What is a reservation contract?
The reservation contract involves, in addition to the confirmation of the intentions of the buyer and seller, a two-way commitment that is usually accompanied by a ‘deposit for the purchase of a property’, thus assuring in some way that the real estate transaction will be carried out.
This purchase deposit corresponds to the money that the buyer advances to the seller as a reservation of the property that is the object of the transaction. Likewise, the signed document is a formal agreement that legally commits the parties to continue with the sale and purchase when the conditions established therein are fulfilled.
Differences between a reservation contract and a deposit contract
The difference between the reservation contract and the earnest money contract can cause some confusion, as although at first glance they seem to be the same, they are different concepts. While the earnest money contract is understood as the agreement reached between the two parties involved, the reservation contract corresponds to the amount of money that is handed over to make the agreement official, normally with the reservation of a newly built home. This type of contract includes a series of detailed points, such as the deadline for signing the deeds, the amount of the deposit or the payment procedure, which must be complied with.
In addition, the legal security in the reservation contract is reduced because, unlike the deposit contract, it is not regulated by the Civil Code, but it is regulated by the Law of Instalment Sales of Movable Goods 28/1998, published in the BOE (Official State Gazette) 14/07/1998.
It should be noted that if you wish to terminate a deposit contract, this can be done as long as the corresponding compensation is paid, taking into account the type of deposit contract signed. However, the reservation contract for a property can only be cancelled if there is a clause in the contract approving it.
Advantages of a reservation contract
If you are the buyer, the main advantage of the reservation contract is that it allows you to gain time from the time you sign the purchase of the house, so you can look for a suitable mortgage for you knowing that there is a real commitment to sell the house by the owner and that there will be no substantial changes in the previously agreed price.
If you are on the opposite side, that is, if you are the seller, you will also have an important advantage: you will have time to carry out the necessary procedures, from repairs to the house to obtaining certain documents such as the energy certificate of the house. In addition, you will know in advance when you will receive the money from the buyer.
