Deposit Bonds

• What is a Deposit Bond? >
• Benefits for the Purchaser and Vendor >
• Frequently Asked Questions >

Sometimes you may not have ready access to the cash deposit required to secure a property...

When you have found the property and need a deposit to secure the purchase, Deposit Power can help by providing a deposit guarantee. As long as you can demonstrate you have the funds available at settlement, with Deposit bonds you are in the position to secure the perfect home or investment property quickly, without using a cash deposit.

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WHAT IS A DEPOSIT BOND?

A Deposit Power Guarantee is a substitute for the cash deposit between signing a contract and settlement of the residential property sale. At settlement the purchaser pays the full purchase price including the deposit.

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

The Deposit Power products available include:

• Short Term Guarantee - for settlement terms up to 6 months
• Long Term Guarantee - for purchase contracts where the Sunset Clause is between 6 and 48 months

Should the purchaser default under the contract of Sale/Offer and Acceptance, the vendor can claim the amount guaranteed from Vero Insurance Limited. Vero Insurance Limited will then seek to recover this amount from the purchaser.

Deposit Power Guarantees were introduced into the Australian market by Vero Insurance Limited (formerly Royal & SunAlliance Insurance Limited) in 1989 and are legally effective in all Australian States and Territories.

BENEFITS

For the Purchaser It's cost effective Useful for asset rich/cash poor customers who wish to invest in property and already own their own home Purchasers don't need to go to the expense and time delay of arranging short-term finance for the deposit Convenient for first home buyers who may have finance approval or assets tied up in other investments Purchasers can keep their own savings earning interest right up until the day of settlement Convenient at auctions

For the Vendor Allows the purchaser to sign a contract more quickly Guaranteed up to 10% if the purchaser defaults May assist in securing the highest bidder, particularly at auction May assist to facilitate the sale of a property where the purchaser may otherwise be unable to raise the deposit

FAQ's

Can I use the Deposit Power Guarantee at auctions?

Yes. A Short Term Deposit Deposit Power Guarantee can be issued prior to you attending an auction. The Deposit Power 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 Deposit Power Guarantee Certificate when you are the successful bidder.

Will the vendor accept the Deposit Power Guarantee?

The Deposit Power Guarantee is legal and available throughout all states and territories in Australia. It is at the discretion of the vendor whether to accept a Deposit Power Deposit Power Guarantee in lieu of a cash deposit. However, the vendor is often keen to obtain a contract of sale on the property and secure a deposit commitment from the purchaser. The Deposit Power Guarantee can usually be organised within 24 hours.

It is recommended that a Suggested Special Condition is inserted or annexed to the Contract of Sale. This condition will amend the deposit provisions and allow the Deposit Power Guarantee to be used.

When does the Deposit Power Guarantee expire or terminate?

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

Can I obtain a refund if I don’t use the Deposit Power Guarantee?

Yes. If you return the unused, original Deposit Power Guarantee Certificate within 30 days of issue the fee will be partially refunded. An administration fee will be deducted and the balance will be refunded to you.

What do I need to do to apply?

To apply, you just need to complete an application form and show us that you have sufficient funds to complete the purchase at settlement. Examples include:

• A loan approval
• A copy of the Contract for property sold that will assist in the purchase of the new property
• Funds accessible prior to the completion date, such as savings, a fixed term deposit, or share certificates
• Evidence of other funds that will assist in the purchase such as the First HomeOwners Grant.

What types of Guarantees are there?

There are two types of Deposit Power Guarantees, depending on the length of the settlement terms. These are:

• Short Term Guarantees
  Short Term Guarantees – are available for purchases where the settlement terms are up to 6 months. Short term guarantees are issued subject to Deposit Power issuing guidelines. Purchasers need to provide evidence they have sufficient funds available to complete the purchase.
• Long Term Guarantees
  Long Term Guarantees – are available for purchases where the settlement terms are between six and 48 months. These can be arranged for applicants who own existing residential property and demonstrate the ability to complete the purchase.

Do I have to accept a Deposit Guarantee?

The only person who has the authority to accept or deny a request for a purchaser to use a Deposit Power Guarantee is the vendor. The vendor has sole discretion to use the Deposit Power Guarantee.

Do I need to amend the Contract of Sale if a Deposit Power Guarantee is used?

A Suggested Special Condition is included on the reverse of the Deposit Power Guarantee Certificate. This should be annexed to the Standard Contract of Sale when a Deposit Power Guarantee is being used (not required with standard NSW Contract of Sale of Land). This suggested condition enables the Deposit Power Guarantee to be substituted for the cash deposit and requires the purchaser to pay the full purchase price including the deposit represented by the Deposit Power Guarantee at settlement.

Can the Deposit Guarantee be used at Auctions?

Yes. The Deposit Power Guarantee can be very useful for purchasers wanting to bid at an auction as it can be difficult for them to organise a cash deposit beforehand, particularly when they are not sure if their bid will be successful.

The Deposit Power Guarantee can be issued prior to the auction so you can gain the vendor’s acceptance of a Deposit Power Guarantee beforehand. The vendor and property details on the Deposit Power Guarantee Certificate will be left blank and the purchaser is authorised to complete these details if they are the successful bidder.

The Suggested Special Condition on the reverse of the Deposit Power Guarantee Certificate should be inserted into the contract when signed on the day of the auction.

What happens if the purchaser defaults under the Contract of Sale?

If the purchaser defaults under the Contract of Sale and the vendor is entitled to retain the deposit, the vendor can claim the Deposit Power Guarantee amount from Vero Insurance Limited. This amount will be paid to the stakeholder nominated in the contract within two clear days of Vero Insurance Limited being provided with the necessary documents (detailed on the Deposit Power Guarantee Certificate).

When does the Deposit Power Guarantee terminate?

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

How do I arrange a Deposit Power Guarantee for a purchaser?

The simplicity of using a Deposit Power Guarantee is one of its main attractions. Applications, which include an indemnity, can be downloaded completed and faxed directly to Vero Insurance Limited and the Deposit Power Guarantee will normally be issued within 24 hours.

What do I do if the vendor, purchaser or I need more information?

Should you, or any of your clients, have any questions about the Deposit Power Guarantee or the application process, our helpline is available on 1800 678 979 Monday to Friday 8.30am to 7.00pm (AEST) excluding public holidays.

CONTACT US TODAY TO FIND OUT MORE ABOUT DEPOSIT BONDS