One of the first steps when buying an apartment is the transfer of prepayment. To avoid problems at this stage, it is important to understand the differences between the advance, deposit and security payment, as well as correctly draw up a deal. We will analyze each of these forms of prepayment in detail.
The choice of prepayment form depends on the goals and level of risk, which the parties are ready to accept
Content:
- Deposit and advance: what is the difference
- What is a security payment
- How to make a deposit correctly
- How to make an advance for an apartment
- How to issue a security payment
- What should be the amount of the advance, deposit and security payment
- What to do if they do not return a deposit or advance
- In which case, the money will be returned if the bank has not approved the mortgage?
- How to choose a suitable prepayment option
Deposit and advance: what is the difference
Although the advance and deposit is often confused, their legal significance is significantly different.
The deposit is not just the money transferred to the seller, but the tool that ensures the fulfillment of obligations. If you make a deposit and then refuse a transaction without a good reason, the amount remains with the seller. But if the seller violates the terms of the contract, he is obliged to return the deposit in double size. This gives confidence to both parties and stimulates them to comply with agreements.
Imagine that you agreed to buy an apartment for 7 million rubles and made a deposit of 500 thousand. However, the seller decided to refuse the transaction to sell the apartment to another buyer. In this case, you can go to a court that will oblige the seller to return the amount in double size. So you will receive not only your money back, but also compensation for the lost time.
With an advance, the situation is different. This is just an advance payment, which is returned to the buyer in the event of a break in the transaction, but does not provide for compensation. If, for example, the seller has found another buyer who offered more favorable conditions, he will return the money to you, but you will not be able to demand reimbursement of your expenses: payment of real estate services or real estate.
What is a security payment
The security payment is a flexible tool that allows the parties to independently establish its conditions. In the contract, you can prescribe in which cases the money is returned, and in which they remain at one of the parties.
Suppose you made a security payment for the apartment with the condition that the amount is returned if the bank refuses the mortgage. When the bank did not approve the loan, the seller repaid the money, as it was registered in the contract. If a deposit was used, but there was no such clause in the contract, you would have to seek a return through the court.
The security payment is especially useful in difficult transactions, for example, when it is necessary to take into account the approval of the mortgage.
How to make a deposit correctly
To draw up a deposit, it is necessary to conclude an agreement. It must indicate the data of the parties, the exact description of the property, the amount of the deposit, as well as the conditions under which the money is returned or remain with the seller.
Before making money, check if the seller is really the owner of the apartment. Request an extract from the USRN and make sure that there are no burden on real estate, such as pledges or arrests. This will protect you from possible risks.
For example, you decided to buy an apartment worth 6 million rubles and agreed on a deposit of 300 thousand. Before transferring money, you check the documents and find that the apartment was seized. In this case, you can refuse the transaction without losing money.
How to make an advance for an apartment
The advance payment is recorded in the preliminary contract of sale or in a separate agreement. These documents indicate the basic conditions of the future transaction, including the cost of the apartment, the terms of its acquisition and the procedure for calculations.
For example, you want to make an advance per apartment. Together with the seller, you conclude a preliminary agreement in which it is prescribed that the advance payment is returned in case of the bank refusal in a mortgage. This allows you to be sure that the money will not be lost if the transaction breaks out for reasons beyond your control.
The transfer of money must be issued in the form of a receipt or included information about the amount of the advance payment in the text of the contract. The seller must personally confirm the receipt of money with his signature.
How to issue a security payment
To make an interim payment, an agreement is drawn up, where the conditions for the return or withholding of money are prescribed in detail. It is important to fix:
- On what conditions is the security payment remains with the seller.
- What obligations of the parties are provided by this amount.
- The procedure for returning funds when disrupting the transaction.
Imagine that you make a security payment for an apartment in a new building. The contract states that the money is returned if the developer does not provide documents for a certain period. And if there are no documents on time, you will receive your money back without problems, as this is provided for by the agreement.
The conclusion of an agreement is an important stage of the transaction. It must be decorated in writing
What should be the amount of the advance, deposit and security payment
The size of the prepayment depends on the form of payment, agreements between the parties and the cost of the apartment.
The advance amount is usually small, since this payment is symbolic in nature and does not imply strict obligations. Most often, the advance is from 10,000 to 100,000 rubles. This size is convenient for the buyer, as financial risks are minimal. The seller, in turn, receives confirmation of the seriousness of the buyer’s intentions.
The amount of the deposit is most often 5-10% of the cost of the apartment. If real estate costs, for example, 7 million rubles, the deposit usually varies between 350,000-700,000 rubles. A higher amount can be agreed if the seller needs to receive a large payment in advance (for example, to cover his own obligations). However, buyers should avoid too large inclinations, since their return in case of disputes can be difficult.
