Deposit on bulgarian property purchase

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Deposit on bulgarian property purchase

Postby Admin » Tue May 28, 2013 2:31 pm

Dear forum members,

The nature of the deposit paid on the beginning of real estate purchases/sales in Bulgaria very often is being wrongly understood by overseas investors as “advance payment” for the property, where the buyer gets the impression that they are paying up towards the seller in front small part of the purchase price with the role to show their intention to complete on the purchase and also to guarantee that this property will be “reserved” for them, i.e. not offered & then sold by the seller to another buyer in the mean time while they are preparing to buy it.
In order to clear any eventual misunderstandings, we would like to describe here several important differences between what is called on the real estate market in Bulgaria “deposit” or “reservation deposit” on one hand, and the advance/earnest payment, applicable per the local Real Estate Law, on another:

1) To whom it is handled/paid: The (reservation) deposit is asked in practice by real estate agents, who usually sign to confirm they receiving it. But this does not mean that the seller receives the deposit. The usual practice is that the estate agent keeps the deposit in order to secure receipt of their own commission fee. This does not secure the buyer's and the seller's interest, and creates problem in situations where the buyer decides to pull out.
On the other hand, in order to secure the buyer’s interests, the applicable by the Law advance or “earnest” payment is to be paid directly towards the seller, in order to rise legal liability & obligation of the seller/owner of the real estate towards this concrete buyer. This is why buyers who make small advance payment to secure the property for them, get proper receipts by the seller directly so they have legal bases, on a later stage to sue the sellers for eventual non-performance or tort. Also Bulgarian lawyers use to implement special clauses in preliminary contracts, concerning the paid deposit too. So to conclude, deposit should be paid to the seller and stays with the seller.
2) How precisely it refers to the concrete purchase – usually the document which is handled to the buyer against the paid deposit towards real estate agent, is a copy (or original when in person) of some sort of signed reservation form with the concrete real estate agency only (not with the seller, so the buyer has no legal relation with the seller about the particular property). Buyer is usually unaware of the actual relations between the seller and the estate agents (who are not regulated in Bulgaria) so the fact that they signed reservation form with the agent does not mean or prove yet they have any rights against the seller and the particular real estate.
On the other hand, the advance payment goes to the seller against signed proper preliminary contract, which consists of all aspects of the purchase and obliges directly the seller, but not the estate agent (who does not owns the property but only advertises it). Please note that the local law is protecting buyers against sellers only if they have a signed private purchase contract with the seller, but not buyers who have received reservation form only from real estate agents. In case of non-performance of the seller to proceed with the sale-purchase of the Bulgarian property, the properly signed preliminary contract can be used in a special civil procedure for getting the deeds for the property even without the assistance of the seller, while the signed reservation form, issued by real estate agent can’t serve such goals in benefit of the buyer – it is a document concerning only the buyer and the real estate agency.
Note that before paying deposits for reserving a concrete real estate for purchase, it is advisable to hire a local independent lawyer; who can advise you in details to whom you should, and to whom you should not make deposit payments in relation to the property purchase; resp. to draw a preliminary contract for you. They can negotiate the preliminary contract before singing it, achieve better position for you in regards to acquiring the ownership and save to you a lot of headache on a later stage.
On the other hand, if you are selling your Bulgarian property, in cases where you hire a local independent lawyer you can be safer that eventually paid deposit by buyers will actually reach you to cover your sale expenses, especially in cases where the buyer pulls out if offered much cheaper property than yours (this is business world so it is understandable that on the real estate market brokers pursue to sell a property, doesn’t matter if namely your property or somebody else’s), so they just leave the deposit to whom they have paid it – so you need to ensure the deposit has reached you once been paid by buyers.
If you need assistance or further guidance about prospective purchase of real estate in Bulgaria, feel free to write to us:

If you are purchasing a property, then you may be interested in reading other related topics: viewtopic.php?f=42&t=587 and viewtopic.php?f=18&t=64

Bulgariandeals Team

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