All Topics / The Treasure Chest / Deposit bonds

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  • Profile photo of robhickeyrobhickey
    Member
    @robhickey
    Join Date: 2002
    Post Count: 0

    Hi all,
    Yep, another first time poster, newbie to the whole property investing thing, etc….

    I was hoping to hear some feedback regarding the concept of deposit bonds. Personally, I’m still in the process of getting together the $$ for a first property investment, and this concept interests me because it sounds like l’d be utilizing ‘other peoples $$’. (it’s possible I’ve heard too many stories of people who get lent money without really giving up the cash.) I was just wondering if anyone has used this before or thinks that this is a good or bad idea.

    Profile photo of AdministratorAdministrator
    Keymaster
    @piadmin
    Join Date: 2013
    Post Count: 3,225

    yes it is normally done and used on off the plan purchases,but can also be used to secure any property..

    Profile photo of wattowatto
    Participant
    @watto
    Join Date: 2002
    Post Count: 50

    Normally you are required to have at least upto 5 times the value of the Deposit Bond as security. This can be either cash or equity in another property. Not sure if they will accept a share portfolio as the basis of security.

    Also it should be remebered that when settlement is due you actually need to be able to come up with the $$$$$…..

    Cheers
    watto

    Cheers
    watto
    Melb Freestyler

    Profile photo of SooshieSooshie
    Member
    @sooshie
    Join Date: 2002
    Post Count: 974

    Hi all,

    I recently asked a very similar question but before I posted it my puter fell off the tree. So I’d be interested in understanding a little more on deposit bonds. What do you use for securtiy if you can’t even raise the deposit and are searching for the funds, but you are desperate to purchase something to keep your business expanding, but your current workplace you do not own? This is a dilemma a friend is going through and as such had to turn down prime real estate that was hard to find because he couldn’t come up with a deposit.

    Please explain if a deposit bond could help him?

    Thanks

    Sooshie [:)]

    It’s all our imperfections that make us perfect!

    Profile photo of NessieNessie
    Member
    @nessie
    Join Date: 2001
    Post Count: 73

    Hi all

    Deposit Bonds were not previously seen to any great extent but seem to be now gaining a foothold in Victoria. They seemed to be a great idea, but if you are a purchaser using a Deposit Bond to acquire a property the risk of losing your deposit is greater. On the wording of current standard real estate contracts, the deposit bond does not fit with standard conveancing legalities. In both the prescribed Contract Note and Contract of Sale it provides through Table A of the Transfer of Land Act 1958 for a deposit to be paid in cash or by cheque. A Deposit Bond cannot be substituted for cash or a cheque without special wording being included to cater for it.
    Under the Sale of Land Act(SLA) the deposit moneys paid under a Contract is assumed as being cash or cheque. A deposit bond is not deposit moneys. Deposit moneys are usually held by the Agent or Solicitor in their Trust Account until released by Section 27 of the SLA or settlement. A deposit bond cannot be paid into a Trust Account. Under the current wording of the SLA there is no prohibition on a vendor personally holding or the vendor’s conveyancer holding a deposit bond, even though under the SLA a conveyancer is not permitted to hold deposit moneys. In this sense a deposit bond is not as physically secure as deposit monies from the purchaser’s viewpoint. If the vendor requires the release of the deposit moneys the purchaser can be requested to make a substitution of cash for the deposit bond.
    If you are a Vendor and a purchaser wants to use a deposit bond – my advice is don’t be persuaded to accept this. If the purchaser cools off in the 3 day period and you are entitled to retain the 0.2% of the purchase price then all you have is a worthless deposit bond and are faced with legal action in an attempt to recover your legal entitlement.
    I hope this is useful information to you all.

    Cheers
    Nessie

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