Are you buying an apartment on a loan? Watch out for these provisions in the preliminary contract

Are you buying an apartment on a loan?  Watch out for these provisions in the preliminary contract

When we are planning to buy an apartment (or house) on credit, we focus most on the choice of real estate. We certainly do not underestimate financing. We usually check creditworthiness some time before the planned purchase. Quite often I observe that we treat the issue of the content of the preliminary contract as an unimportant topic. Huge mistake!

Today, a little bit about the preliminary contract for the purchase of real estate with a loan. Be sure to check if you have included the following elements in the content of your contract if you are planning to buy your own M.

Deadline for concluding the final contract

In the case of purchasing real estate from own funds, i.e. without the need for a loan, the matter is simple. Once the price is agreed between the parties, you need to collect the documents and agree on the date of conclusion of the deed with the selected notary.

It is no longer so simple if the buyer has to use funds from the bank. According to the current procedures, given the extremely sluggish pace of banks’ work in this area, two months may not be enough to obtain a loan. Better to take 3 months. Without a signed credit agreement, the seller (if he has at least a little sense) will not stand for the act of sale.

So if you agree – as the buyer – for too short a time to complete the transaction, i.e. to conclude the final contract, you risk losing your deposit.

When will the seller provide us with the required documents?

The buyer does not always remember to oblige the seller in the preliminary contract to deliver – within a certain period – a set of documents that the bank will need.

What can happen if there is no mention of it in the contract? Let’s imagine that the seller provides us with the necessary documentation regarding the property 2-3 weeks before the planned sale. Then we have no chance of making it on time, the bank will not start the procedure if there is no complete documentation for the loan. So we come back to the first point: the buyer cannot stand for the act of purchase, because there is no credit agreement. The deposit is forfeited. So what if the seller is at fault if it is not directly stated in the preliminary contract?

Advance or deposit?

A classic question that comes up all the time. Let us remind you that the payment of the first installment for the purchase of real estate will be called an “advance payment” – it is refundable when the transaction does not go through. No contractual penalties. If, however, it is a down payment, it is also lost by the buyer if he does not submit the act within the prescribed period – i.e. in accordance with the preliminary contract. But the buyer is also protected: if the seller withdraws from the contract, he is obliged to return to the would-be buyer twice the amount of the down payment.

So if we are serious about buying real estate, a contract without a down payment makes no sense. We give the seller full comfort in looking for a customer who will pay more. Which in the current period, when the prices of flats and houses are going crazy – is very probable.

The same applies if the down payment is symbolic, e.g. 2,000. zloty. If the seller found a customer who would pay up to 5,000 PLN more than we have agreed in the preliminary contract, it pays to withdraw from the sales contract. It is true that he will pay us a contractual penalty of 2,000. PLN, but it will still be ahead of 3 thousand. zloty.

The answer to the question in the title of this paragraph is therefore obvious: always let it be a down payment, but the amount must be reasonable. Not too small, not too big – it is customary that the down payment is 10 percent. prices, but this is already subject to arrangements between the parties.

What if I don’t get a loan?

It happens quite often that we are not 100% sure that we will obtain a loan for the purchase of a selected property. How to protect yourself from such a situation? Theoretically, we can write this in the preliminary contract: if the buyer does not obtain a loan, the above is not treated as a failure of the transaction due to the fault of the buyer. So the deposit is returned.

Everything is fine, but being on the other side – as the seller – I would never agree to such a laconic provision. After all, you can apply for a loan in such a way as to not get it – it is enough not to provide the required documents to the bank.

There are other solutions, i.e. provisions in the preliminary contract, that can be used to make both parties feel protected. Here, however, I will not provide ready-made patterns, because they are our know-how. And they also require the consent of both parties to be included in the preliminary contract, which is not always that simple.

Method of payment

If the transaction is to be concluded with the participation of a bank loan, such provisions should necessarily be included in the preliminary agreement. However, not every seller is familiar with banking procedures. And it may, for example, demand that the entire price be paid at the latest on the date of concluding the final contract. And this is absolutely impossible: the bank must get this very act, analyze whether everything is correct, and only then release the funds from the loan. Sometimes it takes up to two weeks…

So what can happen?

If the preliminary contract does not contain information about the use of a loan (by the buyer), and at the same time there is a provision that all funds are to be paid in the act of sale or earlier – the buyer will not meet this condition in any way.

And again, you can expect to lose your deposit.

These are just a few examples in the topic of how important the content of the preliminary contract is, which we usually do not attach much importance to. Of course, it may happen that the seller turns out to be a very honest person and does not take advantage of our stumble, when we do not foresee something and the final contract is not concluded within the agreed time. But why should we take such a risk?

It is also worth mentioning here that the interests of the buyer are much stronger secured by a preliminary agreement concluded in the form of a notarial deed. But – as I see from my practice – too often the parties take the easy way out and bypass the notary public at this stage. And this, again, is associated with a high risk for the buyer.

Krzysztof OPPENHEIM: financial and real estate expert, specializing in, among others, in mortgage loans, associated with banking since 1993. Since July 2016, he has also been running an anti-debt collection office specializing in: consumer bankruptcy, debt relief, assistance to indebted entrepreneurs, Swiss franc disputes. More information at: and

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