The most common method of acquiring real estate in our country is the purchase and sale, in the form of a notarial deed, with which the transaction is acknowledged before a notary. Before reaching this final contract (notary deed), it is necessary to go through the long process of preparation of the transaction, which includes preparation and collection of the necessary documentation. Drafting and signing the pre-contract is one of the most important steps in doing so.
The preliminary contract for the purchase and sale of real estate is the basis on which the process following the negotiations is built. It records all the terms of the transaction, so that it should be confessed. That is, it binds the seller to transfer ownership of the real estate to the buyer, against a certain price, which the buyer, in turn, undertakes to pay to the seller. In this way, all contracts are validated in writing and the agreed deposit (also called "cancellation" or "deposit") can now be handed over. Another necessity of the preliminary contract is for bank lending. The contract proves to the bank the real request for the loan and helps to approve the loan.
The main conditions that are regulated in the preliminary contract are the provision of the transaction, the price, the regulation of the conditions and relations, terms and the allocation of rights and obligations.
In the contract there is an opportunity to determine how the due will be paid, ie. whether the buyer will pay for the real estate with his own funds or use bank lending. Related to this is the determination of the deadline for payment of what is owed to the seller, or in what way it can be rescheduled, which will allow the seller to procure the necessary amount.
The contract gives the opportunity to negotiate the final price for the purchase of the real estate.
In these conditions, the costs of the transfer of ownership are distributed. The method of amending and supplementing the contract, the refusal to conclude the final contract by some of the parties, as well as what sanctions in favor of the injured person will result in this refusal are determined.
The parties determine the deadline for concluding the final contract for the transfer of ownership of the real estate, the possibility to determine the deadline for the removal of encumbrances.
Gives rise to the right to enter into a final contract. As a rule, the preliminary contract gives rise only to this right. However, there is no obstacle for the parties to agree and attach additional legal consequences beyond these. For example, it is often agreed that the buyer of the property will pay the price and take possession, although the final contract has not yet been concluded.
The preliminary contract does not transfer real rights and has no real translational effect, i.e. the signing of a final contract is necessary for their transfer. The preliminary contract would have a material translative effect if the competent court declared it final due to non-fulfilment of an obligation of one of the parties to the contract.
In conclusion, we can say that the preliminary contract is not a mandatory element of the purchase and sale of real estate, but in case of lack of all documents for a future transaction or the buyer's desire to obtain bank financing, the preliminary contract is a suitable way to protect interests of the parties to it until the final preparation of the transaction.