Whether you are in the position of seller or buyer, a real estate sale is an act that requires rigor and compliance with various legal provisions. The security deposit with the notary is in particular part of the security provisions that intervene in this context. Discover here the essentials to know about this almost essential deposit in a real estate sales agreement.
What is the security deposit at the notary?
The security deposit at the notary is a sum of money paid by the future purchaser following a sales agreement. This deposit constitutes a guarantee for the seller. Indeed, it certifies the buyer’s full will to acquire the property concerned. Note that the payment of this deposit must occur almost systematically after the signing of the sales agreement.
Generally, the amount of the deposit is calculated as a percentage of the sale price and is transferred to the notary’s escrow account. However, in certain exceptional situations, this amount may be paid directly into the seller’s escrow account. In either case, the account number must imperatively be transcribed on the sales agreement. This ensures the traceability of the deposit.
The sum paid by the purchaser can take several denominations. In particular, it can be called:
- Security deposit;
- Immobilization allowance;
- Provisioning of the debit clause.
Whatever its name, it fulfills the same functions. She allows to reassure the seller that the buyer is serious, and especially of seal the bond between the two parties.
In addition, it is important to know that the immobilization allowance is often between 5 and 10% of the sale price of the property. However, since there is no standard governing this practice, the two contracting parties are free to decide on the amount that suits them. However, it is still recommended that the purchaser never accept a sum greater than 10% of the amount agreed for the sale.
Read also: Reduce notary fees, how to do it?
Why is the downtime allowance so important?
Although the seller cannot immediately benefit from the security deposit, several reasons must push the latter to claim its payment. These reasons are of various kinds and allow him to benefit from a number of advantages.
Security deposit: proof of solvency
The security deposit is used for prove to the seller that the buyer has a suitable level of creditworthiness. Indeed, the fact that a buyer is unable to immobilize 5 or 10% of the amount of the sale is often a sign that he does not have a sufficient personal contribution and that he will certainly have struggling to persuade a bank to give him a loan. In other words, the immobilization allowance allows the seller to determine which buyer really has the potential to buy their property.
True financial security
The security deposit at the notary serves as financial security defense pillar. Indeed, although the purchaser is serious and solvent, he can retract at any time. In this case, the penalty clause can allow the confiscation of the security deposit, without the need for a long and complex legal procedure.
In addition, the security deposit with the notary introduces a sizeable financial stake. It is therefore also used to naturally strengthen the level of commitment of each party.
In which case can the purchaser recover the security deposit from the notary?
The security deposit can be refunded by the seller under certain circumstances. It is therefore important to be aware of it so as not to be caught off guard.
When the purchaser asserts his right of withdrawal
The buyer has an irreducible period of ten days during which he has the opportunity to mature his choice and to withdraw without penalty. The notary then finds himself in the obligation to repay it within 21 days from the day after the withdrawal.
When the purchaser asserts a suspensive clause
If the buyer proves his inability to obtain a mortgage offer from a financial institution or a bank, he can request a refund of the security deposit. Some other conditions precedent provided for in the contract may also be mentioned by the buyer in order to obtain a refund.
When the purchaser claims a defect in consent
Finally, the security deposit at the notary can be refunded if the seller has not respected the obligation of perfect information enjoyed by the purchaser. In this case, the reimbursement may even be accompanied by damages.
Read also: What is the role of a notary when selling a home?