Deposit Bonds - acceptance.

Hi everyone,

How widely accepted are deposit bonds by vendors? I am in a situation where I am borrowing 95% so I won't be able to cough up a 10% deposit on auction day. In a red hot market, I'm guessing most vendors at auction won't accept it? How about just a normal sale?

Thanks
Robbo

 

Not too common, but you can try to negotiate

 

There's no rule that says a 10% deposit is required. You could try to negotiate a 5% deposit.

 

Negotiating a 5% deposit with the vendor lawyers prior to auction is quite common (Sydney).

 

7% sounded like the norm when I purchased in QLD, didn't even negotiate.

 

Bear in mind that if you only pay (after negotiating with the vendor's solicitor) a 5% deposit and do not settle, the contract allows them to keep that 5% and sue you for another 5% (making the total loss to you of 10%, not including penalties etc).
Most selling agents are ok with a lesser deposit, as long as it covers their selling commission, because this is where they pull their commission from on settlement.
Deposit bonds cost you some hundreds of dollars but we still have clients use them occasionally.

 

Thanks everyone. I thought 10% was the minimum, but I guess everything is negotiable

Going down the deposit bond route was a last resort, so negotiating 5% will save me a ~$1,000 fee for the bond (fee is approx 1.2-1.3% of the deposit amount).

 

Lol, deposits are routinely like $1k or $2k in WA for the stuff I've offered on.