The Ultimate Guide to the Deposit Contract: Types, Clauses, and Real Risks

Posted by ravi@elitegrancanaria.com on January 2, 2026

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You have visited the property, imagined living there, and reached a verbal agreement on the price. The natural next step is to “sign the deposit agreement.” However, many buyers and sellers treat this document as a simple “formality” or a reservation receipt, when in reality it is the most important contract in the entire real estate transaction.

The earnest money contract is a private sales contract with full legal validity. What you sign here will absolutely condition the public deed before a notary. An error in a clause, a miscalculated date, or the choice of the wrong type of earnest money can block your savings or legally obligate you to a purchase (or sale) that you no longer wish to make.

At Elite Real Estate, our policy is clear: nothing is signed that is not 100% understood. In this guide, we break down the fine print so you can operate with confidence.

1. What exactly are the Arras?

The earnest money is an amount of money (deposit) that the buyer gives to the seller as a guarantee that the sale will be completed within a specified period. This amount is deducted from the final price of the property.

But it’s not just money. It’s a contract that sets the rules of the game:

But it’s not just money. It’s a contract that sets the rules of the game:
The deadline to go to the notary.
The allocation of expenses (who pays the municipal capital gains tax, notary, property tax, etc.).
What happens if one of the parties backs out.

2. The Great Danger: Confusing the Types of Deposits

This is the most critical point and where the most mistakes are made when downloading generic models from the internet. The Civil Code distinguishes several types of earnest money, and the consequences of signing one or another are radically different.

A. Penitential Arras (The ones you should look for)

If the buyer backs out: They lose the amount given.
If the seller backs out: They must return to the buyer the amount given doubled.

Son las más habituales y recomendables porque ofrecen una salida pactada si surgen imprevistos personales o económicos. Importante: Para que sean penitenciales, el contrato debe mencionar explícitamente la palabra “penitenciales” o citar el artículo 1454. Si no está claro, el Tribunal Supremo suele interpretar que son confirmatorias.

B. Confirmatory Deposits (The hidden risk)

If the contract does not specify anything, it is assumed that they are confirmatory.

What do they mean? That the deposit is only an advance on the price.
The danger: If you back out, the other party can demand the strict fulfillment of the contract.
- Example: Earnest money deposits for an apartment of €200,000. You regret it. The seller can take you to court and force you to buy the house and pay the remaining €180,000, plus interest and costs. Losing the deposit is not enough to free yourself.

C. Penalty Deposits

They function as compensation for damages, but do not necessarily grant the power to withdraw from the contract. They are less common in standard residential sales.

3. The “Financing Clause”: Your Life Insurance

In the current market, most buyers need a mortgage. However, signing a deposit agreement without having the mortgage approved definitely (not just pre-approved) is a huge financial risk.

If the bank values the property below the sale price, or if Risks denies the operation at the last minute, and you have already signed a standard deposit agreement, you will lose your money. The seller is not concerned with your relationship with the bank.

The Elite solution: We always recommend including a resolutory condition or suspensive clause linked to financing.

Text type: “This contract is contingent upon the buyer obtaining the necessary bank financing. In case of justified refusal by the bank, the amounts paid will be fully refunded without any penalty.”

Without this clause, you are playing Russian roulette with your savings.

4. The Technical Review: What no one does before signing

This is where our Management + Architecture approach makes the difference. The vast majority of agencies will make you sign the deposit as soon as you like the apartment. We say: Stop.

Before committing your money, our technical team checks three points that could blow up the operation:

Urban planning legality: Does that penthouse have the terrace enclosed? Is that enclosure registered in the Property Registry or is it illegal? If there is a current urban planning violation, the City Council could order its demolition. If you sign a deposit agreement without knowing this, you are buying the problem.
The Simple Note and Encumbrances: We verify that the seller is the real owner (it seems obvious, but frauds occur), and if there are seizures, hidden mortgages or easements that affect the use of the house.
Community Levies: We ask for the community certificate. You don’t want to sign and later find out that an important levy has been approved per neighbor to fix the facade or the elevator next month.

5. Quantities and Deadlines: What is normal?

How much money is given? It is usually a 10% of the purchase price. If the payment is immediate at signing, it can be less (e.g., €3,000) as a “reservation” and the 10% can be completed in a few days.
- Tip: Never hand over large amounts of cash. Always use bank transfer or nominal check to comply with the Anti-Money Laundering Law and ensure traceability.
What deadline do we set? Due to the current slowness of bank management offices and registries, at Elite we recommend a deadline of 60 to 90 days for signing at the notary. It is better to set a long deadline and sign earlier, than to set a short one and have to beg the seller for an extension (who might ask you for more money in return).

6. What happens if the house has “Hidden Defects” after signing?

If you have signed the deposit agreement and, before the notary, discover a serious problem (hidden structural dampness, aluminosis, dangerous electrical installation), we enter tricky territory.

If you did not inspect the house with a technician before signing, making a claim is difficult unless the defect is very serious and prevents habitability. That is why we insist: the technical inspection is done before the deposit, not after. Once the contract is signed, the buyer accepts the condition of the property “as is” (except in cases of fraud or very hidden defects).

Conclusion: Signature, but with a safety net

The earnest money contract is a fantastic tool to secure your future home, but it must be drafted with balance and legal knowledge. It is not a form to fill in blanks; it is a tailor-made suit for each transaction.

At Elite Real Estate, we don’t just manage the visit. Our legal team drafts the contract protecting your interests, and our technical team ensures that what you buy is in order.

Are you about to place a deposit on an apartment? Do not sign without review. Let us review the draft or draft it for you to ensure your money is safe.