Buying a home: don't lose your deposit

03/03/2022

In the process of buying a home, it is very common to sign a deposit agreement in order to reserve the house we want to buy while we look for the necessary financing to do so. The most common type of deposit is the so-called forfeit deposit (arras penitenciales), which implies a penalty for a party that does not fulfil its commitment to buy or sell.

As the time needed to obtain financing tends to be difficult to estimate and it is common to have to consult several banks, we advise you to be prudent, and that you do not get carried away by the enthusiasm of closing the transaction and do not fall short of the deadline established for signing the purchase-sale.

The regulations do not establish the period of time that a financial entity must take to respond to a mortgage application, so you cannot claim if its delay in giving you an answer, whether positive or negative, means that you fail to fulfil the signed deposit commitment. In the event that the bank has raised expectations that are not fulfilled, it would be possible to resort to the Courts of Justice, especially if there were agreements or promises that can be accredited with documentation. The generation of false expectations by the bank, and responses that are delayed by more than could reasonably be expected, are practices that are not considered adequate by banks.

But remember that the bank is obliged to study each financing transaction based on its credit policy and in line with the concept of "responsible lending". It has to assess the creditworthiness of the potential customer on the basis of sufficient information, for which it will need time, and also circumstances may arise that slow down the process. Your swift delivery of all the information requested by the bank might speed things up.

A good way to cover yourself against loss of the forfeit deposit is to expressly stipulate that, in the event of a refusal of the mortgage, the buyer can recover the amount delivered as such deposit.