Real Estate Development and Down Payment Bonds

Frequently Asked Questions About

Down Payment Bonds for Real Estate Developers

Why would a purchaser use a Down Payment Bond?

A down payment bond is a new financial  option that is now available to the purchaser for their  deposit or down payment required on real estate purchases that may not be complete months or even years. A perfect tool for pre-sales.  A down payment bond can be used for all or part of the transaction’s required deposit amounts, for as much as 20 percent of the purchase price, and can  be issued for a minimum period of 3 months to 36 months or even longer.

Why would a purchaser use a Down Payment Bond?

Down payment bonds replace the requirement to outlay a cash deposit, allowing buyers to keep their money working for them right up until closing. Then, at closing, they pay the property’s full purchase price.

Why would a purchaser use a Down Payment Bond?

By allowing this option gives the purchaser the flexibility to utilize their existing equity as opposed to using their cash funds . With a down payment bond, there is no need to use cash for the required down payment when purchasing a property.

Buyers using down payment bonds do not need to withdraw cash from their savings or investments, or obtain financing by using equity in another property.  A down payment bond is also less expensive than traditional real estate financing. A developer accepting the bond provides another option to the purchaser which could lead to a more favorable decision towards the purchasing process.

What is the Benefit to the Developer?

When it comes to pre sales and marketing of any given project that may not be complete for some time, Down Payment Bonds offer a more secure way for a buyer to purchase with comfort and confidence. As a developer the more pre-sales that can meet the financing threshold the more comfortable lenders are willing to finance to a project.

What is the Benefit to the Developer?

So, the more options the developer can provide their buyers will only help the sales and marketing process of pre sales. In addition , a purchaser that has been approved for a down payment bond assures sellers and developers that buyers have been qualified as having the financial capability to complete the transaction. If the buyer does not close the property transaction, The insurance company “QBE “ pays the seller the full amount of the down payment bond.

As a Developer, How Do I Make a Claim When My Buyer Defaults?

If a purchaser does not complete their purchase, the seller can make a claim directly to DPO, by providing the following documents:

• A letter from the seller/seller’s attorney to DPO demanding payment of the deposit bond and stating the reason why. This letter must state that the purchaser has not completed their purchase obligation under the purchase agreement/contract and that the seller has not been paid the deposit by the purchaser;

• A copy of the notice from the seller to the purchaser, where the seller has cancelled/terminated the purchase agreement/contract due to the purchaser not meeting their obligation, entitling the Vendor to retain the deposit; and

• The original Down payment bond

Who is QBE Insurance Group?

QBE Insurance Group Limited is one of the top 25 insurers and reinsurers worldwide with operations in all key global insurance markets. QBE has operations in 49 countries with over 13,500 staff worldwide. Rated "A" (Excellent) by A.M. Best and "A+" by Standard and Poor's.

Visit their website for more information: www.QBE.com

Yes. Down Payment Bonds are underwritten by QBE Specialty Insurance Company, a part of the QBE Insurance Group Limited (QBE).

Who Can Apply for a Down Payment Bond?

Eligible applicants must be US citizens. Applicants can be individuals or couples. The applicant may be an existing property owner who wishes to purchase another property or investors who wish to expand their property portfolio.

How Does A Purchaser Qualify for a Down Payment Bond?

To qualify for a Down payment bond an applicant will complete a DPO application form and supply the supporting information required as noted in the application form.

DPO will then underwrite and assess the application and determine whether the applicant has the financial capacity to be able to complete on the new property purchase taking into account the applicants current overall financial position.

The Advantage

Down payment bonds are a better way purchasing in the pre sales of projects

For many of today’s property buyer’s, the cash required for the deposit is often tied up in their current home or other investments. This can mean either expensive bridging finance or borrowing from a finance company/bank at high interest rates.

Regardless of where the finance is obtained, interest charges, establishment fees and other up-front costs connected with the loan can be expensive and time-consuming to arrange.

For buyers that do have the cash available for the deposit, they would prefer to tie up a small portion of this, rather than the full deposit amount. This allows their deposit money to continue working for them, right up until closing when they pay the full purchase price.

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