This is a formal document, binding on both parties, and signed by them in the presence of a Notary Public. From a practical point of view, it is more important than the Deed of Sale, since it generally contains a complete and detailed description of the entire transaction up to the time when the purchase price has been paid in full and the property is ready to be conveyed to the buyer.
A well-drafted Promise of Sale should contain at least the following provisions:
(a) Full name and particulars of the parties. If the seller is married, the spouse must also sign.
(b) Legal description of the property to be purchased.
(c) Purchase price and payment terms. (d) Default clause.
(e) Date of delivery of the property.
(f) Due diligence required or done.
(g) Representations by the seller and remedies in case of misrepresentation.
(h) Obligation by seller of signing the Deed of Sale upon receipt of final payment.
Many attorneys and notaries in the Dominican Republic do not protect the buyer adequately in the Promise of Sale. Among the most common deficiencies are the following:
(a) The buyer is allowed to pay a large percentage of the price without any security or direct interest over the property. In case of misuse of these funds, the buyer's remedies may be limited to suing the seller personally. Up until 2010, many buyers lived this painful experience.
Generally, the developer uses the buyers’ funds, along with a bank loan, to finance the construction. The bank collateralizes the loan with a mortgage on the property. If the developer runs into financial difficulties or misappropriates the funds, the bank forecloses and the buyers lose both their money and their property.
Solutions: Release the funds as the construction goes. Work with a bank or an expert to verify the quality and advancement of the construction. Usually, banks have their own experts. Verify the track record of the developer. Do your own diligence, ask not only your real estate agent but other locals and ex-pats. Make sure you are protected legally in case things go wrong.
(b) Payments are not conditioned on the availability of a clear title or the adequate progress of construction. Seller, therefore, may demand payment or place the buyer in default without performing their own basic obligations.
Solution: If not already in the terms offered by the seller, you can require to pay 5 to 10% at the reception of the title.
(c) Escrow agents are rarely used. The seller, therefore, has control over the funds as they are paid.
Solution: Some notaries will hold the funds in an account, which is not an escrow account, but serves the same purpose of protecting you and ensuring a smooth transaction.