The amount of the security payment does not have the established framework and is determined individually. Usually this is the amount comparable to the deposit, for example, 5-10% of the cost of the apartment. The main thing is that the amount of the security payment is reasonable. If the parties agree on the special conditions for the return or retention of this amount, they must be clearly written in the contract.
In any case, the size of the prepayment should arrange both sides and correspond to the real capabilities of the buyer. Before making a large amount, it is important to verify the reliability of the seller and the legal purity of the transaction.
What to do if they do not return a deposit or advance
If the seller refuses to return the deposit, it is important to determine who is to blame for the disruption of the transaction. According to the law, the deposit must be returned in double size if the transaction did not take place due to the fault of the seller. If the transaction was canceled on your initiative, the seller has the right to leave a deposit to himself.
If you think that the seller’s refusal is illegal, start by sending a written requirement. In this document, indicate that the deposit was transmitted, and clarify the circumstances by which the deal fell. The seller should explain that his refusal is contrary to the terms of the contract.
If the seller continues to ignore your requirements, go to court. For a successful resolution of the case, you will need a deposit agreement, a receipt on the transfer of money and any other evidence confirming your case. For example, if the deal fell due to the fact that the seller could not provide the necessary documents for the apartment, this will become a serious basis for a court decision in your favor.
When the advance is not returned, first find out the reason for the refusal. Perhaps the seller refers to the terms of the contract, which provides for the withholding of the amount in the event of a breakdown of the transaction. Therefore, it is important to carefully read the advance agreement. If there is no mention that the seller remains the advance, you have every right to demand a refund.
To begin with, you should send the seller a written request for a refund. This can be done through a notary or registered letter with a notification of delivery. The document must indicate the circumstances in which the transaction was canceled, and your grounds for a refund.
If the seller does not answer or refuses to return the advance, you need to go to court. In court you will have to prove the fact of transferring money, so collect all the documents in advance: receipt, contract or other written confirmations. If you have no evidence, the situation may become more complicated, since the seller can deny the fact of receiving an advance.
In which case, the money will be returned if the bank has not approved the mortgage?
The return of prepayment in case of the bank refusal in a mortgage depends on the conditions prescribed in the contract. If the agreement states that the bank refusal is a good reason to terminate the transaction, the money is returned to the buyer. It can concern both an advance and a deposit.
However, if the contract does not have a clause on the return of prepayment in case of a bank refusal, it will be more difficult to return the money. In such a situation, the seller can leave the amount at home, referring to the violation of obligations by the buyer.
To protect your interests, it is important to stipulate this moment in advance and include the appropriate condition in the contract. If you have already found yourself in a situation where the bank refused a mortgage, and the seller does not return the money, start with negotiations. Send a written notice to return the amount and indicate that the disruption of the transaction occurred for reasons beyond your control.
If the seller continues to refuse, the only way out is the appeal to the court. The trial will depend on how in detail the conditions of the return in the contract were spelled out. If the bank refusal was not stipulated as the basis for a return, it can be difficult to return the money. This once again emphasizes the importance of a thorough study of all conditions at the stage of preparation of prepayment.
How to choose a suitable prepayment option
The choice of prepayment depends on the degree of confidence in the transaction.
If you want to insure yourself with the breakdown of the transaction and convince the seller of the seriousness of your intentions, it is better to choose a deposit. This is especially true if the seller wants guarantees that you will not refuse to buy.
The advance payment is more suitable for situations when the parties have just begun to negotiate and the basic terms of the transaction have not yet been agreed. This is a simple way to fix intention, but it does not fully protect your interests.
If the transaction is difficult and you want to flexibly approach the terms of the refund, you should choose a security payment. This will take into account the individual circumstances of the transaction.
How this prepayment will be issued can significantly affect the outcome of the transaction
Conclusion
So, we examined in detail the three main forms of prepayment: deposit, advance and security payment. The deposit provides obligations of both parties, the advance payment fixes intentions, and the security payment gives flexibility under difficult conditions.
To avoid problems, it is important not only to choose the right prepayment option, but also to correctly draw up all the documents. Check the ownership of the seller, request an extract from the USRN and specify if there are encumbrances in the apartment. If the transaction is connected with the mortgage, be sure to prescribe the terms of the return of funds in the case of the bank refusal in the contract.
Most importantly, attentive to each stage of the transaction. Consultation of a lawyer and a clear fixation of agreements will help you protect your interests and make the process of buying an apartment safe and successful.
