Earnest money contract in Spain
When buying a property is Spain as a foreigner, you may need to complete certain proceedings prior having it registered under your name, like opening a bank account, get a NIE number (Numero de identidad de extranjero en España), and verify if the property in question is completely legal, among others. Therefore, it makes sense that you may wish to secure to be the one and only buying party, that is to say, to make sure that the vendor won’t sell the wanted property to a different buyer in the meantime.
In Spain, it is very common that prior the registration or the drawn up of the tittle deed, the parties agree to sign an “Earnest money contract” which is an agreement signed privately by the parties where the buying party shows “good faith” by putting a secure payment or deposit to guarantee that he/she is really serious and is willing to buy the property or land.
An Earnest Money Contract is a legal act generally used when the time frame between the reserve and the actual transmission of the property is really long. Such wide time frame can occur when the buying party wish to acquire a newly constructed home, or a property that is being built, or a second handed property where the seller has stated that it will take some time for him/her to abandon the property in question.
This good faith deposit done by the buying party shall not be confused with a down payment or the first payment in relation to the value of the property. On the Earnest Money Contract, it shall be outlined the amount of money to be put initially by the buyer to secure the future purchase of it, and how the full payment of the value of the property is going to be done.
If the seller accepts to sign an Earnest Money Contract such security deposit will be held in trust or escrow. This type of contract is completely valid and fully in force as a business instrument. Therefore, it is extremely advisable to ask an attorney to draft it or review it for you, thus making it as clear as possible in relation to who is going to assume specific payments and its legitimacy until the final execution of the tittle deed. Our Law Firm counts with bilingual attorneys with wide experience in Real Estate Law, thus they are used to draft this type of agreement on a daily basis. It is extremely advisable that this contract is written in both Spanish and English so both parties know what they are signing on, for later this agreement shall not be undone alleging ignorance of the content thereof.
This Earnest Money contract shall contain the identity of both parties*; the description and localization of the property or land; the value and price to be paid; how the full price of the property is going to be fulfilled; outline if the property is free o not of encumbrances or burdens; outline the owners community fee, if applicable; the cancelation terms and the compensation for the termination or breach of the present agreement; among other matters relevant to the acquisition of the property in question.
*It is important to remember that the agreement shall be signed by husband and wife, whether they act as buyers or sellers, if the property shall be considered as matrimonial assets. Also, if any of the parties, whether buyers or sellers, whish to use a third person or attorney to handle this process, the person shall exhibit a Power of Attorney to this effect.
Contact our lawyers before making any decision or sign any paper. Be wise and receive the guidance that you deserve.