“The Best Alternative to a Cash Deposit
For Your Next Property Purchase”
For Your Next Property Purchase”
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Deposit Bonds
A Deposit Bond is an alternative to the cash deposit (earnest deposit) that is required to be paid up-front when buying a property. Rather than paying cash for the deposit, a buyer can provide the seller a Deposit Bond. The buyer then pays the full purchase price for the property upon closing. By using a Deposit Bond instead of cash, the amount of the deposit is retained by you (the buyer) until closing of the property. There is no need for you to withdraw the cash required from savings, other investments or out of equity in other property assets, so your deposit money is left working for you right through until closing of the property, when you pay the full purchase price.
The cost of a Deposit Bond is cheaper than other financing alternatives and the process of applying is relatively quick and simple. Quite clearly, using a Deposit Bond is a convenient and cost-effective way to secure your next property.
Deposit Alternative has an underwriting agreement with QBE Specialty Insurance Company, a subsidiary of the QBE Insurance Group. QBE Insurance Group is one of the largest insurers and reinsurers worldwide and is the effective insurer of the Deposit Bonds.
The Deposit bond is provided to the seller for the amount of the Deposit by QBE Insurance on the understanding that the Buyer will pay the seller the full purchase price on the closing date. When applying for a Deposit Bond, the Buyer will sign an application form, which includes an indemnity agreement to confirm this arrangement. Under this indemnity agreement, the Buyer will give a legally binding right to QBE to pursue recovery against the Buyer for any part of the Deposit Bond amount that QBE pays the Seller, if the Buyer defaults under the Purchase and Sale agreement.
BENEFITS OF DEPOSIT BONDS
Deposit Bonds are a unique product in that they provide significant benefits to the purchaser, seller and financier involved in the property transaction.
Buyers
- Deposit Bonds replace the requirement for buyers to outlay the deposit in cash before the property closes.
- Deposit Bonds are provided within a quick timeframe. Usually within 48-72 hours, so buyers can go hard on their property contract quickly
- Deposit Bonds are unsecured i.e., no mortgages, charges or liens are taken over the buyer’s property assets. (Although QBE may take security if the buyer defaults under the Purchase and Sale Agreement).
- Deposit Bonds have been priced to be more cost effective than other methods of funding the deposit, such as using cash savings, arranging a bank guarantee / letter of credit or mortgage loan/redraw facility.
Sellers / Developers / Construction Financiers
- Properties sold that have a Deposit Bond issued by Deposit Alternative are considered as complying contracts with many of the leading construction lenders in the US, and are therefore included as pre-sales which is important for meeting pre-construction funding requirements.
- Deposit Alternative carefully assesses each buyer’s financial capability to complete the new purchase.
- The number of potential buyer’s available to a seller increases as many buyers have less than the required deposit available in cash (as their wealth is primarily invested in equity in their home, which isn’t easily accessible).
- Deposit Alternative’s Deposit Bonds are underwritten by QBE Insurance, one of the largest international general insurance and reinsurance companies in the world.
