Australian Deposit Product Now Available in South Africa

Posted On Wednesday, 02 September 2009 02:00 Published by eProp Commercial Property News
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The Alliance Group has now launched a revolutionary financing product in conjunction with Lombard Insurance Company Ltd, where approved buyers will no longer be required to put down deposits or commissions prior to registration of transfer.

Property-Housing-ResidentialAccording to Alliance’s Gary Palmer “not everyone has cash readily available to pay the deposit and commission required when purchasing a property on auction.  We have now teamed up with Lombard Insurance, a subsidiary residential of Hollard Insurance, to offer our clients Deposit Advantage, a similar product which has been operating in Australia since 1989”.

Deposit Advantage offers financial guarantees that postpone the deposit and commission payable to the seller and auctioneer respectively after the property has been knocked down at auction. The product is available for residential, commercial and land purchases.

Comments Palmer, “This is the answer for individuals who wish to purchase property but have their cash tied up in current investments.

It now means that they can secure new investments without touching their savings, which can be invested and earning returns elsewhere. More importantly, it also avoids purchasers having to liquidate assets, cashing in on their fixed investments or selling shares only to find themselves with an unsuccessful bid at auction and having to re-invest their monies.”

Adds Antony Solomon of Lombard Insurance: “In addition to the convenience another major difference between using a guarantee and raising traditional source of funds is the cost.

Deposits and commissions have been traditionally funded out of savings, the proceeds of the sale of a home which often requires expensive bridging finance or by accessing money from your bond. Some of these come at a significant cost.

A 3 month guarantee – for which you pay a once–off fee, is currently available for 2% plus VAT and is issued within 24 hours upon receipt of an application and supporting documents.”

The scheme originated in Australia in 1989 and is available in New Zealand, the UK, and the USA and has recently been launched in Asia. In New South Wales, Australia alone approximately 25% of buyers use this facility.’’

Deposit Guarantee
 
The Deposit Guarantee replaces the cash deposit that is normally paid by a buyer to a seller to secure a property. It allows you the opportunity to pay the full amount of the purchase price upon registration of transfer, instead of raising the cash deposit upfront. The Deposit Guarantee is available for periods of 3, 6, 12 and 24 month terms.

Commission Guarantee

The Commission Guarantee is exclusive to clients of Alliance Group only.  It is an entirely new product to South Africa and is adopted for the same reasons as a deposit guarantee.  This product allows buyers the option of postponing the payment of auctioneers’ commission by up to 3 months, or on registration of transfer, whichever is sooner. The Commission Guarantee is available for up to 3 months only.

Guarantees are usually approved and issued within 24 hours of an application and supporting documents, enabling the buyer to present the deposit or commission guarantee at auction after the property has been knocked down to them.

To qualify applicants will need to demonstrate that they have sufficient funds to complete the purchase by the transfer date.

Concludes Palmer “These products make it easier, quicker and cheaper for those wanting to capitalise on the numerous opportunities being brought to our auction floors''.

Last modified on Wednesday, 18 June 2014 17:04

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