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Who is committed to what at the signing of the preliminary contract?
Whether the parties sign a compromis de vente or a promesse de vente, the preliminary contract will always contain the following terms:
- The agreed purchase price.
- Any conditions for completion of the sale, including the minimum acceptable terms for financing if the buyer will be seeking a mortgage. The party to whose benefit any conditional clause was written will be released from the contract if that condition is not fulfilled.
- The final (last possible) date for signature of the acte de vente.
Upon the signing of the preliminary contract, a good faith guarantee of 10% of the purchase price is paid into the escrow account of either a notaire or an estate agent. The buyer may be able to negotiate putting only 5% down, but will in any case responsible for the 10% if he defaults.
The buyer will lose the good faith deposit if he fails to meet his obligations to purchase the property in accordance with the timing and conditions set out in the preliminary sales agreement. Acting in a timely manner to secure your loan and to arrange your final payment at closing is important to ensuring that this problem does not arise.
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