[Ryu Taemin's Real Estate A to Z] Can You Get a Deposit Back If You Don't Sign the Contract?

'Pre-sale reservation' level preliminary contracts can be refunded upon cancellation
If the sale price and balance payment dates are agreed upon, it is considered a main contract
If more than 10% of the total sale price is paid, the preliminary contract deposit is not recognized

[Asia Economy Reporter Tae-min Ryu] #Office worker A discovered a house he liked after much effort to buy his own home. The real estate agent said, “Many people are coming to see this property, so let's make a preliminary contract first,” and requested a preliminary contract deposit of 5 million won to be sent to the homeowner's account. Trusting this, A immediately transferred the money, but shortly after, the agent contacted him saying, “The house price has risen, and the homeowner has changed their mind,” and canceled the contract.

Recently, as house prices continue to rise, cases of contracts being canceled due to sellers changing their minds are increasing. In the jeonse market, some buyers cancel contracts to find better properties. Under civil law, the principle is that the seller who cancels the contract must compensate double the deposit. Conversely, if the buyer unilaterally cancels the contract, they cannot get the deposit back.

However, if the money paid first is a ‘preliminary contract deposit,’ the situation differs. Legally, a preliminary contract, called a sales reservation, is considered an expression of intent to enter into a formal sales contract in the future before the formal contract is signed. Therefore, the preliminary contract deposit cannot be regarded as a full deposit in principle, and if either party changes their mind, the seller must return the principal amount to the buyer. This applies equally to both jeonse and sales contracts.

However, there is an exception when the preliminary contract is equivalent to a formal contract. If important matters regarding the contract were specifically negotiated before exchanging the preliminary contract deposit, it is considered a formal contract rather than a preliminary one. Typical contract matters include ▲the object of sale ▲sale price ▲date of final payment. If these matters have been agreed upon, the contract is considered complete and effective, and responsibilities for contract performance arise. If the contract terms are not fulfilled after these responsibilities arise, damages may be claimed.

The amount of the preliminary contract deposit is also an important criterion distinguishing it from a formal contract. Attorney Um Jeong-sook of Beopdo Comprehensive Law Office explained, “If 10% or more of the total sale price is paid as a preliminary contract deposit, it can be recognized as a formal contract,” and advised, “If you want to maintain the preliminary contract status, you must be careful about these aspects in advance.”

Attorney Um also explained that oral agreements on contract terms can be recognized as contract formation. However, he added, “If disputes arise over the deposit, it is difficult to prove orally agreed terms,” and advised, “To avoid this, it is better to leave specific agreements such as the object of sale and sale price in text messages or other written forms.”