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FAQ - Vendors
How can a guarantee help you sell your property?
The convenience of using a deposit bond guarantee will attract some purchasers who have difficulty accessing the full cash Deposit. Sometimes people looking to sell their home and buy another have trouble raising the deposit when they have funds tied up in their home or investments. Short term finance can be costly and time consuming whereas the Guarantee is usually less expensive and can be organised easily and quickly. The average value of a guarantee is $30,000 and costs the purchaser only $360 (for a 6 month guarantee); saving expensive outlays in application fees and interest for short term finance. Deposit Bond guarantees are legally effective throughout Australia. In situations where a full 10% deposit is not available (95% finance) a full 10% deposit commitment can be obtained to protect you.
Can the guarantee be used at auctions?
Yes. The flexibility of the guarantee at auctions is one of its key features. A guarantee is issued prior to auction so that the purchaser can be assured of acceptance of the guarantee beforehand.
Does the contract of sale need amending for the deposit guarantee?
Yes, in all states except New South Wales. Since 1996, the standard contract for sale of land in NSW carries a clause recognising a deposit guarantee as a legitimate deposit transaction. In other states, the suggested special condition (found on the back of the guarantee certificate) amends the contract of sale and enables the guarantee to be used instead of a cash deposit. It also states that the purchaser must pay all monies owing to you at settlement, under the contract of sale including the guarantee amount. Check with your representative to ensure that this suggested special condition is inserted or annexed to the contract of sale.
What happens if the purchaser defaults under the contract of sale?
If you are entitled to retain the deposit you can claim the amount from the deposit bond issuer. This amount will be paid to you or the stakeholder nominated in the contract within two clear days of the deposit bond Issuer being provided with the necessary documents. The guarantee cannot be cancelled where it has been relied upon to sign a contract.
Do I have to accept the guarantee?
You have the sole authority to accept or deny a request by the purchaser to use a deposit bond guarantee in a property transaction.
Where can the deposit bond guarantee be used?
The deposit bond guarantee is legally effective and accepted by vendors in all states and territories. The guarantee was first introduced by Vero Insurance Limited (formerly Royal & Sun Alliance Insurance Australia) in 1989, since then it has strongly grown in popularity throughout Australia. Traditionally, deposit bond guarantees have performed best in New South Wales with approximately one in four residential property transactions involving the guarantee. The rapid growth in NSW was aided by the Law Society of NSW and the Real Estate Institute of NSW acknowledging the use of guarantees or bonds.
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