The down payment for the purchase of a home

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When we are in the process of buying a house, we are faced with certain steps to deal with: once we have identified the right property for us and decided to buy, the first step to deal with, after the purchase proposal, is the down payment. In this article we are going to first analyze the definition and what types of down payments exist. 

Let's start with the definition.

Deposit, in civil law, is a sum of money or a quantity of other fungible things paid as a mutual and reciprocal guarantee against non-performance in the contract or as consideration for the case of withdrawal from the contract.

What is its function? It is to provide for a kind of "immediate compensation" in the event of a breach of contract, and in the event of fulfillment must be returned or charged against the performance due.

What types of deposits exist?

  1. Security deposit : Is the type of down payment that is certainly the most widely used . It is a sum of money that is paid by the buyer as security. This means that if the buyer fails to complete the purchase, the seller will be compensated by retaining the sum paid with the down payment.uali types of qQ (Art. 1385. C.C.) " If at the time of the conclusion of the contract one party gives the other, by way of deposit, a sum of money or a quantity of other fungible things, the deposit, in case of performance, shall be returned or charged against the performance due. If the party who gave the deposit is in default, the other party may withdraw from the contract, retaining the deposit; if, on the other hand, the party who received it is in default, the other party may withdraw from the contract and demand double the deposit. If, however, the non-defaulting party prefers to seek performance or termination of the contract, damages shall be governed by the general rules."

The down payment fulfills several functions. First of all, it facilitates the resolution of the dispute in case of default; in fact, in such a case, if the contractor who received the down payment is satisfied with retaining the sum, he will avoid claiming damages and termination of the contract, taking the form of a lump-sum, advance liquidation of damages.

It also serves as proof and confirmation of the conclusion of the contract.

Very important is the guarantee function it serves: on the one hand, it provides an incentive for the debtor party to perform, who will try to avoid losing the deposit given.

  • Penitential deposit : this type is very similar to the security deposit but with slight differences . The penitential deposit is a sum of money (or other performance) that one party delivers to the other as consideration for the right of withdrawal. Given the down payment, the contracting parties reserve the choice between withdrawal and performance. In the former case, the withdrawing party forfeits the deposit given (or, if the withdrawing party is the one who received it, must return double the deposit he or she had); if, on the other hand, withdrawal is not triggered, the deposit must be returned. The penitential deposit, therefore, unlike the confirmation deposit, functions "not as compensation for damages for non-performance of the contract, but as consideration for withdrawal by unilateral will" (Art. 1386 C.C.)
  • Payment method for deposit:

The deposit can be paid by the following payment methods:

  • Non-transferable bank check
  • Cashier's check
  • Bank transfer

All traceable payment methods that can be used as proof of deposit are preferred for deposit payment.

  • But how much is usually paid as a deposit?

Usually the figure is 10% of the purchase price but there is no real written rule. Let's say it is an agreement between the parties so the buyer and seller can agree on the amount to be required. Obviously the higher the deposit amount the more the parties are bound by a common interest (including economic interest) in bringing the transaction to a conclusion.

With this article I hope to have cleared up all your doubts on this topic. If you still have any doubts please contact us at our office, we will try to answer all your questions.

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Until the next blog !

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