Signing earnest money means committing for real: from that point on, backing out costs money. That's why it pays to understand what type of earnest money you're signing, what its clauses say and —above all— to have completed all property checks beforehand.
What the earnest money agreement is
The earnest money agreement is a private agreement between buyer and seller that reserves the property and involves a deposit on account of the price. It sets the agreed price, the deadline for signing the deed and the consequences if either party fails to comply. It is not the final sale (that is signed before a notary), but it is binding.
The three types of earnest money
| Type | What it means if you back out |
|---|---|
| Penitential (the most common) | They allow withdrawal: if the buyer backs out, they lose the deposit; if the seller does, they return double. |
| Confirmatory | They are a confirmation of the contract; they do not allow free withdrawal. The defaulting party can be forced to comply or to compensate damages. |
| Penal | The deposit acts as a penalty for breach, but the complying party can also demand performance. |
The most common in a home sale are penitential earnest money arrangements, which give both parties a priced "exit". But the type must be clearly specified in the contract: if not indicated, interpretation can get complicated.
How much is paid
There is no fixed legal amount. The usual range is between 5% and 10% of the purchase price, although another amount can be agreed. That deposit is deducted from the final price in the deed.
A €300,000 flat with 10% earnest money = €30,000 deposit. If the buyer backs out (penitential earnest money), they lose those €30,000. If the seller does, they return €60,000.
Clauses that can't be missing
- Identification of the parties and the property (with registry data).
- Total agreed price and deposit amount.
- Type of earnest money (penitential, confirmatory or penal).
- Maximum deadline for signing the deed.
- Allocation of costs and taxes.
- Status of encumbrances: that the seller declares the situation (mortgages to cancel, etc.).
- Who takes on the special assessments approved and pending.
The financing clause
If your purchase depends on getting the mortgage, it is essential to include a financing condition clause: if the bank denies you the loan (with documentation proving it), you recover the deposit without penalty. Without that clause, with penitential earnest money, if you do not get the mortgage and cannot buy, you lose the deposit.
Signing earnest money without a financing clause when you depend on the bank. Negotiate it before putting down the money.
What happens if the deal falls through
- The buyer backs out (penitential earnest money): loses the deposit.
- The seller backs out: returns double the deposit.
- You do not get the mortgage and there is a financing clause: you recover the deposit.
- A hidden encumbrance appears that the seller did not declare: depending on what was agreed, it may give the right to terminate and recover what was paid.
Before signing earnest money
Earnest money comes after checking the property, never before. Before putting down the deposit you should have reviewed:
- Land registry extract: ownership and encumbrances.
- ITE and HOA minutes (special assessments).
- Habitability certificate and energy performance certificate.
- Year and condition of the building (aluminosis, asbestos).
- Pre-approved financing.
Before earnest money, analyze the flat for free
Enter the address and get in seconds the year, the condition of the building, the risks, the area price and a checklist. The basis for signing earnest money with confidence.
Analyze my flat →Frequently asked questions
How much earnest money is paid?
Usually between 5% and 10% of the price, although it is negotiable. It is deducted from the final price in the deed.
If I do not get the mortgage, do I lose the earnest money?
Only if you did not include a financing condition clause. With that clause, if the bank denies you the loan with documentation, you recover the deposit.
What happens if the seller backs out?
With penitential earnest money, they must return double the deposit handed over.
Is earnest money signed before a notary?
It is not mandatory: the earnest money agreement is usually private. The final sale is signed before a notary. Even so, it is advisable for a professional to review the contract before signing.
Editorial notice. Informational guide as of the update date (2026). The earnest money agreement has significant legal effects; Listing Barcelona is an editorial and independent platform and does not provide legal advice. Before signing, consult a lawyer.