Deposit or advance payment when buying an apartment: differences, errors, nuances

An advance or deposit when purchasing an apartment is a way for the parties to confirm the seriousness of their intentions to conclude a transaction. The essence of both methods is that the buyer transfers a certain amount of money to the seller before signing the purchase and sale agreement for the apartment. This is why these two concepts are often confused in practice.

However, despite some common features, advance and deposit also have a number of significant differences. What is the difference between them, what are their advantages and disadvantages, and what is better to choose, we will analyze in this article.

What document confirms the fact of transfer of the advance?

The document confirming the transfer of an advance in cash is a receipt from the seller, duly executed. In order for it to have legal force, it must be properly executed.

The receipt must be in writing and contain full information about the persons who transferred and received the funds, the amount of the advance received in figures and words, the date and place of the receipt and receipt of the advance, as well as the obligation for which this advance was paid. The receipt must be signed by the person receiving the advance in the presence of the buyer. The original receipt must be kept by the buyer.

advance payment agreement for the purchase of an apartment (form).

The parties can also enter into an agreement or agreement on an advance and stipulate in it their rights and obligations regarding the payment of the advance, its return, as well as other conditions.

Advance payment when purchasing an apartment

Advance and deposit are two concepts that are encountered very often in transactions related to purchase and sale. But, despite the frequency of flashing in various documents, there is no precise definition of what an advance is and what it is used for, neither in the Civil Code nor in other documents designed to regulate the transactions in question. However, the topic of a deposit or advance payment when purchasing an apartment continues to appear. It remains to understand at least a little what this concept means and how to use it.

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Many real estate sellers require advance payment from potential buyers. That is why it is important to find out how an advance differs from a deposit. If you look in the thematic documentation, you can identify several designations of what the document in question is. Typically this is:

The portion of the money that a seller demands for his or her property before most of the transaction is completed;
The advance is not a guarantee that the transaction will continue. Simply put, this is only a payment that is made at the request of the parties, but has no legal force;
If the deal is secured in advance, there is no clear procedure for when and how to deposit funds. For example, transfer them personally or transfer them to a specified bank account;
There is no need to draw up a special agreement to transfer money;
If for some reason the transaction does not go through, then the only inconvenience is that the advance will have to be returned in the same amount in which it was received.

In general, an advance is a rather vague concept.
It has a purely payment function, and using it as an advance payment is risky. There is even an unspoken rule among buyers - if the owner of the apartment demands that an advance payment agreement be drawn up, it means that, most likely, something is not entirely clear in this transaction. The advance does not provide for the loss of money by either party if the transaction does not go through. The amount is simply returned, but this is where the insidiousness of the contract lies. No one guarantees that the deal will be implemented, and in the end the apartment will go to the rightful owner. So if you're thinking of handing over an advance, you better think about it again.

Sample advance agreement

Like any transaction, even remotely related to money, an advance needs to be documented. This will allow you to avoid fraud, of which there are a lot in the real estate market. Moreover, the most common deception is not even the fraudulent conclusion of a purchase agreement. In the first place are frauds with advance payments and deposits. Therefore, when transferring even such a relatively insignificant amount into the hands of a stranger, you should immediately sign the appropriate documentation, the purpose of which is to reduce the risk of losing money and not getting an apartment.

In the conditions provided for in the preliminary agreement, you can specify all the nuances that concern the parties to the transaction. It is also advisable to specify in the contract exactly when the main transaction will be carried out and what the object of the contract is.

The transaction will not take place if all this is not agreed upon before receiving the document. And if you decide to draw up an agreement, then you need to do it correctly, observing the form and parameters. In particular, the transaction in question must be concluded exclusively in writing. But that’s not all, because you need to enter the following data:

Address of the living space, which should ultimately be transferred to other owners;
Final price of housing;
Advance amount;
The period during which the advance will be valid, and the parties must transfer the final amount;
Information about the persons registered in the apartment and when they will be discharged (exact or approximate date);
When the apartment is completely vacated;
The bank where the advance funds will be transferred;
Contract sanctions used to ensure compliance with its terms in the event of a deal failure.

