Earnest money contract
The deposit contract is an agreement by which two parties agree to a reservation right for the sale of movable or immovable property. That is, it is a pre-contract agreement. In exchange for the reservation in the sale, an amount of money will be given as a signal. It is also known simply as an earnest.
The earnest money is part of the pre-contracts, since the obligation to sign a sale contract in the future is being assumed. The earnest money contracts are widely used in the sale of homes. They suppose an agreement that will be reached when the contract is signed.
For example, in the sale of a home you can make a deposit contract before signing the transfer so that the seller stops showing the home to other interested parties. In exchange for these taxes, an amount of money is usually given in the form of a signal. In these down payments you can include any detail, such as that the house is available before a specific date.
Content of the deposit contract
The following are the terms that are usually included in deposit contracts:
- Identification of the property or property.
- Price and method of payment.
- Term for the granting of the deed.
- Distribution of purchase and sale expenses.
What does it mean to sign a deposit contract?
The most common earnest money is penitential. This implies that the buyer will undertake to acquire the property or property within the term and conditions agreed in the contract. However, the buyer has the right to lawfully withdraw from the sale, which will cause the loss of the amount of money advanced.
In order for the buyer to withdraw from the sale, it will be essential to specify that the earnest money is penitential. For this, it will be necessary for the document to reflect two aspects:
- That the amount to be delivered as an advance payment as a deposit is detailed.
- That the contract establishes the possibility of desisting from the sale for both parties.
Types of earnest money
The main types of earnest money are shown below:
- Confirmations: Part of the total price is paid. If one of the parties does not comply with its obligations, the other can demand the fulfillment of the contract, the resolution and compensation for damages.
- Penitential: The buyer will lose the amount advanced if he does not carry out the sale.
- Criminal: The buyer will lose the money advanced. On the other hand, if it is the seller who defaults on his obligations, he must return double the amount of money advanced.
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