What you should know before reserving a property
Signing a deposit contract (contrato de arras) in Spain is one of the most important steps before buying a property. It is the moment when the buyer and seller state in writing their intention to close the transaction, and the buyer hands over a sum of money as a deposit.
Although it may seem like a simple formality, it shouldn’t be signed in a rush. An earnest money contract commits both parties and can have financial consequences if either fails to comply with the agreement. Therefore, before handing over any money, it is essential to understand what you are signing, what the document includes, and what happens if the sale doesn’t ultimately go ahead.
At The Property Agent we work with buyers looking for a home on the Costa del Sol, often from outside of Spain, and we know this step can raise doubts. The key is to move forward with clear information, no small print, and the right guidance.
What is a deposit contract (contrato de arras)
An earnest money contract is a private agreement between the buyer and seller prior to signing the public deed of sale before a notary.
In this contract, the buyer usually delivers a sum of money as a deposit to reserve the property. This amount is normally deducted later from the final purchase price.
For example, if a property costs €500,000 and the buyer pays €50,000 as a deposit (arras), that amount will form part of the total price. At the signing before the notary, the rest of the amount will remain pending.
The deposit contract helps set the main conditions of the transaction and puts the commitments of the buyer and seller in writing.
If you are in the initial stages of your search, this guide on what a foreigner needs to buy a property in Spain can also help you, especially if you are still organizing your NIE, documentation, or the first steps of the purchase.
Deposit contract vs. reservation contract: they are not the same
A common confusion is thinking that a reservation contract and an earnest money contract are exactly the same. They aren’t always.
The reservation contract is usually used to set aside a property for a short period, often with a smaller amount. It is common in new build or off-plan developments, where the buyer reserves a specific unit while the subsequent documents are prepared.
The deposit contract (contrato de arras) usually carries more legal weight and establishes essential conditions of the sale: price, deadline to sign, amount paid, consequences of a breach, and specific terms of the transaction.
The difference matters a lot. It is not the same to pay a small reservation fee to start the process as it is to sign an arras agreement that may involve losing the deposit if you do not buy, or having it returned double if the seller does not sell.
Types of deposit contracts (arras) in Spain
There are several types of arras in Spain. The most well-known are the arras penitenciales (penitential deposit), but they are not the only ones.
The arras penitenciales allow either party to withdraw from the contract. If the buyer backs out, they normally lose the amount paid. If the seller backs out, they must return double the amount.
The arras penales (penal deposit) work as a penalty for non-compliance, but do not always free the breaching party from the obligation to buy or sell.
The arras confirmatorias (confirmatory deposit) serve as proof that an agreement exists and an advance payment on the price has been made, but they do not necessarily regulate the possibility of withdrawing.
This is why it is so important for the contract to clearly state what type of arras is being signed. It is not enough for the document to simply be titled “contrato de arras”; the clauses must be read carefully.
What a deposit contract should include
A well-prepared deposit contract must include, at a minimum:
- full details of the buyer and seller;
- identification of the property;
- total purchase price;
- amount paid as a deposit (arras);
- payment method;
- maximum deadline to sign before a notary;
- distribution of expenses and taxes;
- status of charges, mortgages, or debts;
- furniture or fixtures included, if any;
- consequences if the buyer or seller breaches the contract;
- special conditions, if they exist.
This last point is especially important. For example, if the buyer needs a mortgage, it may be advisable to include a clause regulating what happens if the bank ultimately does not grant the financing. Not doing so can cause problems if the buyer cannot complete the transaction.
If you are going to buy with financing, check this guide first on how to finance the purchase of properties in Malaga, which explains the basics of mortgages for buyers and common deposits.
What to review before signing a deposit contract
Before signing an earnest money contract, you should review the legal and financial situation of the property.
The first step is to request a nota simple from the Land Registry. This document allows you to check who the owner is and if there are any charges, mortgages, embargoes, or limitations that may affect the sale.
It is also important to check if the property is up to date with community fees, IBI (property tax), and other expenses. In properties within residential complexes (urbanizaciones), which is very common on the Costa del Sol, community fees can be significant and should be known before buying.
If you are buying new build or off-plan, other aspects must be reviewed: the developer, building license, quality specifications, payment schedule, guarantees for amounts paid, and estimated delivery date.
And if you are buying from abroad, your timelines must be realistic. Obtaining a NIE, opening a bank account, organizing international transfers, preparing a power of attorney, or securing a mortgage can take longer than expected. At this point, this guide on opening a bank account in Spain to buy a property can help you anticipate documentation, timelines, and possible mistakes.
Common mistakes when signing a deposit contract in Spain
One of the most common mistakes is signing too quickly out of fear of losing the property. It is normal for a good property to create a sense of urgency, but that doesn’t mean you should hand over money without reviewing the documentation.
Another mistake is not clarifying what happens with the financing. If you need a mortgage, the contract must be well drafted to avoid problems if the bank takes longer than expected or does not approve the operation.
It is also common to confuse a sign (señal), reservation, and arras. An amount paid “to set aside” a property can have different consequences depending on how the document is worded.
And lastly, many buyers do not carefully review what is included in the price: furniture, appliances, parking space, storage room, or agreed renovations. Everything important must be put in writing.
To crunch the numbers more calmly before committing, I recommend you also review this guide on buying costs in Andalusia and this article on AJD (Stamp Duty) in Andalusia when buying a property.
Deposit contract if you buy on the Costa del Sol
On the Costa del Sol, the deposit contract is very common in property sales transactions, especially in resale properties. In new build or off-plan, the process usually begins with a reservation and continues with a private purchase contract.
Every case changes. Buying a finished villa, a second-hand apartment, an off-plan property, or a new build development are not the same. The documents, deadlines, and payments can differ.
Therefore, if you buy in high-demand areas, it is advisable to have local guidance from the beginning. Not only to find the right property, but also to understand the process, compare options, and know what steps come after the reservation.
You might also be interested in this guide on 7 things you should know before buying a property on the Costa del Sol, especially if you are just starting to compare areas, taxes, and purchase steps.
How The Property Agent can help you before signing
Buying a property involves several steps and documents that can raise questions, especially if you buy from outside of Spain or if it is your first real estate transaction.
At The Property Agent, we help you filter properties, understand each step of the process, and coordinate with trusted professionals when you need legal advice, financing, or additional guidance. Before signing any document, it is advisable to fully understand what is being signed and the implications of each clause.
The idea is to help you understand the process and answer your questions before making major decisions. You can learn more about this approach on the page of Celeste Alonso, The Property Agent.
Secure your property safely before taking the next step
Signing an earnest money contract is often one of the steps that generates the most doubts during a real estate purchase. Before handing over money, it is worth reviewing the documentation, understanding the conditions, and confirming that everything agreed is in writing.
Before handing over money, inspect the property, understand the terms, confirm the deadlines, and ensure the contract correctly reflects the agreement.
Are you thinking of buying a property on the Costa del Sol? Contact The Property Agent and we will help you move forward clearly from the initial search to the final signature.
