What is a property deposit agreement (contrato de arras)?

Category: General

What is a deposit contract and why is it so important?

A earnest money contract is a private agreement between buyer and seller through which both parties undertake to formalize the sale of a property within a specified period. This document is usually accompanied by a financial deposit from the buyer, which is delivered as a guarantee of the commitment made.

In our experience at laHome Inmobiliaria, this type of contract is essential to provide security to both parties and avoid misunderstandings. In both national and international operations, it has become an indispensable tool to ensure that the process progresses smoothly.

The earnest money contract not only sets the conditions of the operation, but also allows establishing a reasonable margin of maneuver to organize the rest of the process: search for financing, collection of documents, registry verification and other essential steps in a safe sale.

What does a deposit contract contain?

The drafting of a deposit contract must be meticulous. The basic aspects that must appear in any model are:

• Complete identification of the parties: details of the buyer and seller.
• Description of the property: location, surface, cadastral reference, etc.
• Total agreed purchase and sale price and payment method.
• Amount delivered as deposit, specifying whether they are penitential deposits, confirmatory deposits or penal deposits.
• Deadline to formalize the sale.
• Distribution of expenses and other specific agreements.

In our real estate agency, we make sure that all these elements are correctly written and adapted to each operation. We do not use generic templates, because each home, each client and each situation is unique.

Types of deposit contracts: which one best suits your case?

One of the critical points of the contract is to correctly choose the type of deposit. In the Spanish market there are three modalities:

• Confirmatory deposits: they are an advance payment of the total price and, in the event of non-compliance, they allow demanding compliance or termination of the contract with damages. They are the least used because they can give rise to complex legal disputes.
• Penal deposits: They also work as an advance payment, but an express penalty is established if a party does not comply. A specific amount is usually agreed upon as compensation.
• Penitential Arras: the most used in Spain. They are regulated in article 1454 of the Civil Code and allow withdrawal from the contract: if the buyer backs out, he loses the deposit; If the seller does it, he must return it folded.

At laHome Inmobiliaria we almost always recommend using penitential deposits, as they provide security and clarity to both parties, especially in high-demand contexts where buyers need to act quickly and sellers want hassle-free guarantees.

What is the difference between a deposit contract and a reserve contract?

It is common for buyers to confuse both documents, but they are not the same.

The reserve contract serves to block a property for a very short time, generally while the deposit contract is being prepared. The amount delivered in this case is usually symbolic (€300-€1,000), and its main purpose is to take the property off the market for a few days.

For its part, the earnest money contract implies a firm commitment to purchase and sell and usually includes an important deposit (between 5% and 10% of the final price). Additionally, establish clear consequences if any party backs down.

At laHome we manage both figures, but we always clarify to our international clients the difference between a “simple reservation” and a deposit contract, to avoid legal misunderstandings or wrong expectations.

What happens if one of the parties backs out?

It will depend on the type of deposit signed:

• In penitential deposits, the buyer loses the amount delivered if he desists and the seller must return it in duplicate if he is the one who defaults.
• In penal deposits, the defaulting party pays the agreed penalty.
• In confirmatory deposits, the fulfilling party may judicially demand the execution of the contract or its termination with compensation for damages.

In our history, we have seen cases in which the foreign buyer changes his mind after committing, and situations in which the sellers are not ready to formalize. That is why we always recommend anticipating scenarios and leaving everything reflected in writing in the contract.

How much is usually given as a signal? Amount, deadlines and usual practices

The most common amount given as a deposit ranges between 5% and 10% of the total price of the property. In high value operations, especially in areas such as La Cañada or Campolivar, where we work with medium-high range residential properties, the amount can be adjusted as agreed between the parties.

The standard term to formalize the sale is usually between 30 and 90 days. In mortgage operations, the most common thing is to grant 60 calendar days so that the buyer can obtain financing and prepare the deed.

We, as an agency, supervise that the deadlines are reasonable, especially when the buyer resides outside of Spain and needs more time to manage documents or international transfers.

Signing the deposit contract: better with or without a notary?

Although the earnest money contract does not require a notary to have legal validity, in practice we recommend signing it with the intervention of a professional, whether real estate advisor or lawyer, and even make it public before a notary in high-value transactions.

In our case, being an agency that provides comprehensive service, we offer our international clients the possibility ofsign the contract from your country with legal representation, or organize your visit to sign in person at our offices in La Cañada.

For us, the deposit contract is not just a procedure: it is the document that gives peace of mind and organizes the entire operation.

Practical advice from a real estate agency specialized in sales

After almost a decade helping hundreds of clients buy and sell in the Valencian Community, we leave you our main tips:

• Never sign a deposit contract without reading it carefully or without expert advice.
• Make sure all conditions are in writing: deadlines, penalties, distribution of expenses, etc.
• Ask what type of deposit you are going to sign. Not all contracts have the same consequences.
• Provide the down payment only once you have all the documentation for the home: Land Registry extract, cadastral reference, urban planning situation.
• If you buy with a mortgage, inform the seller of the deadlines so that there are no surprises.

The earnest money contract in international operations

At laHome, more than 40% of our operations are closed with international buyers. Canada, Germany, the United Kingdom and China are some of the most frequent countries of origin. These clients look for properties in quiet and green areas, such as La Cañada or El Plantío, and value the proximity to the airport, the quality of life and the climate.

In these cases, the earnest money contract becomes an essential tool. We write it in several languages, we specify how and when the money is transferred, and we explain the legal consequences clearly and transparently.

Thanks to our experience, we have been able to help many buyers manage the entire process safely and efficiently from abroad.

Arras safely

The earnest money contractIt is not a mere piece of paper. It is the document that makes the difference between a well-managed sale and a possible conflict. It is a commitment, it is a guarantee and it is, above all, trust between buyer and seller.

At laHome Inmobiliaria we have been dedicating our time and knowledge since 2014 to making each purchase and sale a safe, clear and surprise-free experience. Because each property is unique, and so is each client.

If you are thinking about buying or selling in Valencia, remember: the earnest money contract is the first step for your operation to come to fruition. And with the right accompaniment, it is also the beginning of a new stage.

Contact us, we will be happy to help you!