Whatever real estate transaction is carried out, it requires an extremely responsible and careful approach, since any actions of the parties must have documentary evidence. Even such manipulations as the transfer of a deposit must be documented (a special agreement on the deposit is drawn up).
This agreement is concluded if an agreement is reached between the parties on the payment of part of the total cost of the property. The deposit plays an important role. It is simultaneously a guarantee of both the buyer’s intention to purchase this property and the seller’s intention to sell the property to this particular potential buyer.
Making a deposit and concluding an appropriate agreement is a kind of guarantee of the success of a potential transaction for both parties.
The deposit agreement is relatively small and does not include any unnecessary information.
This agreement must include the following information:
- Information about the seller (full name, residential address);
- Information about the buyer (full name, residential address);
- Data about the property (technical characteristics and features);
- Market value of real estate (full);
- Collateral amount;
- The duration of the contract, as well as the date of payment of the remaining part of the cost of the property.
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Purpose of the deposit
Earnest money is money paid to the seller before concluding a purchase and sale agreement. Such a payment is regulated by Articles 380 and 381 of the Civil Code of the Russian Federation and becomes a guarantee of the subsequent conclusion of a house purchase and sale agreement.
Taking into account these factors, the following functions of the deposit agreement :
- security - the deposited funds record the intention of the parties and guarantee the fulfillment of accepted obligations;
- evidence - the executed agreement becomes the legal basis for the implementation of the agreement and the conclusion of the purchase and sale agreement;
- payment - the transferred funds are paid towards the total cost of the house and land, which reduces the final settlement amount.
A deposit agreement for the purchase of a house is drawn up if it is necessary to postpone the conclusion of the transaction. The relevance of the agreement may be due to the unavailability of documents, the lack of full amount from the buyer at the current stage, force majeure, or other circumstances.
We advise you to read:
- ✅ How to draw up a deposit agreement when buying an apartment?
- ✅ Preliminary contract for the purchase and sale of a house with a plot of land: sample
- ✅ Preliminary lease agreement for non-residential premises
- ✅ How to draw up a preliminary agreement for the purchase and sale of an apartment
If the seller and buyer have already reached an agreement, then an appropriate agreement is concluded. In this case, the buyer can be sure that the house will not be sold to a third party, and the seller can be sure that the buyer really intends to buy it.
Return Policy
The deposit for the house and land is returned to the buyer under the following circumstances:
- the seller refuses to sell the property, the return is made regardless of the reason for the refusal;
- the residents were not discharged within the allotted time, which is interpreted by law as an encumbrance on the house being sold;
- the presence of unpaid debts on utility bills also prevents the sale of real estate;
- the seller provided false information about the property, encumbrance, number of owners, pre-emptive right to purchase or other factors.
The deposit is also returned if the terms of the agreement are violated. For example, when the seller does not have time to complete the documents on time or the parties do not conclude a contract for the sale and purchase of a house and land by the specified date.
By law, the seller must return twice the amount of the deposit as a penalty for failing to complete the deal. If the advance payment agreement provided for additional penalties and fines, they are also paid in accordance with the agreement.
The difference between a deposit and an advance
When drawing up a deposit agreement when buying a house, the transferred funds are often confused with an advance payment. These concepts are often used as synonyms, but according to the law they imply different meanings, order of execution and consequences.
Advance payment has different legislative regulations. Such a payment usually means a partial payment of funds when the purchase and sale agreement has already been concluded. Transfer of an advance payment does not guarantee fulfillment of the terms of the agreement and assumed obligations.
Taking this factor into account, the advance agreement for the purchase of a house with land can be terminated without consequences for both parties. The payment itself is returned in the same amount in which it was transferred to the seller.
Unlike an advance, a deposit has legislative regulation and is aimed at securing the transaction and obligations of the parties. If the agreement is terminated, the seller must return double the amount received.
Documents for drawing up a deposit agreement
Drawing up an agreement on a deposit when purchasing a house does not have any special requirements for documents. However, taking into account the terms and conditions of the contract, when drawing it up you will need:
- identification of each party;
- title documents for the house and land plot, cadastral passport;
- a statement confirming the absence of encumbrances and debts for utility services.
It is recommended to check the correctness of the documents before signing the deposit agreement. The buyer must verify the seller's ownership, as well as the absence of other owners and the preemptive right of purchase of shareholders.
Separately pay attention to the marital status of the seller. If the house was purchased during marriage, then the consent of the spouse . If there are minor children, permission from the guardianship authorities for sale may be required.
Before signing, it is also recommended to obtain a notarized consent from the residents to be released from the house . If they are not evicted before signing the deposit agreement, the seller's corresponding obligation is included in the document.
When transferring funds in cash, a receipt . It is drawn up as an annex to the contract and must correspond to the date of transfer of money to the seller.
What does an advance agreement look like?
