Due to its affordable housing prices, efficient health care system, high quality education, mild climate and strategic position in Europe, Italy is one of the most attractive countries to live in. As a matter of fact, many foreigners decide to invest in Italy’s real estate market. However, purchasing a property may not always be an easy task especially if you are not familiar with the technical terminology used in the purchasing process. Therefore, it will be the aim of this article to explain a few basic steps involved in a real estate transaction. In particular, this article will discuss the main differences between a “proposta d’acquisto” (purchase offer) and a “contratto preliminare” (preliminary contract of sale), and their importance in the purchasing process. In fact, both documents are used to conclude a pre-sale agreement, however, the former is a written document through which a potential buyer makes an offer to purchase a property and unless it is accepted by the seller it has binding effects only for the potential buyer, whereas the latter is a declaration of intent to purchase a property, which has a legally binding effect for the potential buyer and the seller. So, what do these documents actually entail?
What is a “proposta d’acquisto”?
A proposta d’acquisto, in English “purchase offer” is a detailed document through which a buyer can make an offer to purchase a property. The document can be amended during the process of negotiations. By signing the purchase offer, the potential buyer shows his/her interest and intention to purchase a property.
The purchase offer will almost always include supporting documents that prove that the buyer can purchase the property; if the buyer must apply for a mortgage, this will be stated in a clause. If a real estate agency is involved, the offer will also outline the real estate agency’s details, commission fee and the time frame within which the purchasing process should be completed. It is worth pointing out that the seller does not have an unlimited amount of time to accept or decline the offer, in fact the offer will also specify the date by which the seller will need to provide the buyer with an outcome.
In addition to a standard purchase offer, which allows the buyer to withdraw from the offer at any time if they change their mind, there is also another type of offer, i.e., the proposta irrevocabile di acquisto (“an irrevocable purchase offer”). Unlike the standard purchase offer, if the buyer decides to make an irrevocable purchase offer, this will become binding and he or she will not be able to withdraw from the offer for a pre-determined period of time.
A purchase offer can be made in writing or verbally, however, in most cases it is written. If a real estate agency is involved in the transaction, the agency will provide a form which can be used to make the offer.
When the potential buyer submits the offer to the seller, he or she will need to pay a security deposit (“caparra”); both the seller and the buyer will need to agree on the amount. If the seller accepts the offer without renegotiating the terms and conditions of the purchasing process, he or she will sign the purchase offer and the terms included in the accepted offer will become binding for both parties.
At this point, the parties will be able to move forward and sign the preliminary contract of sale, which will ultimately lead to the final deed of sale.
What is a “contratto preliminare”?
An agreement in which both parties to the transaction commit to signing the final deed of sale is known as a contratto preliminare (or compromesso), or “preliminary contract of sale” in English. Detailed information about the property including its final asking price, its specifics as they appear in the Land Registry, and a description of its grounds, are outlined in a preliminary contract of sale. This document also outlines the property price, the payment method which will be used during the transaction and the time frame to complete the purchasing process.
The purpose of the preliminary agreement is generally to allow the buyer to verify that the property is sellable, that it respects urban planning, and that the seller has a legal right to sell the property. If these documents are in order, the seller and the buyer can proceed with signing the final deed of sale, which ultimately transfers the property’s ownership rights from the seller to the buyer.
Often, a preliminary contract of sale may also include the date by which the final deed of sale must be signed. This is agreed by the parties by taking into account the time that is required for the buyer to take out the mortgage, if applicable. In this sense, a preliminary contract of sale is also useful when applying for a mortgage as the buyer can use this document to provide the bank with proof that the funds requested will be used to purchase a given property.
When the preliminary agreement is signed by both parties to the transaction, the buyer must pay a deposit and the agreement ultimately results in both parties committing to signing the final deed of sale. If the buyer withdraws from the agreement after signing it without a valid and legal reason, he/she will lose the deposit. On the other hand, if the seller decides to withdraw, he/she will be forced to pay the buyer double the amount of the deposit paid.
Finally, if both the seller and the buyer sign the preliminary contract of sale before a notary, the agreement achieves a legally binding effect for the buyer and he or she will not be able to sell the property to third parties. On the other hand, if they do not sign the preliminary contract of sale before a notary, the buyer can potentially sell the property to a third party and the buyer, whom the property was going to be sold to originally, will be entitled to compensation.
Finally, it is worth mentioning that entering into a preliminary contract is not mandatory as a deed of sale can also be signed directly after the purchase offer is accepted. However, a preliminary contract of sale is widely used in Italy because it increases security for both parties in the event of changes in the transaction.
Final remarks
In conclusion, while a purchase offer is formal document through which a potential buyer makes an offer to a seller in order to secure a property, and it becomes legally binding for both parties only when it is accepted, the preliminary contract of sale is an official contract which has legal binding effects from its execution and it ultimately results in both the seller and the buyer signing the final deed of sale.
If you would like more information about the purchasing process, or you would like a free consultation with our team of real estate experts and attorneys, do not hesitate to contact us at info@italianrealestatelawyers.com.
