What is a deposit bond?
A Deposit Bond is used in lieu of cash for a deposit on the purchase
of a property. The bond gives the Vendor security that can be converted
to cash in the event the purchaser does not proceed with settlement
of the property. The bond is NOT an insurance policy it is a form
of Surety or Guarantee. The purchaser indemnifies QBE by way of
an Indemnity.
What is an Indemnity?
An Indemnity is a written agreement that provides QBE a legal right
to recover the amount of the bond from the purchaser in the event
of default under the contract.
Does the purchaser pay the Deposit at Settlement?
Yes. The bond simply represents a deposit, it does not remove the
obligation on the purchaser to pay the deposit at settlement.
When does the Bond terminate?
The bond terminates on the Expiry Date or when the contract for
sale is completed, terminated or rescinded. In the event the purchaser
fails to finalise settlement and the Vendor becomes entitled to
terminate the contract, the bond terminates when QBE pays the deposit
to the Vendor.
What are the advantages of a bond?
For a small premium a bond can be purchased for periods from 6 weeks
to 4 years, depending on the settlement term of the property. The
cash that would normally be used for a deposit can be invested until
settlement arrives. Many people buy properties "off the plan"
or that are under construction. Completion of the property can be
months or even years away. The Deposit Bond ensures the purchaser
secures the property without the burdensome outlay of a 10% cash
deposit until the property is ready to settle.
Are vendors happy to accept Bonds?
Yes. The security provided by a major A+ Rated Financial Institution
like QBE is much desired by Vendors as they have the comfort of
knowing that, in the event the purchaser does not proceed with settlement,
they get the deposit.
What happens in the event of a dispute between the Vendor and the Purchaser?
The bond is designed to provide convenience to the purchaser and
security to the vendor. In this respect QBE are obliged to pay the
deposit if the purchaser fails to proceed with settlement, regardless
of any disputes or for whatever reason failure occurs. Once QBE
has been reimbursed the bond amount by the purchaser, the purchaser
is free to pursue recovery of any loss from the Vendor.
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