Like any other agreement, the advance agreement has its own parts that must be taken into account when drawing up the form of the document. These parts include:
- Preamble (in simple terms, header). It contains complete information about which parties are involved in the agreement, as well as complete information about them (passport details, details of the documents on the basis of which they sign the agreement);
- Subject of the agreement. This section contains complete information about what kind of real estate is being sold, where it is located and what cadastral number it has;
- Contract price and settlement procedure. This section also contains information about how the advance is paid and what percentage of the total amount it constitutes;
- Rights and obligations of the parties. This part of the agreement records information about what rights each of the parties to the agreement has, what responsibilities they have, as well as how the land plot will be transferred to the new owner upon completion of settlements;
- Force majeure circumstances. In addition to the actions of the parties upon the occurrence of force majeure circumstances, this part must indicate how the advance payment will be returned in the event of cancellation of the transaction;
- Details of the parties. Data should be recorded here that will help re-identify the parties, as well as information for transferring funds.
This is the classic structure of the contract, which is regulated by the Civil Code of the Russian Federation. When drawing up an agreement under which an advance payment will also be made, the corresponding section is included in it.
Advance agreements for the purchase and sale of land can be found here.
Deposit size
The law does not regulate the amount of the deposit when purchasing a house and land. The corresponding amount is determined by the parties by agreement and can be either fixed or percentage.
The optimal amount of advance payment is considered to be 5-10% of the total cost of the house and land. In the contract, all values must be clearly stated - the total amount, the percentage of it and the corresponding amount of the deposit.
It is emphasized that the preliminary payment is transferred to the seller towards the total cost of the house and land. This aspect must be taken into account in the final calculation. For example, if out of 3 million of the total cost the deposit amounted to 300 thousand, then when concluding a purchase and sale agreement the buyer pays 2.7 million.
How to draw up a deposit agreement?
The agreement on the deposit for a house upon purchase does not have an approved form and is drawn up according to the general rules for the preparation of documents and transactions. It is recommended to include the following provisions in the agreement :
- description of the parties to the transaction - full names, passport details, contact information;
- information about the house and land plot - address, type, location, area, technical characteristics, cadastral number, other aspects;
- title documents for the house - registration certificate, grounds giving the seller the right of ownership;
- the full cost of the house and land, the amount of the preliminary payment in figures and words;
- method of transferring the deposit - when making a bank transfer, a bank account is provided; when paying in cash, a receipt for receipt of funds is attached to the agreement;
- the obligations of the parties include the actions necessary to conclude a purchase and sale agreement - check-out and eviction of tenants, paperwork, drawing up an agreement, full payment of the cost, and other aspects;
- liability of the parties - the consequences of refusal to conclude a purchase and sale agreement for the seller and buyer, the procedure for returning the deposit, payment of a fine;
- additional provisions of the agreement stipulate the terms of the individual agreement - the transfer of furniture, the procedure for paying for utilities and processing related documents;
- terms - indicates the period during which the main contract for the purchase and sale of the house will be concluded;
- The signatures of the parties and the date of drawing up the document are affixed.
If the deposit is transferred on another day, the agreement must contain a corresponding date or deadline. In this case, the contract must provide for the payment of a penalty and a procedure for termination if payment is not made within the specified period.
Drawing up a receipt
The receipt is issued as an annex to the deposit agreement when purchasing a house. It is considered a mandatory document for cash payments and must reflect the following information:
- details of the agreement to which the receipt is attached;
- date and place of registration;
- full names of the parties, passport details;
- information about the witnesses present during the transfer of money;
- the transferred amount is stated in the document precisely as a deposit, and not an advance or pledge;
- brief information about the house, information about the seller’s ownership is written down;
- the amount of the payment made is given in numbers and in words; the total cost of the house and land plot, corresponding to the terms of the contract, may also be indicated;
- the document is signed by each of the parties and the witnesses present.
The receipt is handwritten and written by the seller . If any disagreement arises, a graphological examination will allow us to establish its authenticity. It is recommended that the document be drawn up in two copies for each party.
It is allowed to draw up a receipt in printed form. However, in this case, it is better to have the document certified by a notary. Such an action will confirm the legality of the registration even in the absence of other witnesses.
A receipt confirming receipt of a deposit for the purchase of a house is drawn up immediately upon transfer of money . The entire amount received must be included in the document. If it is transferred in two or more parts at different times, the corresponding number of receipts is drawn up.
If the house being sold has several owners, the deposit is distributed among them. A separate receipt is drawn up for each co-owner. In this case, it indicates the total amount of the advance payment and the share of the person concerned.
Sample deposit agreement for the purchase of a house with a plot
The deposit agreement ensures the fulfillment of the obligations assumed by the parties to the transaction under the contract for the sale of real estate.
It acts as documentary evidence of the provision of finance, and is necessarily attached to the set of documentation required when completing the transaction.
Of course, it does not provide unambiguous guarantees, but in this way you can insure yourself in case of controversial situations.
In this case, the acquirer assumes the obligation to pay the remaining amount for the purchased property, and the alienator guarantees that he will not sell the property to other persons during the specified period.
The deposit stipulates that the alienator suspends the sale of objects (stops showing the property, removes posted advertisements from publication), and the acquirer stops searching for other real estate.
