When you are buying off the plan, you will usually be asked to make a deposit, generally 10 percent, so you will need to consider how you will get the money for that. Having a healthy deposit (more than 10 percent) will also open up more lending options for you as the risk is lower for lenders.

The deposit will be held in trust until final settlement takes place. This means your money is protected until the project is completed. If the project does not go ahead or finish as expected, you should be able to reclaim your deposit.

Alternative deposits

There are some alternatives to a cash deposit and they are a Deposit Bond or Bank Guarantee. You will need to discuss with the sales agent or developer if they will accept these forms of deposit.

Deposit Bond

A Deposit Bond is a form of guarantee offered in lieu of a cash deposit. The issuer of the Deposit Bond, like a bank or other lender, guarantees unconditional payment of the deposit bond amount to the Vendor in the event that the Buyer fails to settle/complete the Contract of Sale.

Bank Guarantee

A bank guarantee is basically just that…. a guarantee issued by a bank. Basically it’s a piece of paper with an official stamp on it, and it gives the holder the right to cash in the guarantee in certain circumstances. The approval process for a bank guarantee is pretty much the same as a loan approval process, and the bank will only issue a bank guarantee if they can actually guarantee that you’re good for the funds.

Basically if you’re approved for a bank guarantee you will exchange contracts with the bank guarantee as a deposit. On settlement you will be required to come up with the whole purchase price.

Get expert advice

If you are looking to get finance to buy an off the plan property make sure you understand how it works and what you can commit to. You should speak with your solicitor or legal adviser before entering any off the plan contract, or any property sales contract. Make sure you get someone qualified to check the contract before you sign.

Have you used a different way of paying a deposit?

Making an offer to buy a home can be simple if you understand how the agent who is selling the property prefers to manage the sale. Here are a couple of common approaches to making an offer on a property not being sold by auction.

Each state and territory in Australia has different laws on how offers can be made so make sure you check before buying so you know what to expect.

Best offer first

Basically this means you get one crack at buying the property, you will not get multiple opportunities to tweak your offer so you need to put your absolute best offer forward the first time.

Dutch auction

This is when you can make multiple offers based on feedback from the agent, it might be the price or the terms. You may be up against other interested buyers too so be sure to ask the agent where things stand so you don’t miss out.

Sale by date

An agent may set a date by which offers have to be in. The cut off date means you put in your best offer and see how you go. The deadline creates a sense of urgency for sincere buyers to make an offer.

You should also check whether agents will take verbal offers or if they have to be in writing.

Conditions of sale

The other consideration with your offer is any conditions you might have. Offers with no conditions will obviously be attractive to a seller. Conditions might include the settlement period, finance or pest checks.

The key to being successful with your offer is to work with the agent so that you get the best result and that means finding out early how the offers will be handled.

If you have been through or know other ways of making offers please share them below.