In the purchase of a property, there may be different circumstances that make it necessary to enter into one contract or another. In chronological order and assuming that all reasonably possible contracts are signed, we could describe the following:
Legal advice contract: Sometimes the buyer and/or seller decide to hire the services of legal professionals to advise them on the sale and purchase transaction. This is therefore a private contract for the provision of services whereby, in exchange for the legal advice provided by the professional, the client pays a fee. It is advisable to formalise this relationship in writing, specifying the exact amount of the fees to be charged, i.e. the fixed price of the advice.
Mediation contract with the real estate agency: This is the private document whereby a seller contracts with a real estate agency to mediate between the seller and the buyer in order to formalise the sale in exchange for a financial consideration. This consideration is traditionally agreed on the basis of a commission that can range from 2 to 10% depending on the circumstances and is paid by the seller unless the parties agree otherwise. It is important to specify whether the service is exclusive or not, the time and form of payment, and whether or not the amount includes value added tax.
Reservation contract: This is a private document signed between the buyer and the seller whereby the latter reserves for a certain period of time the priority in the acquisition of the property to the former against other buyers in exchange for a small amount of money (around one percent of the sale price). Normally, a clause is included whereby, in the event that the sale materialises, this amount is deducted from the sale price.
Deposit contract: This is a private document signed between the buyer and the seller whereby both parties undertake to buy and sell respectively the agreed property at a certain price within a period agreed between them. To this end, the buyer contributes an amount of money that is generally around 10 percent of the sale price, so that if the commitment is breached by the buyer, the seller has the right to keep the deposit or down payment, and if it is breached by the seller, he must return the deposit to the buyer and pay him an amount equal to the deposit as compensation. Normally a clause is included whereby in the event that the sale is completed, this amount is deducted from the sale price, the regime of expenses and taxes derived from the sale is defined and increasingly a clause is included whereby the contract is null and void in the event that mortgage financing is not obtained for the purchase and the seller must return the deposit paid.
Private purchase contract: This is the private document signed between the buyer and the seller whereby both parties respectively buy and sell the agreed property at a specific price. This document sets out the terms and conditions governing the transaction. Although some of them will be determined by the earnest money contract if it was signed, it is very important to define who is responsible for the expenses, to establish the charges and encumbrances that the property has, the existence of occupants, to define and describe the property very well, observing that the registered reality of the property corresponds to the physical reality, to establish the price and the form and moment of payment, the penalties for non-compliance and the guarantees in the event of postponement of the price, etc.
Public deed of sale: This is the public document in which the sale and purchase is formalised and which will subsequently be presented at the corresponding land registry for due registration, which will make the transaction effective against third parties. It will include all the clauses that define the operation, although it will be conditioned by what is agreed in the private purchase contract. The means of payment must be sufficiently accredited and attached to the deed itself. Normally, in practice, the public deed usually replaces the private purchase contract because the earnest money contract itself usually requires the parties to execute the deed of sale within a certain period of time.
Finally, if the operation is formalised with bank financing, it will be necessary to formalise the mortgage loan contract, which will be formalised in a public deed and in which there is no margin for negotiation, being necessary to take into account the clauses included in the same that jurisprudence has previously declared as null and void, as well as the contract for the provision of property valuation services that the bank obliges the parties to formalise the operation.
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