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Legal Guide to the Earnest Money Contract in 2026: Everything You Need to Know

The earnest money contract (contrato de arras) is probably the most important document in the home buying and selling process. It is not a mere formality, but a legal commitment that protects both the buyer and the seller before going to the notary.

At ABA Expertos Inmobiliarios, we know that clarity at this stage is essential for the success of the transaction.

What exactly is an Earnest Money Contract?

It is a private contract where the parties agree to reserve the purchase and sale of a property, handing over a sum of money (a deposit) as proof. It usually represents 10% of the sale price, although this percentage is negotiable and can vary depending on each contract.

Types of Arras: Which One to Choose?

Not all deposit agreements are the same. According to the Spanish Civil Code, there are three types, and confusing them can have serious financial consequences:

Expert tip: In the residential market of Madrid and coastal areas, 90% of contracts use penitential arras, as they offer a clear way out if either party changes their mind.

5 Critical Points for an Accurate and Secure Contract

For the contract to be professional and reliable, it must include these verifiable details:

• Property Identification: It must include the registry description, the cadastral reference, and above all, state that the property is free of encumbrances (based on a recent Nota Simple).

• Mortgage Clause: If you need financing, it is vital to include that the contract will be voided (and you will get your money back) if the bank denies the loan. Without this clause, if you do not get the mortgage, you will lose the deposit.

• Distribution of Expenses: It is necessary to specify who pays what (Notary, Registry, Municipal Plusvalía tax, and Property Transfer Tax - ITP). Typically, the buyer pays the deed expenses and the seller pays the plusvalía.

• Maximum Deadline for the Deed: In 2026, it is advisable to set a deadline of 60 to 90 days. This gives enough time for bank appraisals and document management.

• Status of Utilities and HOA: The seller must guarantee that they are up to date with the property tax (IBI) and community fees.

Frequently Asked Questions (FAQs)

Who keeps the earnest money if the sale is canceled?

If the buyer backs out, the seller keeps the deposit. If it is the seller who backs out, they must return double the amount delivered to the buyer (in the case of penitential arras).

Is it mandatory to sign the arras before a Notary?

No, it is a private document and has full legal validity. However, the final signing of the purchase and sale must mandatorily be executed in a Public Deed before a Notary for its inscription in the Property Registry.

Is the earnest money deducted from the final price?

Yes, the amount delivered is considered a down payment on the total agreed price.

If you have more questions, visit our [Frequently Asked Questions Section].