Deposit Bonds On The Nose With Property Vendors
The Age
Saturday October 13, 2007
THINK of it as a deposit for a deposit. You pay an insurance company $800 to guarantee that you're good for a house deposit of $80,000. It's money for jam.
But some Victorian real estate agents are refusing or discouraging use of these promissory notes - known as "deposit bonds" - at auctions, disgruntling buyers. Agents' commissions are often drawn from cash deposits through "early release", but deposit bonds mean agents can't get their fee until settlement.Craig Shearn, director at Jellis Craig Clifton Hill, said his agency did not use deposit bonds."We've always had a company policy that we don't accept them . . . for the very simple reason that it's not cash.""If there's a vendor-funded advertising campaign, the agent is not able to reimburse themselves on the part of the owner."Alex Flamm, principal of LJ Hooker Elsternwick, said deposit bonds were "too complicated" and that he would not accept them, unless under specific instructions from the vendor.Deposit bonds are universally accepted in NSW, but in Victoria, vendors can refuse them in favour of a deposit.But a source close to The Age said some agencies were discouraging the use of deposit bonds, disgruntling potential buyers at auction.Deposit bonds were used more frequently during the apartment boom a few years ago by people buying "off the plan".In 2004, falling values hurt many off-the-plan buyers, and companies began to refuse deposit bonds.
© 2007 The Age