Don’t Rush the Reservation Agreement

Article chapters:

• Before the purchase
• Take your time signing the reservation contract
• Peter’s story

Moreover, when dealing with the broker, haggle as if you were in a Persian marketplace. The more eager to buy you seem, the higher the price you’ll pay in the end.

Before the purchase

What to do if you’re given a tour of a home that you really like? Will you immediately let yourself be carried away, saying “This is what I want”?

This wouldn’t put you in exactly the best position to negotiate. What might be a matter of the heart to you, is just another business matter to the broker. If they find out that you’re seriously interested in the property, they’ll usually be quick to inform you that “there’s a huge interest in this flat…, they’re giving tours to three more seriously interested buyers just today…, and that if you really want the home, you’ll have to sign the reservation contract as soon as possible.” Agreeing means taking the bait, from which an escape won’t be easy.

Take your time signing the reservation contract

“It’s a standard agreement that everybody signs with us,” is what agents will say. However, signing a reservation agreement directly on a tour of the property is a serious blunder that any purchaser should avoid. By doing so, not only do you book the flat, but you also bind yourself to purchasing it. And although it’s usually possible to change your mind and back out at a later time, it will cost you, as reservation contracts prescribe substantial penalties for this eventuality.

A reservation contract signed on the spot is a widespread and understandable mistake. And it’s true that at the end of the day, it’s the person who signs the reservation agreement first who buys the property. Even so, stay calm and don’t enter into any agreements on the spot, as:

1. You cannot know whether you will change your mind after a night-long debate with your spouse,
2. you cannot know what defects might show up during the next tour,
3. you often don’t know whether you’ll secure a mortgage,
4. and you cannot know whether you’ll be able to come to an agreement with the seller regarding the conditions of the purchase.

Peter’s story

Peter ordered our standard package of legal services related to real estate sales and purchases. As usual, we started by examining his reservation agreement. It contained provisions on a contractual fine of 60,000 crowns, should he back out of the purchase. Peter told us that he was a freelance graphic designer and that his monthly income was variable.

Therefore, we incorporated a standard set of withdrawal conditions into his agreement, one of which enabled Peter to withdraw from the reservation contract if he wasn’t able to take a mortgage. This is exactly what happened: The bank refused to provide the full mortgage he needed, and he couldn’t afford the flat in the end.

However, owing to the fact that we modified his reservation contract, he didn’t have to pay the broker a single crown. This represents, by all means, a favourable outcome when compared to the 60,000 that he was originally bound to pay if he had signed the reservation agreement on the spot.