What do I need to know before signing a deposit contract?

What is an earnest money contract and what is it for?

He earnest money contract It is a private agreement between buyer and seller that works as a pre-contract of sale. This commitment ensures that both parties agree to carry out the future transaction of the property. Generally, the buyer delivers an advance financial amount (normally the 10% of the total value of the property) to reserve their right to the property. The main purpose of this contract is to ensure that the terms of the agreement are respected and to establish a solid basis for the formalisation of the sale.

Types of deposits in the real estate sector

There are three main types of deposits that can be agreed upon in a real estate purchase and sale contract. Each type has specific characteristics and is chosen according to the needs and intentions of the parties involved.

1. Confirmatory deposit

• These deposits confirm the existence of the sales contract.
• They materialize with an advance payment from the buyer to the seller, which forms part of the total transaction price.
• They do not authorize to withdraw from the contract, since its function is exclusively to confirm the agreement.
• Although they are less common, they can be used in certain cases where penalties are not sought.

2. Penitential pledges

• They allow either party to withdraw from the contract lawfully and without having to justify damages.
• If the buyer withdraws, he loses the deposit paid. If the seller does so, he must return double the amount received.
• These deposits are the most common in the real estate sector, regulated by the Article 1454 of the Civil Code.

3. Penalty deposit

• They are based on a penalty clause that allows for a claim to enforce the contract or compensation in the event of non-compliance.
• They do not represent an advance on the purchase price., but they allow claims for damages, interest and execution of the contract.

What information should an earnest money contract include?

An earnest money contract must contain certain key elements to ensure its validity and protection for both parties:

1. Personal data of the buyer and seller.
2. Property description, including key features.
3. Purchase and sale price and agreed payment method.
4. Amount of the deposit or economic advance.
5. Maximum period for formalizing the deed of sale.
6. Commitment to sign before a notary.
7. Distribution of expenses associated with the purchase and sale.
8. Penalties in case of contract cancellation by either party.
9. Signature of both parties.

Legal aspects of current interest

Since the implementation of the Article 621.49 of the Civil Code of Catalonia, there is a new regulation that protects the buyer in case of refusal of a mortgage by the bank. According to this law, if the bank does not grant the financing, the seller must return the deposit. without applying any penalty.

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If you are thinking about buying a home and need advice, in Serra Real Estate Group We help you every step of the way. Find out more about 500 properties for sale on our website or visit one of our offices:

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For more information, contact us by filling out our contact form or by sending us an email to info@serra.immoWe are here to help you find your ideal home.