The deposit bond is a type of Surety bond - a commonly used financial instrument in Australia as an alternative to cash deposit. Bond deposits facilitate the purchase of real estate or commercial property. They are sometimes confused with deposit insurance, where bank deposits are protected, but they are actually financial instruments that apply to real estate transactions.
A buyer can use deposit deposits in place of cash, by giving the seller a deposit bond at the time of purchase. The buyer and the seller must both agree that the buyer will pay the seller the total amount for the property purchased in the future; ownership transfer of property from the seller to the buyer on this date.
Bond deposits provide the seller assurance that the buyer's deposit is insured, and that they will receive it in cases where the buyer fails to fulfill its obligations to the seller.
Video Deposit bond
Warranty
Bond deposits provide assurance that transactions will happen - in other words, they provide transaction guarantees. Note that this is different from insurance , which provides a reminder of what might happen if it happens.
Maps Deposit bond
Buyer
A deposit bond is issued on behalf of the buyer, by the insurer or bank, in the form of a certificate guaranteeing the total amount of deposit money required for the purchase of real estate.
Bond deposits are typically used when potential buyers of real estate accessibility to their own cash are limited, usually in other investment grade classes.
History
Deposit bonds were introduced in Australia in 1988 by British insurance giant Royal Sun and Alliance through their Australian-owned company called Deposit Power.
Banks and other insurance companies follow the introduction of deposit bonds into their product offerings, especially for their mortgage clients. Other financial intermediaries, such as brokers and financial advisers, have also become part of the supply chain of sales and issuance of deposit bonds to consumers. These financial intermediaries are usually authorized to act as agents for insurance companies or banks.
New Zealand and the United States are the latest markets to receive deposit bonds in recent years. In the United States, bond deposits are known as bonds bonds down payment
Risk Mitigation
Banks and insurance companies have their own guarantee guarantees related to the issuance of the Deposit Bonds to be fulfilled by the people.
Guarantee guidelines vary from one company to another, but most bond issuers look for the following:
- assets and liabilities
- the ability to earn or get financial approval in place
The risk is borne by the issuer of ergo deposit bonds of financial institutions or insurance companies, on behalf of the buyer.
If the buyer fails to comply with their agreement, the seller is entitled to keep the security deposit in custody as collateral and in lieu of cash for the purchase of the real estate.
Therefore, after the claim, the funds will be paid immediately by the issuer of the bonds to the seller. Being a guarantee, the show is covered no matter what.
References
- https://www.finder.com.au/deposit-bonds
- http://depositpower.com.au/what-is-a-deposit-guarantee/
- https://www.commbank.com.au/personal/home-loans/deposit-guarantee.html
- https://www.mortgagechoice.com.au/home-loans/home-buying-advice/tips-and-tools/deposit-bond.aspx
- https://www.moneysmart.gov.au/glossary/d/deposit-bond
- https://www.lawsociety.com.au/cs/groups/public/documents/internetcontent/1150687.pdf
- https://www.slideshare.net/DownPaymentOptions/what-is-a-down-payment-bond
- http://www.investopedia.com/terms/a/assurance.asp
- http://www.cblinsurance.com/products/property-deposit-bonds/
- http://www.investopedia.com/terms/f/forward-exchange-contract.asp
- http://depositbonds.com.au/
- https://danskebank.com/en-gb/Corporate-Banking/Trade-and-Export-Finance/Guarantees/Pages/guarantees-and-bonds.aspx?tab=1
- Surety bond
- Main Builder Association
Source of the article : Wikipedia
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