What Is an Earnest Money Agreement
In the process of buying or selling a property in Spain, one of the most important documents signed before the final purchase contract is the contrato de arras, or earnest money agreement. This preliminary agreement serves as a legal and financial commitment between buyer and seller. In this article, we explain what it is, the different types that exist, and what to keep in mind before signing one.
Definition of Earnest Money Agreement
A contrato de arras is a private agreement in which the buyer delivers a sum of money to the seller as a reservation or deposit for the property. It establishes the mutual commitment of both parties to complete the transaction within a set timeframe and under agreed conditions.
What Is It For?
The earnest money agreement serves three main purposes:
To reserve the property while administrative steps—such as mortgage approval or land registry checks—are carried out.
To define the basic terms of the transaction (price, deadlines, conditions).
To protect both parties in the event of a breach of contract.
Types of Earnest Money Agreements
Spanish law recognizes three main types of contrato de arras:
Confirmatory Arras (Arras Confirmatorias)
These are considered a partial payment of the total price, used as proof of commitment. If either party defaults, the other may demand fulfillment of the contract or its termination with compensation for damages.Penal Arras (Arras Penales)
These include a financial penalty. If the buyer backs out, they lose the deposit. If the seller defaults, they must return double the amount received.Withdrawal Arras (Arras Penitenciales)
The most common type in real estate. These allow either party to withdraw from the agreement without needing to justify the reason, although with financial consequences: the buyer forfeits the deposit if they pull out, and the seller must return double if they withdraw.
What Should an Earnest Money Agreement Include?
To ensure the agreement is valid and helps prevent future disputes, it should include at least the following:
Identification of both parties
Description of the property
Total purchase price
Amount delivered as earnest money
Deadline to formalize the purchase contract
Type of arras agreed upon
Consequences in case of non-compliance
Recommendations Before Signing
Before signing an earnest money agreement, it’s essential to:
Check the legal status of the property
Confirm there are no outstanding debts or encumbrances
Seek advice from a qualified professional
At Selecta.house, we support our clients throughout the entire buying process to ensure a secure transaction with no surprises.