January 19, 2015
In the process of buying a home in South Australia, should your offer be accepted you will be asked to provide a deposit to the real estate agent as a show of good faith once the cooling-off period has expired.
This deposit will be kept in a trust account and will be part of the funds at settlement time. Deposits can be from $100 up to 10% of the purchase price and can be negotiated between seller and buyer at the signing of the contract.
In some circumstances, buyers may not be able to access funds immediately to pay this deposit. This is where a deposit bond can be an alternative solution.
A Deposit Bond or Guarantee is a substitute for the cash deposit given to the real estate agent.
The bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price.
This bond is a guarantee that should the purchaser default under the contract of sale, the vendor can claim the amount guaranteed from the guarantor. The guarantor will then seek to recover this amount from the purchaser.
Because a bond or guarantee is used rather than a deposit, at settlement the purchaser pays the full purchase price including the deposit.
Deposit bonds will be issued once a customer can show proof that you have the funds to complete the purchase at settlement, eg:
- A loan approval for the new property.
- Savings, a fixed term deposit, or share certificates that can be accesses before settlement.
- If your funds come from a property sale; a copy of the Contract for property sold.
Finally, let us remind you that the deposit amount accepted by a Real estate agent is different to the amount of funds that the banks require you to provide to get a loan approved.
For more information on how much deposit you need to get a homeloan, see our blog, https://www.mortgagechoice.com.au/fiona.manley/blog/how-much-deposit-do-i-need-to-get-a-home-loan--26739.