Purchasing property at auction using an Exchange Bond^®

The Exchange Bond^® can now be used an alternative to paying a cash deposit when buying a property at Auction.

The Exchange Bond^® is:

A financial guarantee issued and underwritten by the Exchange Insurance Company Limited which is authorised and regulated by the Financial Services Authority in the UK.
Simple, secure and easy, an Exchange Bond^® replaces the cash deposit that is normally paid by a buyer to a seller on exchange of contracts to secure a property purchase.

To learn more about what an an Exchange Bond^® is and how it works, please use the links on the left of the page. Specific details about Exchange Bond^® for property auctions are below.

How Exchange Bond^® works with property bought at auction

Traditionally, when the hammer falls, the purchaser immediately secures his purchase by paying a deposit. This is effectively exchange of contracts.

However, this large cash payment can be postponed by using an Exchange Bond^®. The process is:

The bidder must first ensure that the seller of the property is willing to accept an Exchange Bond^®. The auction house should be able to advise on this.
Prior to the auction, the bidder applies for an Exchange Bond^® for the property he/she is going to bid on. See the fees section below.
The application states the maximum deposit amount that is to be covered by the Exchange Bond^®, along with other information, including the bidder's legal advisor details.
On acceptance of the application, The Exchange Insurance Company issues a customer agreement. The bidder should take legal advice on this before signing and returning this with the premium (detailed below).
The Exchange Bond^® is then sent by The Exchange Insurance Company to the bidder's legal advisor, from where it can be collected and taken to the auction.
After successfully winning the auction for the property, the bidder (who is now the purchaser) gives the Exchange Bond^® to the autioneer house, who will insert the relevant details of the seller and the property and the deposit amount (less auction fees which must be paid as usual) on the Exchange Bond^®. The deposit amount must be equal or less than the maximum deposit amount stated on the Exchange Bond^®. A copy of the Exchange Bond^® is sent back to The Exchange Insurance Company by the auction house.
The Exchange Bond^® is valid for a period of 8 weeks from the date of auction, during which time the property purchase must be completed.
At completion the purchaser pays the full purchase price less any auction fees already paid.

Important

If, as a buyer, you fail to complete your property purchase, The Exchange Insurance Company will do the following:

Pay the seller the full deposit amount.
Recover that full deposit amount from you, the buyer.

If it is the seller who fails to complete then no payment is made by The Exchange Insurance Company to the seller and there is nothing more to be paid by you.

If completion is delayed beyond the expiry date of the Exchange Bond^®, then you will need to pay for an extension certificate.

How much does an Exchange Bond^® for property auction cost?

There is a £125 application fee. The premium (payment) is then dependent upon the amount of the deposit being guaranteed:

For up to a £20,000 deposit, the premium is £300.
For up to a £30,000 deposit, the premium is £325.
For up to a £40,000 deposit, the premium is £350.
For up to a £50,000 deposit, the premium is £375.

If the Exchange Bond^® is not used for the property stated at the auction it may be returned and re-issued for a different auction any number of times in a six month period.