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Tom H.
Tom H.
Glen Alpine, NSW
16 Likes
2 Followers

We are going to an auction on Saturday and the agent and conveyancer have differing views on us using a deposit bond to buy the property. Is it ok to use a deposit bond at an auction?

7 months ago

Responses

Hi Tom,
There very first question is, will the vendor accept a deposit bond?
If the agent says the vendor will accept a deposit bond they can be a great way to have flexibility when bidding at an auction. The deposit bond can provide you with funds for the deposit up to a given value, which is helpful because at auction you never know until the day what the final value required will be.

Good luck
Awesome Albert

Comments

Thanks Albert, what would be the reason for the vendor not to accept a deposit bond?

Some vendors don't understand how the deposit bond works and feel more comfortable with a bank cheques or direct deposit into the real estate's trust account because it feels realer.

http://www.afr.com/personal-finance/10000-property-buyers-caught-in-deposit-power-collapse-20180306-h0x460

I have a number of clients caught up in this disaster. Cost to each of them in thousands. ONE client has not been able to renegotiate another bond.

so if a deposit bond is the best way forward then rip in. But dont let anyone tell you they are risk-free. Deposit Power was by no means a tiddler in the deposit bond "pool".

so with all due respect to Albert, the first question maybe should be "how does one of these things work and what are the risks involved?"

good luck
bc

Comments

Brendan, a deposit bond is really a convenience product and the purchasers should always have equivalent funds in cash or equity in their property. The benefit for example being that you can retain your cash in a term deposit.
I am curious to know how people actually got into financial trouble other than the lost monies paid for the deposit bond fee?
The risk is really for the vendor in the event the purchaser can't settle and the vendor is left with a worthless deposit bond. This is another reason some vendors like developers do not like them.

https://www.lawyersconveyancing.com.au/faq/deposit-bond-faq/

this is the first thing I found online when I googled "deposit bond" and it is actually quite good:) It explains how a deposit bond is not a deposit and its not a bond.....its an insurance policy that guarantees the vendor gets paid on settlement.
and it costs the property purchaser a premium to fund this guarantee.
so when Deposit Power went belly-up a few months ago, lots of these guarantees evaporated. the property purchasers all had to run around like headless chooks lining up new deposit bonds, and one of them was not able to do so......so she had to pull cash out of a TD which was a pretty expensive excercise for her.....thousands.

so yeah, they are a convenience thing. And I am not a fan :)

cheers
bc

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