Buying your own home is often associated with great excitement and a lot of hope. You’re finally fulfilling your dream of owning your own home and you’re already imagining how the children will romp around the rooms and where you’ll put up the tree at Christmas. But before you can get down to renovating, decorating and enjoying, you should ideally have dealt with all the organizational and financial aspects of buying a property. We will give you a compact overview of the down payment aspect below.
What is a down payment when buying real estate?
A down payment is the payment of an amount that serves as a guarantee for compliance with the contractual agreements. If a property purchase is to take place, a notarized preliminary contract can be concluded between the buyer and seller beforehand – as long as the final purchase contract has not yet been concluded. This means that the seller undertakes not to sell the property to anyone else until the final purchase agreement has been concluded. Such a pre-sale agreement is usually used if the buyer still needs to clarify the financing of the purchase but already wants to secure the property. In return for the seller’s waiver, the buyer must make a down payment on the purchase price. The amount of the down payment can either be a lump sum or a percentage of the purchase price.
Are down payments common when buying real estate?
Whenever a pre-sale agreement is concluded, a deposit on the purchase price is usually agreed. This serves as security for the buyer’s solvency and purchase intentions. If, on the other hand, the buyer withdraws before the final purchase contract is concluded, he is usually liable to pay damages to the seller.
How much should the down payment be when buying a home?
The amount of the down payment on the property purchase price is not regulated by law. The buyer and seller are therefore free to agree on an amount. Down payments of up to 30 percent of the purchase price are common in real estate transactions. In any case, the exact amount of the down payment should be recorded in the preliminary purchase agreement. It should also be agreed that the down payment is to be deducted from the purchase price as part of the notarized preliminary agreement as soon as the final purchase agreement is concluded.
Is it possible to buy a property without a down payment?
There is no legal provision that makes a down payment mandatory when buying a property. Accordingly, this is an agreement that the buyer and seller enter into voluntarily as part of the preliminary purchase agreement. Accordingly, the payment of a deposit when buying a property is not mandatory by law, even if it is often made in practice.
In real estate transactions in highly competitive markets, the preliminary purchase agreement in conjunction with the down payment is advantageous for both the seller and the buyer, as it provides both parties with certainty that the transaction will actually take place.
