What is a Down Payment Bond? The flexibility to purchase property while leaving your investments intact
What is a Down Payment Bond? A Down Payment Bond is a form of a promise to pay / guarantee, that is issued on behalf of the purchaser to the seller for the purchase of real estate. Down payment Bonds are a form of a financial guarantee or simply put “promise to pay". This down payment bond is accepted in lieu of cash when the purchaser must pay deposit monies to financially secure their commitment to purchase Real estate. The down payment bond acts exactly the same as if you would have placed a cash deposit into escrow.
What is a Down Payment Bond? By using a down payment bond, it allows you to keep your money working for you, right up until you need to close. It’s a smart, safe and simple way of securing your real estate purchase quickly, without having to tie up your money. By using a down payment bond, it allows you, the purchaser to secure your purchase without tying up your funds, liquidating any assets , breaking any CDs and or similar. More importantly, it allows your money to remain working for you, right up until the time you are required to close on the purchase, at which point you will then use your funds and or finance to close the purchase price in full. It is one of the most efficient means in securing a financial commitment towards the purchase of real estate in the US today.
Are there risks? Yes, there are risks associated with using a down payment bond In the event a purchaser cannot complete the closing of the purchase, the seller will be entitled to keep the down payment /deposit. Such an event will constitute a default on behalf of the purchaser. At that time the seller will make a demand for payment on the down payment bond at which point the insurance company will and is obligated to pay in full to the seller, the value of the down payment bond. Down payment bonds are a form of financial guarantee and NOT an insurance policy. Purchasers CANNOT walk away from a down payment bond without risking a default listing on their credit rating and being subject to a full legal recovery process.
When do you use adown payment bond? Any real estate purchase that may not be complete for months or even years. A purchaser who has found an ideal property that is currently being marketed off the plan. The project will not be completed for another 2 years. The purchase price is 450,000. The seller’s requirement is for a 20% deposit, the purchaser must deposit 90,000 into escrow. The purchaser is desirous of this property; however, they do not have the liquidity right now to pay 90,000. The purchaser does have equity, earns good income and knows he can afford this. The solution, a down payment bond. Down Payment Options will underwrite the purchasers financial statements along with income and credit score, and on approval issue the client a down payment bond for 90,000 for 2 year duration as requested by the seller. The total premium for such is approximately is 8,550 plus state taxes, as opposed to locking up 90,000 for 2 years. Best of all, Down Payment Options can have this bond issued within 2-4 days.
What are the requirements for adown payment bond? In essence it’s the same process as one would apply for a loan. However, far more simply. All applicants will complete the Down Payment Bond application. Down Payment Options (DPO) will review the application and conduct a credit analysis. Upon review, DPO will send correspondence to confirm a preliminary approval to proceed, subject to documents that the purchaser will provide for verification. All required information will be outlined in the correspondence. This process makes it easy for the applicant to be guided through the application to approval process far more simply.
Real World Scenario"Using a deposit bond was the solution to enable me to achievemy real estate investment goals while still allowing me to keepcash on hand to earn a higher rate of return! No doubt this willbe the critical tool for investors at all levels to leverage theirassets to maximum benefit. I highly recommend everybodyconsider this new and savvy alternative for all their real estatepurchases. Thank YouPatrick Llewellyn - Mortgage Professional, Las Vegas, Nevada
Real World Scenario"They assisted us greatly with our sales in Australia, with issuingbonds that greatly assisted for the successful marketingcampaigns for Altitude, Zest, Volt and Aura within Australia andtheir assistance achieved very good volume levels there. Theyproved to be extremely helpful, efficient and diligent in thereviews and approvals of our bond deposit purchasers, andthere after sales/settlements assistance was indeed greatlyappreciated. The deposit bond product is accepted by all theprimary mainstream lenders such as the major for trading banks,ANZ, Westpac, NAB, Commonwealth Bank within Australia andNew Zealand. Deposit bonds are very simply standardprocedure within Australia and New Zealand and are all verymuch parts of our landscape."Robert Holden – Director, Conrad Properties Limited
Real World Scenario"My group and I really appreciate your help and service ingetting our Deposit Bonds for the purchases of property inAustralia….. I found out about Deposit Bonds from my realtor inAustralia so I had an idea of how it worked. My partners and Ilike the Deposit Bond approach, especially for long termconstruction projects. A group of individuals did not have tooutlay as much funds to control two units for a long period oftime…"John “Randy” Wedum – Architect, Aspen, Colorado
Real World Scenario"The deposit bond assisted me in purchasing a new condo inArizona, and allowed me to still hold onto my own money, touse it in any way that is best for me. The employees of the bondcompany were very friendly and helpful and I would definitelyuse their services in the future."Steve - Chicago, Illinois
Real World Scenario"I was on location in Costa Rica finishing a commercial realestate development when I found the condo that I wanted tobuy in Vegas. The team worked with me to put a deposit bondin place that allowed me to conserve my cash and use it on myCosta Rica project. They were very accommodating andcreative in working with me from another country."Benjamin Hadary - Developer, Galeria Conchal, Guanacaste,Costa Rica
Real World Scenario"Gemstone Development, the developer of the MantattanWestproject, located in Las Vegas is using Deposit Bonds as anacceptable method for the purchase deposit required underour Purchase and Sale agreements.Our buyers have responded well to the idea of Deposit Bonds.Even if they have the funds to pay cash for an earnest deposit,they realize that this is a cost effective way to secure theproperty. I thoroughly recommend the product. "Alexander Edelstein - CEO, Gemstone Development
Real World Scenario"ANZ has provided funding to developers who have acceptedDeposit Bonds in support of "off the plan" sales contracts. Of theavailable Bond products in the market QBE is an appropriatelyrated underwriter to the satisfaction of ANZ."Tony Murray - Head of Insurance Risk, ANZ Insurance, ANZ BankAustralia
Real World Scenario"St. George Bank accepts Deposit Bonds as a Legal form ofdeposit in regards to the purchase of a residential house or unit."Bradley J Squire - Executive Manager, Credit & Administration,St. George Bank
Real World Scenario"Scott Financial Corporation has recently discovered a viable tool toassist the Lending Industry in improving commercial real estateunderwriting by enhancing the required sales deposit amountrequirements. It truly is win-win-win. The Buyer, for a small fee, canbetter manage their cash required upfront for the deposit until theirreal estate closing.The Seller/Developer can require a larger amount upfront in thesales deposit, while providing a vehicle to fund the increasedamount. Finally, the Lender has improved underwriting; by obtainingincreased non-refundable sales deposits facilitated through theinsurance bond. The application process in the underwriting goes along way in qualifying the buyers for the Project. As lenders continueto require larger non-refundable deposits for sales or upgrades; thisvehicle offered will have increasing use in the lending industry."Brad J. Scott - Development Financier
Real World Scenario"It is common practice for the Bank to recognize as aconstituting valid deposit, a Deposit Bond."Mario Caleite - Director, BankWest
Connect with Us! Down Payment Options 410 S. Rampart Boulevard Suite #390 Las Vegas, NV 89145 Tel. 1.702.726.6818 firstname.lastname@example.org www.downpaymentoptions.com