Taking into account the differences between paying a deposit and an advance payment when purchasing an apartment, special attention should be paid to the following points of the contract:

Advance amount. This is an unsettled unit. It is calculated according to a percentage of the value of the property. Therefore, to begin with, sellers conduct a professional assessment of the market value of the apartment. Then they determine what percentage of the amount they would like to receive. But it is advisable to discuss this point with the buyer. In addition, this paragraph considers not only the amount of the advance, but also how it will be paid. Naturally, the buyer, wanting to reduce his contribution, has no guarantees, and the seller is interested in increasing it. Therefore, using a certain percentage is the most reasonable solution.
Object of the agreement. The amount is transferred through the bank. But even if transfer through a bank account is not possible, when transferring cash, it is important to obtain a legally correct receipt. This paragraph also describes when the amount is received, etc.
Apartment address. Naturally, even with a preliminary agreement, it is necessary to indicate for which apartment all this was started. For example, indicating the location of the property. The condition of the property is also described in detail. This is important because quite a lot of time passes between the preliminary and the main transaction, and the condition of the apartment may change. In addition, this paragraph indicates whether children are registered here and when they will be discharged.
Responsibility if the deal falls through. Naturally, at this point it must be indicated that the contract cannot be terminated just like that. In particular, use fines and sanctions. If people are not ready for such transactions, then they will not sign an agreement with strict conditions. So this is another way to reinsure yourself.

Advance amount

Before concluding a transaction to transfer an advance to an account, you need to determine what this advance will be.
Few people understand the difference between a deposit and an advance, or whether a deposit can be used. The fact is that the amount is strictly individual, but according to the unwritten rule, the amount of this monetary compensation should not exceed 10% of the transaction. But this does not mean that the percentage will be less. For example, it is more profitable for the parties to indicate an amount equal to 5% of the cost of the apartment. They stipulate this in the contract. But in the process of purchasing housing, for example, when buying an apartment, the deposit or advance depends on whether the buyer can count on the final receipt of living space. The main difference between an advance and a deposit is the degree of risk. The advance payment is returned in the same amount in which it was paid, but the deposit must be paid in double amount if the seller broke the deal, and if the buyer is at fault, the money remains with the seller.

But let's take a closer look at what may affect the final advance size:

Real estate area. The fact is that the larger the apartment, the more expensive it is. It is logical that if the cost of the apartment itself is high, the percentage of its price can be reduced, because the amount in any case will be quite substantial;
Condition of the property . Simply put, has it been renovated, or is it just a slightly touched-up ruin claiming to be a palace;
Number of applicants interested in purchasing real estate. If several buyers apply for an apartment at once, then the choice will fall on the one who agrees to pay a large amount as an advance.

As for the legislation, it has practically no control over this issue. And if you want to play it safe, then in the contract specify the exact amount of the contribution, to whom and under what circumstances it was transferred, and when the transaction should be completed.

What documents confirm the transfer of the deposit?

In addition to the agreement, the party who received the deposit must issue a receipt indicating the personal and passport details of the persons who transferred and received the money, the date and place of drawing up the receipt, the amount of the deposit in figures and words and the obligation for which the deposit was issued. The receipt must be signed by the appropriate person with his full name.

The deposit can be transferred to the seller's account. In this case, the purpose of payment must indicate that the transferred amount of funds is a deposit, and the obligation secured by it must also be identified.

deposit agreement when purchasing an apartment.

Features of the deposit

The deposit is the amount that the buyer transfers to the seller of real estate against future payment for the apartment, as a guarantee of the completion of the transaction and compliance with the preliminary agreements of the parties. If the purchase and sale transaction takes place within the agreed period, this amount is counted towards payment of the cost of the apartment. The deposit guarantees the parties to the future transaction the fulfillment of their agreements.

