Before the 15-30 days set out on the reservation agreement have run out, Frank and Diane will sign the sales contract that commits them to buying the property and the seller to sell it to them. There are several ways of doing this, for example with a preliminary sales contract (contrato privado de compraventa) or a down payment contract (contrato de paga y señal). However, for many overseas buyers it will be a deposit contract (contrato de arras) , which is sometimes translated as the ‘earnest money contract’).
The arras/earnest money contract is a private legal agreement which reserves the right to purchase the property at a set price at a set timetable and penalises the buyer or seller if they break the agreement.
Frank and Diane’s lawyer goes over the contract with them, with a translation, and they agree that the property and its description, location, price, boundaries and so on are exactly as they had expected and are as described in the building survey report. They and the owner (or their representatives) then sign the contract – there is no notary at this stage. They also arrange for the payment of 10% of the price to be transferred.
Given that Frank and Diane are definite about buying the property, it might be in their interests to pay as high a deposit as possible, to dissuade the seller from backing out. On the other hand, if the seller is a non-resident and the money is not protected, you need to know that they will not disappear with your money, leaving the mortgage company to reclaim the property.
The payment method will also be agreed between parties. It will usually be a bank transfer or a bank cheque showing the name of the party receiving the money. The parties may sign a contrato privado de compraventa which creates a binding agreement and sets for a completion date as well as the terms and conditions of the sale (price, way of payments, contractual deadline…). If the seller breaches that agreement, the purchaser may take the option of fulfilling the agreement or may choose to withdraw from the sale and claim for damages incurred. The difference with the contrato de arras is the option to enforce compliance of the purchase agreement before applying for compensation.
If your money comes from a territory considered as a tax haven, you must inform and explain the projected investment to the Spanish Government at least six months in advance, using form DP2. Once the purchase has been formalised, you inform the Spanish Tax Of ce if the money comes from a tax haven, or if the amount exceeds €3,005,060, whatever the provenance of the invested capital might be.
Suppose the couple want to buy, but are not ready to commit to a final contract date? There are mechanisms for delaying the process.
The contract for ‘booking’ housing is a contract of sale, but one in which the buyer and seller postpone the sale. Its terms will vary between existing houses and off-plan sales. For off plan, if the house will not be ready in time, or indeed construction not even started, the seller must provide some guarantees for repayment of the advanced sums, plus the statutory interest. Note the following however:
Source; AIPP / RICS / RDE