches a Pennsylvania real estate contract:

• Buyer breach — seller may retain earnest money as liquidated damages (if specified) or sue for specific performance or actual damages
• Seller breach — buyer may seek specific performance (force the sale) or sue for compensatory damages

Specific performance is available in Pennsylvania because real property is considered legally unique — no two properties are identical.

License Law and Contract Obligations

Under RELRA, salespersons must: - Provide signed copies of contracts to all parties promptly after execution - Deposit earnest money in a broker escrow account within the timeframe specified by PREC - Retain transaction files for the required period - Not provide legal advice — use standardized forms and refer legal questions to attorneys

For Pennsylvania contract practice questions and a full study guide, visit [CARealestate.com/states/pennsylvania](https://carealestate.com/states/pennsylvania).