Are you buying a flat or a house? When finalizing the transaction, you may encounter a situation in which a preliminary real estate purchase agreement will be prepared. When is such a contract used, and when can the purchase of an apartment be finalized without signing a preliminary contract?
Reservation for the buyer, protection for the seller
The conclusion of the preliminary real estate purchase and sale agreement actually starts the real estate purchase transaction. It can be treated as an official reservation of a flat or house and a declaration from the buyer and seller that they are willing to conclude a final agreement in the future. The purpose of concluding the preliminary contract is to enable the parties to prepare for signing the future final sale contract, but with the comfort of booking an apartment or house, or an exclusive plot.
The preliminary contract protects the interests of both parties. It should contain essential provisions and provisions of the target contract, in particular the specification of the subject of the transaction and the date of conclusion of the final contract. The preliminary contract is most often accompanied by an advance payment or an advance payment made by the buyer to the seller for the future transaction.
When is the preliminary contract not necessary?
The conclusion of a preliminary contract is not always necessary for the parties to the final contract. Usually, it is not necessary to sign it if the parties are immediately ready to conclude the main contract of sale of the property in the form of a notarial deed, for example because the transaction is made with cash or by transfer from the buyer's account to the seller's account.
When is it worth signing a preliminary contract?
However, there are also circumstances when the sale of an apartment or house should be preceded by a preliminary contract. This is the case in the following cases:
- Realization of transactions with the use of a mortgage - before all the formalities related to the loan and its granting at the bank are completed, it is worth "reserving" the property with a preliminary contract.
- Unregulated legal situation of the real estate - legal status, claims, easements and encumbrances of real estate in the land and mortgage register.
- The need to divide the property - e.g. a building plot into several smaller ones.
- Waiting for the decision to issue development conditions - if it is not known, for example, whether the desired property can be built on the plot being sold.
In all of the above-mentioned situations, the preliminary real estate purchase agreement protects the interests of the buyer - if it turns out that he will not receive a loan for an apartment, he may resign from the purchase, with the loss of only the down payment made to the seller. For the person making the sale, the preliminary contract is a signal that he can sell his property after meeting certain conditions.