The concept of a deposit is defined in Articles 380-381 of the Civil Code of the Russian Federation. In accordance with these articles of the code, if the purchase and sale agreement for an apartment is not concluded due to the fault of the buyer, the deposit remains with the seller. If the seller avoids concluding the transaction, he is obliged to return double the amount of the deposit to the buyer.

A contract or agreement on a deposit must be concluded in writing. Signing a deposit agreement or a preliminary purchase and sale agreement implies a refusal to sell the apartment to a third party. That is, the owner undertakes to remove the apartment from sale, or indicate in his advertisements that a deposit has been accepted for the apartment (up to such and such a date). If, after accepting the deposit, the seller still decides to sell the apartment to a third party, he will be forced to raise the price by at least the amount of the deposit. After all, he will have to return the money transferred by the buyer as a deposit, and the same amount from his own pocket.

If the buyer changes his mind and finds a more profitable purchase option, then his benefit from this should cover the loss of the deposited amount.

The larger the deposit amount, the greater the responsibility of the parties, and the less likely that one of the parties will refuse the transaction.

However, if the buyer refuses to purchase, the seller already has the money in his hands (he may simply not give it back). The buyer, in case of failure of the transaction due to the fault of the seller, will still need to receive a double amount of the deposit from the seller. You may have to go to court. And although the specific amount of the deposit is not regulated by law, it is worth considering all the risks. Therefore, the amount should not be very large. As a rule, depending on the region and the value of the property being alienated, the amount can be determined by the parties from 30 to 300 thousand rubles.

What to choose?

The parties have the right to decide which method of advance payment to choose by mutual agreement. It all depends on the specific situation. For example, if the seller is not sure that he will subsequently conclude an agreement to purchase an apartment, it will be more profitable for him to make an advance payment, because only in this case will he be able to get back all the money paid. If the chosen apartment fully meets his requirements and he does not want to lose it under any circumstances, then in this case it is more profitable for him to make a deposit, because in this case, if the seller changes his mind about concluding the contract, he will have to pay the buyer double the amount of the deposit.

Regardless of which option is chosen by the parties, the buyer must check all documents for the apartment, as well as the powers of the persons signing the agreement, before depositing funds.

In the event of controversial situations, including situations related to the seller’s failure to return the amount of the advance payment or double deposit, the parties have the right to go to court to resolve the conflict.

How to Avoid Scams

You should pay attention to some important conditions of real estate transactions:

When drawing up contracts, all points must be discussed in advance..
The parties are required to identify each other . For each of them it is important: the transaction is made personally by the seller and buyer or their representatives. In the latter case, a notarized power of attorney is required.
You will need to check the title documents for the apartment and technical ones, and check the actual layout with the one indicated in the papers.
If the property has several owners, they must give written permission to sell the share by one of them and be present when all papers are signed. If a minor has rights to property, housing can be sold with the written permission of the guardianship authority; legal representatives can act on his behalf. In this case, the minor must be registered in advance at a different address. It is better to obtain consent from the owners before executing the deposit agreement.
If the spouses are divorced, then within 3 years one of them can claim his share in the jointly owned apartment . You need to inquire about the seller’s marital status and ask for a marriage or divorce certificate as confirmation.
It is advisable that at the time of the transaction there are no registered residents . Otherwise, each contract will have to indicate a separate clause on the timing of the discharge of such persons. If minors, single mothers, disabled people, and elderly citizens are registered in the premises, it is better not to agree to purchase such housing. At the last moment it may turn out that they have nowhere to check out. If any of the residents refuses to leave the premises, much less check out after re-registration of ownership rights, the new owner will have to go to court.
Before the final conclusion, you need not only to check the condition of the premises , but also at the end to draw up an act of acceptance and transfer of property.
It is advisable to inquire whether the apartment has utility debts . If so, you can immediately reduce the cost of housing by this amount.
It is better to draw up real estate transactions in the presence of a notary and certify all documents with his signature and seal. Then this person will additionally act as a witness.

Read Sample minutes of the general meeting of residents of an apartment building

Difference between advance and deposit