Not so many years ago when we bought a property in Sydney, we would pay our deposit by way of a personal cheque. Simple and easy. The Real Estate Agent simply exchanged the contacts as this was deemed as consideration, and banked the cheque the next day, SOLD!!!
Today cheque books are increasing becoming in rarity, and we hear of buyers who come to pay their deposit and become unstuck due to banking limits, and to compound the misery, the selling agent doesn’t have DEFT payment. We get onto what DEFT payment exactly is later. This has become a massive problem for some buyers who have missed out on their dream home as they can’t get their deposit together in time, this is a nightmare.
Here are the top options and explanations to ensure that you have your deposit at the ready:
A deposit bond is a financial instrument used in property transactions that can be used in lieu of a cash deposit. This bond acts as a guarantee to the seller that the buyer will pay the deposit on the settlement date. In Sydney, Australia, deposit bonds are becoming increasingly popular as property prices continue to rise, and buyers may not have the cash available to pay a deposit upfront.
A deposit bond is essentially a guarantee from an insurer that the deposit will be paid on settlement. The bond is issued for a specified amount, nearly always 10% of the purchase price, and is valid for a specific period, typically six to 24 months. The cost of the bond is a fee paid upfront, typically around 1.2% of the bond amount, which can be cheaper than borrowing the cash deposit from a bank or other lender.
Using a deposit bond in a property transaction in New South Wales, is relatively straightforward. The first step is to obtain a pre-approved deposit bond from an authorized provider, such as a bank or insurer. Once approved, the bond can be used as a substitute for a cash deposit when making an offer on a property.
When the offer is accepted, the buyer will sign a contract of sale, and the deposit bond will be included in the contract as a guarantee of payment. On settlement day, the buyer will pay the balance of the purchase price, and the deposit bond will be cancelled.
One of the benefits of using a deposit bond is that it frees up cash that the buyer may need for other expenses related to the property purchase, such as conveyancing fees, inspections, and other costs. This can be particularly useful in Sydney, where property prices can be high, and buyers may have limited funds available.
Another advantage of using a deposit bond is that it can be a useful tool in a competitive property market. In situations where there are multiple buyers vying for the same property, a deposit bond can help a buyer stand out from the crowd by showing that they have the financial means to complete the purchase.
In conclusion, a deposit bond is a financial instrument that can be used in property transactions in Sydney. It acts as a guarantee to the seller that the buyer will pay the deposit on the settlement date. Using a deposit bond can be a useful tool in a competitive property market, as it can help a buyer stand out from the crowd and free up cash for other expenses related to the property purchase.
Deft Payment Systems is an Australian-based company that provides electronic payment services for the real estate industry. Most pro-active agencies use DEFT, but not all so you need to check early. When paying a deposit for a house in Sydney using Deft, the process typically works as follows:
- The buyer and seller agree on the terms of the sale, including the deposit amount.
- The buyer obtains a Deft Payment Systems deposit guarantee, which is a guarantee that the deposit will be paid on time and in full.
- The buyer transfers the deposit amount to Deft Payment Systems, which bypasses banking limits and deposits the funds directly into the Real Estate Agents trust account.
- The seller is notified that the deposit has been received and can proceed with the sale.
- At settlement, the deposit is released from the Agents trust account and paid to the seller.
Using a payment system like Deft provides a secure and reliable way to transfer and hold funds during a property transaction. It helps to protect both the buyer and seller by ensuring that the deposit is paid on time and in full, and that the funds are held securely until settlement.
Making a electronic bank transfer toa selling Agents trust account is of course possible. However, with prices of homes in the blue ribbon areas of the Lower North Shore like Mosman, Cremorne, Cammeray, Northbridge or Neutral Bay as an example, or Manly, Fairlight, Seaforth, Freshwater on the Northern Beaches being so high, the deposit amount always exceeds day transfer limits. This is where may buyers get unstuck and have missed out. Being prepared and calling your bank early, letting them know well in advance of your intensions, and having them prepared for a large transfer of funds will help you secure your next dream home.
Be prepared with your deposit planning and all due diligence. Ask the selling agent early if they use DEFT payment as this is the easiest and most secure way to make payment.