Signing an Intent to Purchase Agreement for Real Estate

When negotiating the purchase of real estate, it is recommended to sign an Intent to Purchase Agreement (also called a Promise of Sale Agreement or promesa de venta in Nicaragua).

The Promise of Sale is a pre-contract that requires the parties to enter into a Purchase Agreement at a future date, sets the terms of the negotiation, and establishes fines or penalties that apply if either party fails to comply with the Agreement.

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Signing an Intent to Purchase Agreement is good for both the seller and the buyer. At the time of signing the promesa de venta the seller will receive an advance payment of the sale price, generally 10 to 20% of the total price (as freely agreed by the parties). In addition, by signing the Agreement, the seller has certainty that the purchase will take place, and may safely take the property off of any listings.

A buyer also benefits by signing an Intent to Purchase Agreement, as the property price is set in the Agreement, and the seller cannot increase it; the buyer can carry out a proper due diligence on the property without any risk of having the seller change his or her mind about selling; and terms and conditions of the sale are set in the Agreement, providing time for the buyer to make arrangements, such as wire transferring funds for paying for the property.

Since money is advanced when signing an Intent to Purchase Agreement, it is recommended to carry out a preliminary due diligence for any red flags that may jeopardize the property purchase.

For added safety, an Intent to Purchase Agreement or promesa de venta should be subscribed before an Attorney and Notary Public, and should take the form of a public deed, as it will facilitate asserting the rights of either the seller or buyer in a Court of Law.

Additionally, a buyer may consider recording the Intent to Purchase Agreement with the Real Estate Registry. By recording the Agreement, the Registry will refuse to record a Purchase Agreement of the property by a third party, another Intent to Purchase Agreement, as well as any incumbrances, such as mortgages, liens, etc. For recording purposes, an Intent to Purchase Agreement must necessarily take the form of as a public deed.

Please contact us for additional information.

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