Do you know to what extent earnest money contracts are relevant in real estate transactions? We know that buying a property is not a simple process or anything like it. In fact, one of the details to highlight is the documentation that must be in place at the time.
What is an earnest money agreement and what is it needed for?
When we refer to earnest money contracts we are talking about a document referring to the pre-sale. That is, those that do not directly formalize the transfer of a house but guarantee that it will take place in the future. This is due to the payment of a guarantee.
This means that the signing of the earnest money involves an advance amount of money to be paid for the property. One of its main objectives is that a reservation on the property can be agreed upon. In addition, the seller gets more certainty about the sale and will not have to look for new buyers.
How important are earnest money contracts?
Of course, you may be wondering if it is really necessary to have an arras. Among the reasons why this document is so important in the sale of a property, we find the following:
It is the basis on which the direct documentation of the sale will be based. It is thanks to this that the transfer of ownership is really guaranteed.
The earnest money contracts establish all the obligations that will be fulfilled in the future by both parties.
The reservation of the property is guaranteed for an established period of time. In this way, the seller will not be able to use the house or apartment in another sale transaction until the term of the lease has expired.
We can understand the relevance of the earnest money contract and that it is not insignificant. In fact, it is considered to be of great relevance in guaranteeing preferential access to a purchase. After all, if you do not sign it, you risk losing the right and preference of purchase.
What are the types of earnest money contracts?
Certainly, earnest money contracts are not unique documents, but have different presentations. In this regard, the following types should be highlighted:
- Penitenciales, which simply provides for the return or forfeiture of the money if someone defaults. Likewise, a payment equivalent to 100% of the amount agreed in the deposit is also determined.
- Penalties, being those that derive in penitential consequences in the event of any fault of any of the parties. These prevent a person from being obligated to perform the contract and establish a payment in addition to the indemnities.
- Confirmatory, where the advance payment is translated as a guarantee that the contract will be fulfilled. This implies that one of the parties is entitled to compel the other to comply with its obligations.
And this is where we come to the necessity of knowing how earnest money contracts work. Even if you already have some knowledge of these documents, it is best to seek professional advice. Where could you find the experts? You are about to find out.
Carlos Baño León Attorneys-at-Law, experts in earnest money contracts
Are you planning to sell a house? Do you need the best advice for sales procedures? Any legal matter requires the assistance of the best lawyers and you can find them here. Since 1984 we have been providing quality service in the city of Alicante.
Want to know more about us? On our website we have all the information about the legal services we offer you. In addition, we are always ready to assist you, so do not hesitate to contact us. Carlos Baño León Abogados is your solution for earnest money contracts.