Why you need a Contrato de Arras when buying property in Spain

Imagine you discover your dream property online. It ticks all the boxes, and you’re eager to make an offer. However, you want to see it in person, verify its condition, and secure mortgage approval before committing.

How can you ensure the property is reserved for you, especially if you live far away and have a hectic schedule? This is where a Contrato de Arras comes into play.

Continue reading for more details. 

Key takeaways

• The validity of Contrato de Arras is minimum 60 days 
• Downpayment is 5-10% of the property price (including initial reservation) 
• The final signing must be contingent upon receiving the mortgage
• Only sign after mortgage approval and provide the reservation contract or contrato de arras with the Nota Simple

What is Contrato de Arras, and why do you need it when buying property in Spain?

The Contrato de Arras is a reservation agreement between the buyer and seller that outlines the key terms of the purchase.

This agreement is a binding commitment for both parties and is crucial in the Spanish property-buying process.

Types of Contrato de Arras

1. Confirmatory Deposits

If one party breaks the agreement, the other can demand completion or cancel the contract and seek damages.

2. Penitential Deposits 

If the buyer backs out, they lose the deposit. If the seller backs out, they must return double the deposit to the buyer.

What is included in Contrato de Arras?

The contract outlines the fundamentals of the purchase and sale, including:

1. Timeline and sale conditions

Details about the sale's timeline and conditions, including property condition, items (furniture, appliances), and other specific terms.

2. Price

The Contrato de Arras must clearly specify the deposit amount, usually 5-10% of the property price. 

This acts as a financial safeguard and a tangible sign of commitment.

3. Mortgage clause

If the purchase relies on a mortgage, this must be explicitly stated. 

This clause allows the buyer to rescind the agreement without losing the deposit if they fail to secure financing.

4. Validity

The Contrato de Arras should be valid for at least 60 days to cover the due diligence period and mortgage release. 

If buying during the summer, consider a 90-day validity, avoiding deadlines in August when Spain slows down for siesta and holidays.

What do you need to know before signing Contrato de Arras?

The agreement should specify the deadline for finalizing the sale and the conditions under which the sale will proceed. This includes details about the property's condition, the items included in the purchase (furniture, appliances, etc.), and other specific terms.

"The deposit can be claimed if either party fails to meet the agreed-upon timeline. This section ensures that both parties clearly understand what is expected and when," says Iván Bellod Díaz, Lawyer and Managing Director at Hoteland.

Manage your cross-border home-buying journey in one place with Homevest

Securing a mortgage often involves a complicated process of submitting numerous documents to pass the bank’s risk approval. Homevest simplifies this process by offering a streamlined digital service.

The platform provides customers an all-in-one place to centralize their cross-border home-buying journey. 

Homevest assists applicants in sourcing the documents required for bank review, making the paperwork easily accessible to the broker, and the bank. 

This streamlined process can save you time and effort, increasing your chances of a successful mortgage application.

You’ll benefit from expert advice from mortgage brokers who will help you build your mortgage file and represent your interests in front of the banks.

We recommend obtaining professional or specialist advice before taking or refraining from any action based on the content in this article. The information in this article does not constitute legal, tax, or other professional advice from Homevest Limited. Prior results do not guarantee a similar outcome. We make no representations, warranties, or guarantees, whether express or implied, that the content in this article is accurate, complete, or up to date.