IT’S hard to think of another product quite like property.
It’s all about scarcity value.
Every property, even in the most copy-and-paste development, is unique.
There’s only one apartment on that floor with those views in any given building.
Once it sells, there won’t be another.
Such scarcity can generate fear in clients that they will lose an opportunity, which is why some people are willing to put down money upfront to secure a property.
Paying a deposit is standard practice in Spain, and particularly on the Costa del Sol.
The ‘reservation’ consists of the agent taking a property off the market for an agreed period to give the buyer, or their lawyer, time to conduct due diligence.
The amount is usually around €3,000 but can be more, or less, depending on price.
And the period is normally two weeks but, again, can vary subject to the buyer’s, agent’s, and seller’s wishes.
As discussed before in this column, Spain (with the exception of Catalunya since 2010, and the Basque Country since 2015) has no legislation in force regarding estate agents, meaning the industry and its practices are self-regulating. Or, in other words, essentially unregulated.
If, knowing this, you still wish to pay a deposit, what kind of contract should you sign and who should you pay?
And does a deposit bind the owner to sell to you? In most cases, the answer to this is no.
To ensure my advice follows the letter of law, I talked to our friendly neighbourhood lawyer, Adolfo Martos Gross of GAM Abogados, to get his expert opinion on the matter from the purchaser’s point of view.
The first thing that buyers have to understand, Adolfo explains, is that there are two different and separate relationships at play here.
One binds buyer and seller together, while the other is between the buyer and the agent, who merely acts as an intermediary to the sale.
Estate agents can ask buyers to sign a reservation contract with or without the permission of the seller.
If they do so with the seller’s express written consent, the contract will bind the latter to the terms of the agreement.
If not, buyers are only dealing with the agent, and any deposit will likely be held by the agent and not the owner.
Such contracts are all too common on the Costa del Sol and, I would say, are a waste of paper for both buyer and seller.
What can also happen, Adolfo notes, is that the agent may ask the seller to authorise a contract after the fact.
In this case, however, the seller is under no obligation to agree to or be bound by the conditions it contains if it was signed without their prior knowledge and approval.
Instead of presuming that all concerned are acting in good faith and, in the worst case scenario assuming the consequences, Adolfo suggests buyers should always demand to pay a deposit direct to the seller.
This should be done via bank transfer to an account that can be proven to be held by the seller under the terms of a contract signed by them personally.
If buyers do decide to enter into any other kind of contract and entrust a reservation deposit to an estate agent, the possibility exists that the agreement signed and money paid will only benefit the agent.