Selling Property in Spain
Keep marketing it until you get your deposit!

Do not take your home of the market until you get a deposit!

The relatively straight-forward process of buying and selling a property can become a real headache if things go wrong. What if it goes wrong right at the beginning?

The Reservation Deposit

The reservation deposit is a sum, usually between 3,000 Euros and 12,000 Euros, that the  buyer pays to the seller to "reserve" the property and stop him selling it to somebody else. The reservation deposit should be paid to the seller by cheque, but it can also be in cash.

If the buyer decides not to proceed with the purchase, he will forfeit the reservation deposit, so the seller keeps it. Conversely, if the seller backs-out, he is obliged to return to the buyer double the reservation deposit. So, if the seller has received 3,000 Euros and decides not to sell, he has to return this 3,000 Euros and pay a further 3,000 Euros compensation, making a total of 6,000 Euros payable.

A typical example of a selling your home

Let's assume your home is for sale at 400,000 Euros, and you have been told by your estate agent that they have an offer of 385,000 Euros, which you decide to accept. The estate agent will then obtain a reservation deposit from the buyer, which is typically 3,000 Euros.

The estate agent will prepare a receipt for the 3,000 Euros, and confirm that the balance of 382,000 Euros will be due to be paid over the next few weeks (10% in the next 10 days and the remainder upon completion at the notary).

Subject to Mortgage Approval

When you read the reservation contract, you notice that it says "subject to mortgage approval". This is perfectly legal - it could also have said "subject to survey", and provided your home is in good order, this should be just a formality. However, because this clause has been entered into the agreement, the reservation deposit will not be given to you until the buyer has had his mortgage approved.

But what happens if the buyer cannot get a mortgage?

He desperately wants your home, but in reality he just cannot afford it! This is where the problem occurs.

You have signed a reservation agreement, have agreed a price and are happy to go along with the mortgage approval clause. The estate agent, as a direct result of this clause, holds onto the deposit money of 3,000 Euros.

One week later, you are still waiting to hear if the buyer has a mortgage offer. You contact the estate agent who says that the buyer is having difficulty raising the required monies, but he will advise shortly. Another week goes by, the estate agent telephones and confirms that the buyer is now looking at other means of raising the finance. A further week passes, and the estate agent advises you that the buyer cannot proceed.

Because your reservation agreement stated "subject to mortgage approval", the reservation deposit is returned to the buyer. And because you did not receive any reservation deposit, your home has not been sold and you are free to continue to market it.

Your property was "off the market" for three weeks, and no reservation deposit had been given to you. Our advise is keep marketing until you receive your deposit!