The decision to buy a home involves months of searching and endless visits and conversations with individuals, developers, estate agents, banks and others. From the moment you decide to buy a home until you become the owner, there will be many moments in which you will have to make decisions. This process involves many aspects to evaluate and terms that are new to many of us, but very important to know.
Having gone through all this and finally found the home we want, the last thing we want is for someone else to buy before us. This is why there are various agreements between buyer and seller to formalise the interest in a home before the deed is signed. In the meantime, other types of procedures can be carried out. There are two options: the reservation contract or the deposit contract.
Although both concepts guarantee the sale and purchase of the property, they are not exactly the same. In the next article we will focus on the reservation contract. Whether you are looking for a first or second home, or are considering investing in a new construction, this article will be of interest to you. Let's get started!
What is a property reservation contract?
The reservation contract is a document that confirms the intention to purchase the property and acts as a guarantee to the vendor that the sale will go through. The operation of this contract is simple. The reservation is made when the buyer pays a percentage of the total value of the property, known as the "deposit for the purchase of a house", which is subsequently deducted from the price of the house.
This property reservation agreement brings the buyer closer to becoming the owner of the house. And the seller agrees to deliver the property within the agreed time.
Differences between a reservation contract and a deposit contract
Although both contracts appear to be the same, they are different concepts. Although it is true that the deposit contract is also a document that formalises the sale and where a sum of money is allocated from the value of the house, in the case of the reservation contract with deposit we are talking about new construction houses that have been bought directly from the promoters.
But that’s not all. The main difference lies in getting out of the contract. While the deposit contract can be cancelled as long as the corresponding compensation is accepted, the reservation contract for a house with a deposit can only be cancelled if there is a clause that allows it.
Another difference between the two contracts lies in their regulation: the legal certainty of the housing reservation contract is reduced because, unlike the deposit contract, it isn’t regulated by the Civil Code. On the contrary, it is regulated by the law on instalment sales of personal property.
Signal housing reservation models: what should it contain?
In the model contract for the reservation of accommodation, we can find the personal details of the buyer and the seller, the detailed description of the property, the amount of the deposit for the house, the payment method and all the clauses agreed by both parties, as well as the cancellation clause, if possible.
Remember that these conditions are binding on both parties and formalise the subsequent sale and purchase agreement . There are two models for reserving a home with a deposit:
- Reservation contract in the pre-commercialisation phase. When the launch of the promotion takes place before obtaining the building licence and the guarantee policy. In this case, the deposit paid by the buyer isn't subject to VAT and the maximum period of validity is shorter. Furthermore, it isn’t a binding reservation, so you can cancel it and get your money back if you finally decide not to go ahead with the purchase.
- Reservation contract in the marketing phase. In the opposite case, we find that the property in question is already in the marketing phase. In this case, the offer includes ¡ VAT and is binding unless otherwise agreed.
What is the percentage of the deposit to reserve a property?
The deposit to reserve a property varies between 1% and 5% of the final price of the property. The longer the signing period and the formalisation of the transaction, or the higher the value of the property, the higher the percentage will be. On the other hand, if the sale is complicated, the percentage can be reduced in order to make it easier for the buyer.
As a general rule, new homes on the Costa del Sol costing less than €700,000 usually come with a deposit of between €5,000 and €10,000, which is often non-refundable once the contract has been signed, unless the buyer doesn’t pass the money laundering process and the promoter refuses the purchase. For luxury properties, the percentage of the reserve is between 1% and 3% of the value of the property.
In any case, the advantages of signing a reservation contract when buying a home are many. It is a guarantee that brings you closer to your dream home.
Buying and selling new homes guaranteed with Prime Invest
Do you need professional advice on buying or selling a new home? Before formalising the purchase of a new home, it is advisable to seek the advice of a specialist team from the outset. At Prime Invest we have a large number of new construction properties in the most luxurious and residential areas of the Costa del Sol, Ibiza and Punta Cana.
Our experience and understanding of the dynamics of the property market make us your perfect ally when you are looking for professional advice when reserving a home. Our team of expert estate agents are ready to provide you with specialist advice and guide you through every stage of the deposit reservation process. Contact us and experience the housing reservation process in a calm and secure way.
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