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 a down 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 a down 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 achieve my real estate investment goals while still allowing me to keep cash on hand to earn a higher rate of return! No doubt this will be the critical tool for investors at all levels to leverage their assets to maximum benefit. I highly recommend everybody consider this new and savvy alternative for all their real estate purchases. Thank You

Patrick Llewellyn - Mortgage Professional, Las Vegas, Nevada

Real World Scenario

"They assisted us greatly with our sales in Australia, with issuing bonds that greatly assisted for the successful marketing campaigns for Altitude, Zest, Volt and Aura within Australia and their assistance achieved very good volume levels there. They proved to be extremely helpful, efficient and diligent in the reviews and approvals of our bond deposit purchasers, and there after sales/settlements assistance was indeed greatly appreciated. The deposit bond product is accepted by all the primary mainstream lenders such as the major for trading banks, ANZ, Westpac, NAB, Commonwealth Bank within Australia and New Zealand. Deposit bonds are very simply standard procedure within Australia and New Zealand and are all very much parts of our landscape."

Robert Holden – Director, Conrad Properties Limited

Real World Scenario

"My group and I really appreciate your help and service in getting our Deposit Bonds for the purchases of property in Australia….. I found out about Deposit Bonds from my realtor in Australia so I had an idea of how it worked. My partners and I like the Deposit Bond approach, especially for long term construction projects. A group of individuals did not have to outlay as much funds to control two units for a long period of time…"

John “Randy” Wedum – Architect, Aspen, Colorado

Real World Scenario

"The deposit bond assisted me in purchasing a new condo in Arizona, and allowed me to still hold onto my own money, to use it in any way that is best for me. The employees of the bond company were very friendly and helpful and I would definitely use their services in the future."

Steve - Chicago, Illinois

Real World Scenario

"I was on location in Costa Rica finishing a commercial real estate development when I found the condo that I wanted to buy in Vegas. The team worked with me to put a deposit bond in place that allowed me to conserve my cash and use it on my Costa Rica project. They were very accommodating and creative in working with me from another country."

Benjamin Hadary - Developer, Galeria Conchal, Guanacaste, Costa Rica

Real World Scenario

"Gemstone Development, the developer of the MantattanWest project, located in Las Vegas is using Deposit Bonds as an acceptable method for the purchase deposit required under our 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 the property. I thoroughly recommend the product. "

Alexander Edelstein - CEO, Gemstone Development

Real World Scenario

"ANZ has provided funding to developers who have accepted Deposit Bonds in support of "off the plan" sales contracts. Of the available Bond products in the market QBE is an appropriately rated underwriter to the satisfaction of ANZ."

Tony Murray - Head of Insurance Risk, ANZ Insurance, ANZ Bank Australia

Real World Scenario

"St. George Bank accepts Deposit Bonds as a Legal form of deposit 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 to assist the Lending Industry in improving commercial real estate underwriting by enhancing the required sales deposit amount requirements. It truly is win-win-win. The Buyer, for a small fee, can better manage their cash required upfront for the deposit until their real estate closing.

The Seller/Developer can require a larger amount upfront in the sales deposit, while providing a vehicle to fund the increased amount. Finally, the Lender has improved underwriting; by obtaining increased non-refundable sales deposits facilitated through the insurance bond. The application process in the underwriting goes a long way in qualifying the buyers for the Project. As lenders continue to require larger non-refundable deposits for sales or upgrades; this vehicle 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 a constituting 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 info@downpaymentoptions.com www.downpaymentoptions.com