The deposit is an important element in real estate sales contracts, so in the case of a transfer of real estate against consideration, you will certainly come across the following provision in the contract:
The deposit shall be included in the purchase price, in case of failure, the party responsible for the failure shall forfeit the deposit, and shall be obliged to refund twice the deposit received. The deposit shall be returned if the contract of sale is terminated for reasons for which neither or both parties are responsible.
In the pre-contract or contract of sale, the parties stipulate the amount of the deposit that the buyer will pay to the seller to secure their obligations, which is of course part of the purchase price. Therefore, the deposit is a fixed amount of money. In any event, it must be stated in the contract that the sum has been paid as a deposit, to which the law assigns the consequences described above, otherwise the sum paid is considered to be an advance which will be returned in any event in the event of the contract being frustrated, and thus does not provide the contracting parties with sufficient guarantees.
In sales contracts, the deposit serves a function that protects the interests of both the seller and the buyer, avoiding unnecessary time lost due to possible withdrawals. On the one hand, the seller can feel safe in the knowledge that the buyer is serious about the purchase, as it puts the buyer in a serious bind if he or she backs out, and on the other hand, the buyer can feel safe in the knowledge that the seller will not change his or her mind and sell the property to someone else. In summary, a deposit therefore binds both parties to the obligations they have entered into in the contract.
The amount by which the buyer expresses his intention to buy to the seller may vary, depending on the agreement of the parties. Generally speaking, the parties usually agree on a deposit of 10% of the purchase price of the property, but it may be lower or higher. When determining the amount, it should be borne in mind that the court may reduce the deposit if it is excessive.
A deposit not only ensures the buyer’s commitment but also guarantees the seller the success of the transaction, but both parties should carefully review the sales contract to ensure that it contains all the necessary details and that the parties are clear about the obligations they are taking on and securing with the deposit.
