Nowadays, thanks to digital solutions, real estate companies can send contracts to be signed from any mobile phone or computer. On a practical level, there are several contracts in which it can be applied: the rental contract and the contract of sale, for example.
However, doubts often arise as to how we can know that the signatories are going to comply with their sales obligations. Are they really committing themselves to the sale, and how can we be sure of this? Well, to solve this big problem there is the earnest money contract.
What is an earnest money contract?
The earnest money contract is a private agreement that reflects the commitment to carry out a purchase-sale. In exchange for the delivery of a sum of money in the form of a deposit, which will be deducted from the final price of the sale, the buyer’s right to purchase a movable or immovable property is agreed. The seller, on the other hand, undertakes to sell the property under the agreed conditions.
In this way, both signatories acquire a commitment prior to the purchase and sale of a property.
Types of arras
According to the Supreme Court, three types of arras are recognized:
- Confirmatory Deposits: Their purpose is to confirm the commitment of both parties to the purchase and sale of the property by means of the delivery of an economic advance, which will be discounted from the final price, as a guarantee of compliance. In this case, penalties are not clearly established.
- Penalty deposits: Implemented as a guarantee of the fulfillment of the contract, substituting the compensation of damages but without authorizing the withdrawal. It establishes the amount that the buyer will lose in case the sale is not carried out.
- Penitential or waiver of withdrawal: Allows one of the parties to terminate the contract. If the buyer does so, he will lose the amount paid as a deposit; if, on the other hand, the seller does so, he must return to the buyer double the amount paid as deposit.
Which information must be included in this type of contract?
As we have mentioned, the earnest money contract is a preliminary document and not the final contract (that would be the purchase contract), but it is essential that it reflects the conditions of the future sale.
Therefore, it should include information such as
- Personal information of both signatories
- Description and identification of the movable or immovable property object of the contract
- Final price of the purchase-sale and form of payment
- Amount of money contributed as a deposit, discounted from the final price.
- Distribution of the possible expenses of the procedure
- Estimated maximum time to formalize the operation
- Signature of buyer and seller
Is it mandatory to make an earnest money contract?
Yes, it is mandatory to make an earnest money contract when signing a purchase contract, since it is the proof that ensures the fulfillment of the obligation of a sale by the parties involved.
As with reservation contracts, the signing procedure in the earnest money contract can be done in person or remotely. In the latter case, the process is device-independent and relies on strong authentication procedures such as OTP SMS, which ensures the identity of the signatories.
In addition, it is a contract regulated by the Spanish Civil Code (article 1454), which gives it greater legal backing. In the event that one of the parties backs out, depending on the type of the unfulfilled deposit, the other party will be entitled to demand the fulfillment of the same, or request the termination of the contract with compensation for damages.
How to optimize the signature on an earnest money contract
If your clients do not use digital solutions, you will know that formalizing and signing earnest money contracts is not an easy task. As there are many parties involved in the process, it can be a process that can take several days. However, since its widespread implementation, the electronic signature has managed to optimize the signing of this document:
- It helps to achieve new business opportunities. By streamlining the entire signing process, real estate agents do not invest unnecessary effort in the same transaction. They can focus on offering the same service to a larger number of clients.
- Increased labor productivity. The actions to be carried out during the manual process require more time than a digital process.
- Avoid unnecessary travel. By using paperless solutions, it is not necessary for signers to travel to the real estate office to sign the document, nor is it necessary to send it by mail. With the electronic signature, signing processes and document management are automated.
- It reduces costs associated with materials. Thanks to this digital solution, the days of using large amounts of paper to scan, print and send important documents are over. Now, everything is done digitally. So there is no need to invest in physical document storage costs either.
Checks the integrity of the contract with signature validity
Yes, today’s technological tools can optimize your earnest money contracts with great results. But Viafirma’s solutions go one step further: they allow you to check all the information at the moment of validation. It is possible to know this information because the electronically signed documents contain metadata related to the collected evidences. Thus, with signature validation, all parties involved in the process will be able to check the integrity and validity of relevant aspects such as:
- Document signature status
- Signatory data
- Certificate validity or repudiation
- Obtaining the public key
- Among others
Viafirma Documents, your solution to optimize your real estate contracts
Do you work in a real estate agency and you are tired of complicated procedures? Would you like to speed up the formalization of purchase and rental documents? Viafirma is the company you need. With our digital solutions you will be able to send your earnest money contract to be signed by all the people involved in the transaction: buyer, seller, guarantor and the real estate company. All this, legally and remotely. Because there is nothing like enjoying your home as soon as possible.