Earnest money deposit (escrow)
A sum paid by the buyer upon signing the preliminary contract, typically 5–10% of the purchase price, held in escrow by the notary or estate agent. It is returned in full if the financing condition precedent fails. It is forfeited (or owed to the seller) if the buyer withdraws outside the cooling-off period and the suspensive condition.
Key points
- Typically 5–10% of the purchase price, held in escrow by the notary or estate agent.
- Returned in full if the financing condition precedent is not fulfilled.
- Forfeited or owed to the seller if the buyer withdraws outside the cooling-off period without a valid condition.
- The escrowed amount is deducted from the balance due at the notarial deed signing.
Frequently asked questions
What happens to the deposit if the bank refuses the loan?
If the preliminary contract includes a financing condition precedent and the bank refuses the loan on the agreed terms, the buyer may withdraw without penalty and recovers the full deposit. The refusal must be notified by registered letter within the contractual deadlines, accompanied by the bank's written rejection.
Why is the deposit amount negotiable between 5% and 10%?
No statute mandates a specific percentage; market practice ranges from 5% to 10% depending on local market conditions and negotiation. A seller in a strong position may require 10% to limit the risk of late withdrawal. The buyer may try to negotiate 5% to reduce the funds tied up during the financing period.
What is the difference between escrow held by a notary versus an estate agent?
Funds held in escrow by a notary are deposited with the Caisse des Dépôts, offering maximum security. A licensed estate agent holding a carte T with a financial guarantee may also hold the funds, but the buyer should verify the existence and amount of this guarantee. In the event of a dispute, restitution may be faster through a notarial escrow.
In practice
On a €280,000 apartment purchase, the buyer pays a €14,000 deposit (5%) to the notary's escrow account. Two months later, the bank refuses the loan: the full €14,000 is returned within 21 days of the refusal notification.
Official sources
- Promise to sell: unilateral promise or compromise · Service-Public.gouv.fr
- Sale agreement and loan condition precedent · Service-Public.gouv.fr
- Housing and financing information · ANIL