Is a reservation deposit common? How much?

Hello everyone,

we are in "negotiations" for a house construction project. The project is already fully planned and organized.

It involves the construction of two semi-detached houses on a divided plot, with the individual halves being sold. One semi-detached house is already in the shell construction phase (windows have just been installed) and for the other (the one we are interested in) the construction is expected to begin in February.

Two companies (actually three, if you count the intermediary) are involved. One is the organizer and the other the developer, who have been working together for a long time and have already built several apartment buildings together.

Everything is planned in advance here. We have soil surveys, subdivision declarations, the certificate of occupancy, construction services, the energy certificate (preliminary version), and the description of construction services. We have already had two consultation appointments and are quite impressed with everything. Of course, we plan to have the contracts reviewed externally and to find a construction supervisor.

The plan is to buy the plot and then make the work contract, with which the house will be built. Everything with prices etc. is already listed in the description of construction services. Also, the budgets for floor coverings, tiles, planned number of sockets, etc. Possible surcharges have been discussed (for higher-quality coverings, more sockets, etc.). A chimney is, for example, planned and would be included, but we would receive a credit if we do not want it.

Now it is the case that we are supposed to pay a reservation deposit of €5,000, which will then be offset against the house. Is this usual? I couldn’t find anything about this in the forum. It is of course understandable that the companies want to ensure that we are committed (planning, possible presentation to other customers, etc.) but hm... we just wanted to ask what experiences you have had regarding this.

Sometimes you just get the feeling that everything sounds TOO good.

Thank you very much for your time, best regards Neon

Edit: Company names anonymized

OT: Remember to calculate the real estate transfer tax on the total amount (land and house price) when considering additional costs.

Acquaintances also paid a reservation fee for a planned condominium. For a purchase price of 300,000 EUR, they wanted 2,500 euros.

Whether this is customary (legally okay) though, I can't say. I would also be skeptical at first.

Regarding the OT: Yes, we have already calculated that, but thanks for the hint!

As I said, on the one hand, I can understand it. We plan together, invest time in us, possibly say no to other potential buyers, and then we say: "Oh no, it’s not going to happen." There was apparently such a problem shortly before. "Our" half was actually already sold, but then the financing did not come through.

On the other hand, we also don’t want to commit/ be pressured too quickly. There are still a few things to clarify regarding the equity capital (this is mostly located in European foreign countries since my husband is not German) and therefore we would of course like to secure these things first.

Hello,

Now it is such that we are supposed to pay a reservation deposit of €5000, which will then be offset against the house. Is that usual?

Usual – I don’t know right now; but I increasingly think so. I can tell you that for a plot of land that I have "exclusively" on the market and that is supposed to be built with a complete semi-detached house, I now also tend to follow this practice. There are so many potential builders who make life difficult (often dragging on like chewing gum), so at least some commitment is necessary.

What is important is the wording, how and under what conditions the deposit is offset and what happens if you withdraw from the construction contract. If this agreement takes into account the needs of both parties and is legally sound, I wouldn’t see any logical reason that should oppose such a procedure.

Foolish greetings

Thank you very much for your detailed feedback. I had understood it to mean that the €5000 would go into their possession if we decide against it, but I could be wrong. What is the usual procedure here? So what usually happens with the deposit amount in case of withdrawal? We haven’t signed anything yet, and the reservation deposit is supposed to be due before signing. So basically as security to make sure we sign – at least that’s what I thought.

Edit:

We have just received the reservation agreement. It says the following:

If the buyers unexpectedly are proven to be denied financing for the purchase object at the usual market financing costs, the paid a ccount reservation payment will be . Upon conclusion of the purchase contract, the a ccount reservation payment will be credited against the first purchase price installment. Withdrawal of the buyers from the purchase contract must be mutually indicated in writing. If the buyers withdraw from the contract without apparent reason, the paid reservation payment may be retained.
If the seller withdraws from the purchase contract, there must be an important reason. An important reason is the failure to provide proof of financing or failure to apply for financing.

That means that we only get the amount back if the financing doesn’t work out, right?

Best regards, Neon

We also paid a reservation deposit, or rather it is basically not a deposit but a fee or advance payment. We paid 500 euros, as we were sure that we wanted to carry out this project. If, for example, the financing had not worked out or we had changed our minds, we would not have gotten the money back. However, this was not the case, and therefore 500€ was credited towards the final price.