Step 2: The Reservation Contract and Deposit

Once your estate agent and lawyer have discussed the purchasing terms and conditions with the seller and an agreement has been reached, the next step is to formalise this verbal understanding through a written contract. This document is known as the Reservation Contract (Contrato de Reserva) and should be signed by both you or your representative and the seller. It might also include details about payment terms, estimated dates for exchange of contracts and completion. If both parties accept the terms in the contract a binding agreement is created.

It is standard practice in Spain for this Reservation Contract to be accompanied by a sum of money which is paid by the buyer to demonstrate to the seller that there is a real intention to purchase. This money is known as a Reservation Deposit (Señal de Reserva) and usually amounts to between €3,000 and €12,000. Once this deposit has been paid, the property is taken off the market and the price is frozen for a specified period of time; usually about 30 days.

It is very important to remember that this deposit is usually non-refundable. In other words, if you do not exercise your option to purchase within the period of time established in the Reservation Contract the seller is under no obligation to return your money. However, if the seller backs out of the deal he will have to return your deposit.

There are two important pieces of advice to remember when you are at this stage in the transaction

First, it is essential to have funds available when you travel to Spain to view properties. Any delay in paying the Reservation Deposit could result in you losing the property you want to buy.

Second, avoid paying the Reservation Deposit by cheque because it can take up to ten days for it to clear. During this time the seller is free to accept an offer from another purchaser who can pay cash. To avoid this situation it is advisable to pay the Reservation Deposit in cash or by credit card.