If you plan to sell or buy a property, it is necessary to know what is known as earnest money contract and the types of contracts, to know which is the most suitable for each sales process.
What is an earnest money contract?
The earnest money contract is a private contract between the seller and the buyer where it is agreed the sale of a property. To perform this covenant together an amount of money in respect of the signal.
It is very common to confuse the earnest money contract with the contract of sale, they are different things. Some of the reasons for that are not equal are the following:
1. The earnest money contract:
- By means of it, you can not execute the transfer of the property listed in the contract.
- If a waiver of the buyer loses the amount of money you already gave it to you. And it is not a mere foretaste of the total value of the property.
2. The contract of purchase and sale:
- Through it, you can only give the resolution if you do not meet the other party, either for specific reasons of the contract.
- If you perform the contract of sale, there is no going back; the reason for the transfer of the right of the building and the purchase would be final.
Types of arras:
Below, we present to you the three types of arras for the sale of a property and when you should use each of them:
- Arras confirmatory: Its purpose is to reaffirm the commitment of both parties to the sale. They usually ask for a deposit of total value, that is to say, that this amount forms the first term of the price and which must follow others. If you do not meet the parties may not cancel the contract, but general rules will apply for failing to comply with the obligations. The injured party can seek compensation that must be set by a judge or the sale of the home.
- Arras criminal: These are determined as a guarantee of fulfillment of the contract. In case you do not comply, the buyer shall be understood as the loss of the earnest total or partial, and the seller will require the return along with the amount agreed to in the contract. The earnest criminal not authorized to waive the contract, thus suggesting that both parties are 100% certain that they want to formalize the sale.
- Arras penitential: They are the type of arras most common; allows the parties to terminate the contract through the loss for the buyer or the double return for the seller. These are recommended in case the signature of the scriptures depends on the approval of a mortgage by a bank or when you are not sure that you go to formalize the process of purchasing a property.
What type of arras is more convenient for the seller?
Normally, the earnest penitential tend to be the best alternative for sellers. However, the person must analyse if you can take double the amount of money in the event that it becomes another buyer or, on the other hand, you want to give up.
What type of arras is more convenient for the buyer?
In this case, it is also suggested that the earnest penitential always and when you are certain that you want to acquire such property or willing to lose the amount of money that you give if you want to renege on the agreement.
On the other hand, agrees to the booking contract, which requires both parties and gives no option to resign.
Information contained in a contract of deposit:
Although the earnest money contract does not become a definitive agreement, is a document of great importance as it shows the conditions of the future transfer. Because of this, the earnest money contract, you should gather the information that will then be detailed in the contract of sale.
Below, we will show you the basic information that all earnest money contract must include:
- Personal data of both parties.
- Description and identification of the property.
- Value official currency of the sale, and the form of payment.
- Definition of the amount of money in advance, which will be deducted from the final price.
- Deadline to enter into the contract of sale.
- Commitment to sign the contract by means of a public deed.
- Apportionment of the expenses of the sale.
- Signature of both parties.
What should I do before signing a contract of arras?
Before signing this document, you need to consider certain points:
- It is recommended to visit the property with a technician to make sure that it is in good condition.
- Is the purchase of the ownership and the loads of the building. To not take no surprise, you can ask a simple note to the Registration of the Property and so you will be able to verify who the owner and the burdens that you have.
- You must request the proof of payment of the TAX to the owner to double check that there are no unpaid tax.
- Look at the earnest money contract if it is appropriate to make any changes.
- Finally, it is important to observe the final document before signing.