Applying for a mortgage, going to the notary... These are essential steps when buying a flat, but there are previous stages that you should take into account because the purchase starts from the moment you make a "match" and know that you want that house, not when you close the sale.
To ensure that the property will be yours, there are deposit contracts and one of the most useful is the penitential deposit contract , which, no, does not at all imply going to jail if you fail to comply with your obligations.
What is a penitential deposit contract?
Before signing the sale agreement before a notary, it is customary and advisable to sign a deposit contract. This document seals the commitment of the owner of the house to sell it and the buyer to acquire it, and includes the conditions of the agreement.
In addition, it involves the payment of an amount as a reservation and an advance payment that is later deducted from the purchase price. However, it is not advisable to confuse the deposit contract with the reservation contract.
From there, there are different deposit contracts depending on the agreement and the consequences of not complying with it. That is, what will happen if one of the parties backs out.
Penitential deposits are also known as withdrawal deposits , because they allow the seller and the buyer to withdraw from the transaction. In other words, not to comply with the commitment in exchange for compensation as provided for in article 1454 of the Civil Code.
The article stipulates the following: “If there was a deposit or token in the contract of sale, the contract may be rescinded by the buyer agreeing to lose it, or the seller agreeing to return it doubled.”
Other types of deposits you can use
Penitential deposits are the only ones included as such in the Civil Code. However, there are two other types of deposits.
On the one hand, there are confirmatory deposits , which, as their name suggests, confirm the sale with the payment of money by the buyer. Unlike the penitential deposit, this model does not allow either party to back out.
If the injured party wishes to do so, they may request that the contract be fulfilled or request compensation.
On the other hand, there are the penal deposits , which are not expressly regulated in the Penal Code but are governed by the penal clauses of the same. This contract also does not allow either party to freely withdraw, but it does establish the penalty that must be paid and which is usually an amount of money as compensation.
What information does the deposit include?
The deposit contract is more than just a reservation of the flat, and it is therefore advisable not to sign it lightly. In the end, this document summarises the basic points of the sale .
This includes:
? The purchase price.
? The payment method.
? Money that is given as a deposit and is later subtracted from the purchase price.
How much time do you have to sign the sales contract (and find a mortgage if you need one).
Who will pay each of the purchase and sale expenses?
? Buyer, seller and property information.
? The commitment to sign the contract publicly.
As you can see, a good summary of the sale with key information, especially because it establishes the time you have to obtain financing to buy your house.
Who pays the deposit contract?
The reality is that there is no rule regarding this, so it will depend on the agreement you reach. The most common is that they are paid in half or, if the buyer or the seller has hired an agency, this contract is included in the services.
There is no doubt about who gives the money for the deposit contract . This is always the buyer, who is the one who wants to agree on the purchase of the house.
What percentage of the price must be paid as a deposit?
How much is a deposit to pay? Again, whatever both parties consider appropriate. The normal amount is between 5% and 10% of the purchase price of the property.
How long does an earnest money contract last?
Once again, the duration of the deposit contract will be what you agree upon.
This is a very important part of the contract, since if the term of the deposit contract is exceeded without signing the sale , either party may request compensation. This compensation will depend on the type of deposit contract and is what we will see now.
For this reason, when in doubt, it is better to be cautious and sign a long deposit so that you have time to find financing and a good mortgage.
Can a deposit contract be cancelled?
Yes, the main characteristic of the deposit contract is that it can be cancelled . What does this mean? It is possible to cancel it at any time and with complete freedom.
However, in doing so, the buyer will have to pay the compensation indicated. In the case of the buyer, this will be the loss of the money he paid in advance as a deposit, and in the case of the seller, double that amount.
What happens if I back out and don't want to buy the apartment?
One of the most common fears that arises with deposits is not getting a mortgage to buy the apartment.
Unless the contract specifies otherwise, it doesn't matter why you back out . The result will always be the same: you will lose your deposit.
Fortunately, it is possible to include clauses of this type in the deposit contract, which will serve to release you if you are not granted the mortgage .