ARRAS contract: what is it and what to watch out for?

The earnest money contract is a document that is signed during the purchase and sale of a property. In it, both the buyer and the seller express their willingness to carry out the transaction and undertake to complete it within a certain period of time. In turn, the buyer pays a sum of money to reserve the property and demonstrate to the seller his willingness to purchase it.

The really important thing about the signing of the earnest money is that there are legal consequences for non-compliance, below we will tell you what they are. In turn, the notary will use this document as the basis for drafting the deed of sale, so all the details of the transaction and all the agreements that have been made between the parties must be included. For example, if you agree to divide the IBI payment between buyer and seller proportionally, this should be detailed in the earnest money contract.

Types of earnest money contracts

There are three types of earnest money contracts and they differ mainly in the consequences of non-performance. However, most home sellers and home buyers use the penitential earnest money contract.

How to write an Arras contract to sell my apartment?

It can be drafted by our real estate agency: if we sell the apartment with a real estate agency, it will be in charge of drafting the earnest money contract and the cost will be included in the commission. In fact, many brokerage contracts (which are those we sign when we hire the agency to sell the apartment) include a clause where we authorize the agency to collect the earnest money on our behalf.

What information should be included in a down payment contract?

Below, we detail the basic information that a down payment contract should contain, but remember that we can (and should) include all the information we consider important and all the agreements we have reached with the buyer.

	Identity of the parties: full name, NIF or CIF of both the seller and the buyer. If the apartment is in the name of several persons, the data of all of them must be included.
	Notification address: for notification or communication purposes, the contact addresses of the buyer and seller must be included. In the event that either party changes its notification address, it shall notify the other party.
	Location of the apartment: city, town, address, cadastral reference and all the data that allow to fully identify the location of the property.
	Type of contract: if we sign a deposit we must indicate what type it is or make mention of article 1.454 of the civil code (if it is a penitential deposit). If we do not do so, it may be understood that by default it is a confirmatory deposit, with the consequences that this entails.
	Purchase price: it is advisable that the amounts be written in both letters and numbers.
	Amount given as a down payment: when signing the contract, the buyer gives us an amount of money as a down payment or reserve. This is usually 10% of the final price. This amount and the remaining amount to be delivered on the day of signing must be indicated, stating that the initial amount will be deducted from the total price.
	Maximum term to formalize the sale: the maximum term to sign the deed of sale before a notary must be recorded and, in addition, we must specify the date on which the keys of the apartment will be delivered.
	Consequences for breach of contract: it is important to explicitly include the consequences of a breach of the earnest money contract, both by the buyer and the seller.
	Charges on the property: it must contain the legal conditions under which the property will be delivered at the time of signing. For example: free of encumbrances or mortgages, up to date with the payment of the corresponding taxes, without tenants, etc. In order for the sale to go through and the buyer to take possession of the property, all conditions must be met as detailed in the earnest money deposit.
	Distribution of the expenses of the sale and purchase: the agreement of distribution between buyer and seller of the expenses related to the sale and purchase must be reflected. This avoids possible evasions and problems.
	Date and signatures: the contract must include the date on which the document is signed and must be signed by all parties involved, i.e. buyers and sellers.

How much money is given when signing an earnest money deposit?

In general, 10% of the sale price of the apartment is usually paid as a deposit. But since it is a private document, the amount may vary depending on the needs of both the buyer and the seller. In any case, this sum of money must be detailed in the contract and will be taken as an advance on the sale price. In other words, on the day of signing the deed of sale, the buyer will give us the total value of the apartment, minus the amount that he gave us in the deposit.

What is the deadline to sign the deed from the signing of the earnest money contract?

In general, the term for the deed of sale is 90 days from the signing of the earnest money contract. However, this is a private document, so the term depends exclusively on what the buyer and seller have agreed at the time of signing.

In addition, if for any reason it is not possible to deed the property on the agreed date, an extension can be made. It should be added that this is not mandatory in any case, so it will depend exclusively on the will of the parties.

What happens if the earnest money contract expires?

If the earnest money contract expires without the deed of sale having been signed, there are several scenarios:

• If we want to continue with the sale and purchase: in this case, it is possible to extend the document. To do so, it is sufficient to add an extension addendum to the contract and indicate the new deadline for signing at the notary’s office. It is also advisable to include the reasons why it was not possible to sign on the stipulated date.
• If the buyer cannot or does not want to continue with the sale and purchase: if the contract expires and the buyer does not want or finally cannot buy the house from us, we can keep the money he gave us as a deposit as long as we have signed a penitential earnest money contract. As mentioned above, this is the type of contract that is signed in most cases.

• If we are the ones who decide not to sell: if the contract expires and we are the ones who give up or cannot go ahead with the transaction, we will have to return the earnest money to the buyer in full and in duplicate, if we have signed a penitential earnest money.

How to claim for breach of the Arras

If the day of the signing of the deed of sale arrives and the buyer does not show up, it is advisable to follow a series of steps:

1. Notify the buyer in writing, summoning him again at the notary’s office for the signing of the deed of sale.
2. If the buyer still does not show up, we can ask the notary to issue a document obliging him to come to the notary’s office to sign the deed. This is known as an appearance record. At the same time, it is advisable to notify the buyer again in writing in order to summon him to the notary’s office on a specific day and time.
3. If after doing all this, the buyer still does not show up, we can go to court to demand the fulfillment of the purchase commitment (if we sign a penal or confirmatory deposit) or retain the deposit if we sign a penitential deposit, which is the one that is signed in most cases.

Once we have done all this, we can re-post the ad to look for a new buyer.

Source: helpmycash.com