3.1 Pennsylvania Purchase Contracts

The Pennsylvania Agreement of Sale

Pennsylvania has no statutory contract form, but virtually every residential resale uses the Pennsylvania Association of Realtors (PAR) Agreement of Sale (the ASR form). Because a contract conveying an interest in land must be in writing to be enforceable under the Statute of Frauds, an oral 'deal' on price is unenforceable until both parties sign. The state exam tests the standard elements every valid contract needs.

Hand Money (the Deposit)

Pennsylvania calls earnest money hand money (or down money). It is fully negotiable, becomes part of the purchase price at settlement, and the agreement must name the holder (usually the listing broker, a title company, or an attorney). A key state-portion rule: under 49 Pa. Code Sec. 35.324, once the licensee receives the deposit it must reach the broker's escrow account by the end of the next business day after acceptance.

• The agreement states who holds the deposit and how disputes are resolved.
• Hand money is not automatically forfeited on buyer default; release follows the contract's terms or a written release signed by both parties.
• A broker may never use hand money to cover the buyer's costs without written authorization.

Common trap: Students pick 'earnest money' as the PA term. On the state portion, the deposit is hand money — the concept is identical, but the wording is what the question is testing.

Time Is of the Essence and Contingencies

The PAR Agreement of Sale contains a printed 'time is of the essence' clause, meaning every deadline is a firm deadline. Missing a contingency or the settlement date can put a party in default; extending any date requires a written change signed by both parties. Most contingencies run a fixed number of days from the date of acceptance (the Execution Date), not from signing the offer.

Worked scenario

A buyer signs an offer on March 1; the seller accepts and the agreement is dated March 3. The form gives a 10-day inspection contingency. The buyer must deliver an inspection objection (the PAR 'Reply') by the end of day March 13 — counted from the March 3 acceptance, not March 1. Because of the time-is-of-the-essence clause, a notice sent on March 14 is late and the buyer is deemed to have accepted the property's condition and waived the right to terminate on inspection.

After inspections, the buyer may:

1. Accept the property as-is and proceed.
2. Reply requesting repairs, credits, or a price reduction (a negotiation, not a unilateral demand).
3. Terminate within the contingency window and recover the deposit.

Forming and Killing a Contract

A contract forms only when acceptance is communicated to the offeror. Until then the offer can be revoked.

• Any change to price, dates, or terms is a counteroffer, which legally rejects and terminates the original offer.
• The counteroffer becomes the new offer; the original cannot be 'snapped back' unless re-offered.

Note: Unlike many western states, PA closings are settlements run by title companies or attorneys, not standalone escrow companies. Keep this distinction — it appears in both contract and closing questions.

Default, Remedies, and Special Clauses

The PAR Agreement of Sale spells out what happens when a party fails to perform. If the buyer defaults without a valid contingency excuse, the seller's remedies (per the form) typically include retaining the hand money as liquidated damages or pursuing other legal remedies — but only if the contract's release procedure is followed. If the seller defaults, the buyer can usually demand return of the deposit or sue for specific performance, because each parcel of land is considered unique.

Mortgage contingency mechanics

The mortgage contingency protects a financed buyer. The buyer must apply for the stated loan, pursue it in good faith, and obtain a written commitment by the deadline. If the buyer cannot get the loan despite good-faith effort, the buyer may terminate and recover the deposit. A buyer who waives the mortgage contingency (or buys 'cash') gives up this protection — failing to close then risks the deposit.

Other tested clauses

• Possession: the form fixes when the buyer takes possession; absent agreement, possession transfers at settlement. A seller staying past settlement needs a post-settlement occupancy addendum.
• Capital Improvements / fixtures: built-in items convey unless excluded; the contract lists included and excluded personal property to avoid disputes.
• Notices and the 'Reply': PAR forms require written notices delivered within the stated period; verbal notice does not satisfy a time-is-of-the-essence deadline.
• Recording the agreement is generally not done; instead, the buyer's protection is the written, signed agreement plus prompt settlement.

Exam tip: The exam often pairs 'time is of the essence' with a missed deadline and asks for the consequence. The right answer is usually that the party who missed the deadline is in default or has waived the contingency — not that the deadline is automatically extended.