Grand Conveyancing and Property Finance

Deposit Bonds/Guarantees

A Deposit Bond is a guarantee issued by an insurance company to the vendor. It acts as a substitute for the cash deposit between signing a contract and settlement of the property. At settlement the purchaser is required to pay the full purchase price including the deposit. The use of a deposit guarantee does not remove the obligation of the purchaser to pay the full deposit, but delays that obligation until settlement.

The deposit guarantee can be issued for all or part of the deposit amount required, up to 10% of the purchase price. Acceptance of the deposit guarantee in lieu of a cash deposit is at the sole discretion of the vendor.

Should the purchaser default under the contract of Sale, the vendor can claim the amount against the guarantee. The insurance company who has issued the guarantee will then seek to recover this amount from the purchaser.

Who can apply for a Deposit Power Guarantee?

Those eligible are: Existing property owners who wish to purchase property, investors who wish to expand their property portfolio and first home purchasers.

Why do purchasers like Deposit Guarantees?

Like many of today’s purchasers, cash for the 10%, or even 5%, deposit required to enter into a contract on another property is often tied up in the current home or other investments. This can mean either expensive bridging finance or borrowing from a finance company at high interest rates. Regardless of where the finance is obtained, interest charges, establishment fees and other up-front costs connected with the loan can be expensive and time-consuming to arrange. Deposit Guarantees offer an efficient, secure alternative that saves you time and money.

Can a Deposit Guarantee be used at auctions?

Yes. A Guarantee can be issued prior to you attending an auction. The Guarantee amount is fixed, but not the property details, so you can attend a number of auctions. You simply complete the vendor and property details on the Guarantee Certificate when you are the successful bidder.

Will the vendor accept the Guarantee?

The Guarantee is legal and available in all states and it is at the sole discretion of the vendor to accept it. The vendor is often anxious however to obtain a contract of sale on the property and secure a deposit commitment from the purchaser. The Guarantee can usually be organised within 24 hours, contracts are signed and the property is sold.

It is recommended that a Suggested Special Condition (found on the back of the Guarantee Certificate) is inserted or annexed to the Contract of Sale. This condition will amend the deposit provisions and allow the Guarantee to be used.

When does the Guarantee expire or terminate?

The deposit guarantee ceases when the Contract of Sale is completed, terminated, rescinded or the expiry date occurs, whichever happens first. The Guarantee also terminates when a claim is paid by the guarantor.