Our goal in this article is for you to learn about the terms you will hear during a real estate sale. But our website does not constitute legal advice; we simply explain the more common cases or uses. Many specific cases exist and we encourage you to contact a real estate professional or your notary in order for you to have adequate and complete information.
The offer to buy, sale offer or the provisional sale agreement are 3 ways by which you can end a first agreement during a property sale. They are also called: “preliminary contracts”. They all have a predetermined period of validity after which they become obsolete if one of the parties has not signed the document or a deed of sale. Fees due to the intermediaries must be explicitly mentioned;
All three of these contracts are “private agreements”, this means the documents are written and signed by both parties. Thus, a provisional sale agreement is often named a “private agreement”.
These documents are drafted at the start of the legal sale processes. The differences between them reside in the parties’ obligations and the conditions for terminating the contract.
This offer essentially binds the buyer, this why it can be named “price offer”. It is often orally done in regards to older buildings. But for a buyer who really wants to buy the property it is recommended to put the offer in writing (via a real estate agent) because once the “Offer to Buy” accepted and signed, the seller is legally committed and the terms will be reported onto the provisional sale agreement.
This promise to buy has a period of validity relatively short, in most cases 8 days during which the seller can accept or refuse this offer.
The offer to buy can contain suspensory clauses and that can be built on (for example):
When buying brand new property, you will find a variant called the reservation contract. The developer or marketer of the brand new property commits to reserving the good at a fixed price found in the document in exchange of a guarantee deposit. The amount of this deposit corresponds to 2 to 5% of the price of sale but calculated on the length of time between the dates of the signature of the document and the delivery of the property. The longer this period is, the smaller the deposit will be. No deposit is possible if the period is longer than 2 years. Kept in receivership it is also illegal for the seller to receive it directly.
Thus if the buyer does not obtain the loan (suspensory clause) the withdrawal will be without penalty and the seller will have to return the whole deposit. But the suspensory clause must not allow the future buyer to stop his loan application. Furthermore, if the developer does not build the project, the guarantee deposit must be returned. To find out more on the return of the guarantee deposit in the case of a reservation on a planned new property
It is a document in which the seller commits to selling the property to a buyer and only to that buyer during a limited period of time (usually 2 to 3 months). During this lapse of time, the seller cannot refuse the sale nor sell to someone else.
After period of validity or if the conditions stated in the Sale Offer are achieved then an authentic deed can be signed between parties. The elements found in the Sale offer we be used to draft the final sale agreement.
The sale offer is demanding for the seller because in it the price must be stated but not only, documents that allow the buyer to take note of the condition in which the property is must be collected and given to the interested buyer:
Some of these documents are required anyways to the property on sale.
The seller must also commit to keep the house or flat in the same condition the buyer was presented with when signing the Sale Offer. Renting is only possible with the go ahead of the future buyer.
The seller is completely committed with the Sale Offer.
In order for this document to be valid it must be registered with the tax authorities within 10 days of signing. The buyer must pay for the registration fees and this is often the raison for which this type of contract is rarely used in favour of the free provisional sale agreement.
When both the buyer and the seller agree on the terms of the transaction, they sign a provisional sale agreement (or a indenture) which will define the terms of the sell. It is the most frequently used contract in real estate transaction in France when committing to a sale.
Unlike a Sale offer, the provisional sale agreement does not need to be registered with the tax authorities.
In it you will find more or less the same information you would find in a Sale offer, but you will also find the buyers commitments.
The provisional sale agreement is only signed once the seller receives the guarantee deposit from the buyer. It is generally 5% of the sale price; the deposit will be deducted from the total sale cost when signing the deed at the notary’s. The provisional sale agreement is often considered as the final agreement before the final deed because both parties are fixed on price and other terms. The date of the signing of the final deed at the notary’s is fixed and in the document. The usual delay between the two signatures is 3 months.
This contract, as it is the case with the sale offer, gives a maximum of 10 days to the buyer to legally withdrawal.
Our advices are free and we are at your disposal to answer any of your questions.