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Deposit Bonds

A deposit bond is Basically an insurance policy. The deposit bond is the policy document that tells the vendor that the insurance company will pay the 10% deposit to the vendor in any of the circumstances where the deposit would ordinarily be forfeited by the vendor.

No money actually changes hands under the deposit bond. Instead, all purchase funds are paid at settlement. In the ordinary course of events settlement takes place, the purchase price is paid in full, and the deposit bond simply lapses.

It is an essential condition of the contract that the deposit is paid either before or at exchange of contracts. The deposit is held by the depositor. The Contract defines the deposit holder as the vendor’s agent and if there is no agent than it is normally held by the vendor’s Conveyancer. Provided the deposit cheque is held by the estate agent, the vendor’s Conveyancer or the vendor at or before exchange the deposit is taken to be paid on time.

The deposit or any part of it can be paid by cheque or in cash. Any cheque is acceptable as payment of the deposit, it does not have to be a bank cheque. If the deposit is not paid on time or the deposit cheque is not honored by the paying bank then the purchaser is in breach of an essential term of the contract. The vendor can terminate the contract at any time before the purchaser makes good the deposit.

If the contract provides, the deposit can be paid by installments then each installment must be paid on time, otherwise the vendor can terminate.

“There are numerous reasons to use a Deposit Bond. It can help avoid expensive time delays and bridging finance, enable a purchaser to buy at auction or off the plan and can allow the Purchasers savings to remain intact”


Deposit Power

Deposit Power Bonds