Questions answered

The following is a list of frequently asked questions. Click on a question to see the answer. Alternatively you can show all answers for printing.

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General questions

1. What is an Exchange Bond^®?

   An Exchange Bond^® is a financial guarantee provided by The Exchange Insurance Company Ltd to a property seller/developer on behalf of a buyer. It replaces the traditional cash deposit typically required at exchange of contracts for a residential property. But remember, at completion you have to pay 100% of the purchase price. More details...

2. Are they risky to use?

   No. The objective is to place both buyer and seller in the same position as they would normally be following exchange of contracts as if a cash deposit had been provided.

3. Can the deposit be part cash and part Exchange Bond^®?

   Yes. The Exchange Bond^® amount is fixed by agreement between the buyer and seller. If part of the deposit is to be in cash, then the bond application amount should be stated as the balance of the deposit amount required by the seller.

4. Is it cheaper to use an Exchange Bond^®?

   Our aim is to simplify the process of buying and selling property by removing the hurdle and complexity of the traditional cash deposit. Where new properties are involved, we expect that the buyer will receive a credit for any premium paid to The Exchange Insurance Company to set off against the purchase price payable at completion. The financial benefits to a buyer, therefore, are substantial when compared to an equivalent cash deposit.

   Even without this premium credit at completion from the seller, the financial comparisons can be favourable for a buyer.

5. Is The Exchange Insurance Company regulated?

   Yes. The Exchange Insurance Company is authorised and regulated by the FSA in the UK and conducts business in Ireland on a “freedom of services” basis.

Buyer's questions

6. How do I apply for an Exchange Bond^®?

   You can download an application form here. Alternatively, the property developers we work with have access to the application form.

   In an ordinary house purchase transaction your legal advisor will also be able to access the application form if they have registered with us. Legal advisors need to be registered with us before they get access to our secure network for applications, but this is a very simple process (see our web-site).

7. Will a developer accept an Exchange Bond^®?

   We already have agreements to work with most major property developers throughout the UK and Ireland and increasingly overseas. That means the developer will make it clear that he is prepared to accept an Exchange Bond^®. If your developer does not have an agreement with us, we would be pleased make the necessary arrangements.

8. Will the seller accept an Exchange Bond^®?

   A seller would not typically receive your cash deposit - it is often held by his/her legal advisor. It is the seller's legal advisor, therefore, who needs to be satisfied that the Exchange Bond^® is equivalent to a cash deposit. We provide pro forma advice and explanatory notes for all legal advisors designed to ensure that there are no material grounds to oppose your wish to use an Exchange Bond^® instead of making a cash deposit.

9. What if the seller will not accept an Exchange Bond^®?

   We would be pleased to discuss this matter directly with the seller’s legal advisors to seek resolution of the perceived problem. You may wish to make your offer conditional on the seller accepting an Exchange Bond^® in lieu of a cash deposit.

10. What if the seller has unfairly kept your deposit?

    If The Exchange Insurance Company makes a payment to the seller under the Exchange Bond^® which the seller intends to retain as your forfeited deposit, and you believe that the seller was not entitled to do so, all your rights to recover the value of your deposit from the seller remain intact under the purchase contract between you (the buyer) and the seller.

11. Will my legal advisor be able to arrange an Exchange Bond^®?

    Yes, provided he/she is registered with us (see our web-site). When registered your legal advisor will have access to an on-line application form.

12. What if I haven’t appointed a legal adviser yet?

    We need to be sure that you are properly advised as to the nature of an Exchange Bond^®. Accordingly we need to be able to communicate directly with your legal adviser in order to complete the transaction. You will be able to receive an indicative quote without having appointed a legal advisor, but should you wish to use an Exchange Bond^® you will need to supply us with the details of your legal advisor in order to obtain the Exchange Bond^®.

13. What are the key criteria for issuing an Exchange Bond^®?

    We need to be satisfied through a simple credit check that if you fail to complete the house purchase and we are obliged to make a payment to the seller under the Exchange Bond^®, you will be able to reimburse us that payment.

14. Is an Exchange Bond^® transferable?

    No. An Exchange Bond is issued based on your personal credit standing against a specific property purchase and cannot be transferred or assigned to a third party.

15. What happens if my property purchase collapses before exchange of contracts?

    The premium will be refunded provided that the Exchange Bond^® is returned to us and contracts have not been exchanged.

16. What happens if the purchase collapses after exchange of contracts?

    This will depend on the reasons for the collapse. If the seller could claim your cash deposit under the house purchase contract then he/ she is likely to make a claim under the Exchange Bond^®. Unless there is some fundamental fraud then we will be obliged to pay. We will then seek immediate reimbursement from you of any amount that we have to pay the seller.

17. Can I apply for more than one Exchange Bond^® at the same time?

    Yes, but having multiple applications would be a factor in the approval process. We need to be satisfied that you could meet all your obligations under an Exchange Bond^® issued on your behalf. Multiple Exchange Bond^® applications could be conditional on additional credit requirement, such as a net worth statement, proof of income, etc.

18. What happens if the completion date is changed?

    A Term or Overseas Exchange Bond^® can be extended, but if it needs to be extended for more than 28 days there will be an additional premium to pay. You will be liable for any extension premium but in some circumstances the seller/developer may, at his sole discretion, pay, reimburse or grant a credit off the purchase price at completion (especially if the delay has been caused by the seller/developer).

    A General Exchange Bond^® has a maximum life of 6 months but if exchange has been delayed, we will issue another one with no additional premium - just a small administrative charge. A General Bond^® expires 90 days after exchange of contracts.

19. If no claim is made on the Exchange Bond^®, will I get my premium back?

    Your premium represents the price we charge for issuing an Exchange Bond^® and is not refunded when the Bond expires.

    Property developers may give a credit to you at completion for the amount of the premium which you have paid for a Term Exchange Bond^® – we negotiate this directly with developers before entering into framework agreements with them.

20. If my application is rejected, will I get my application fee back?

    The application fee covers our costs of processing your application including third party expenses (credit agency fees). This fee will not be refunded in any circumstances even if your application is rejected.

21. How long does it take to process an application?

    Once we have received your application form we aim to give approval within 48 hours. Occasionally additional information requirements may cause a delay, but these can be minimised with prompt responses from yourself.

22. What happens if I am made redundant or become seriously ill?

    If circumstances arise which could threaten your ability to complete your property purchase contract, you must inform your legal adviser, the seller and The Exchange Insurance Company as soon as possible. Such circumstances do NOT release you from your obligations under either your property purchase contract or your agreement with us. However, we may be able to reach a settlement between ourselves and the seller that could lessen your liabilities.

23. What happens if a buyer does not complete the complete the purchase contract?

    As a buyer, you are legally liable to complete the purchase contract. If you fail to complete the purchase, the seller will be able to forfeit your deposit - which in this case means that the seller will make a claim on The Exchange Insurance Company Limited under the Exchange Bond^® for the deposit amount. The Exchange Insurance Company will seek immediate reimbursement from you. Failure to reimburse ExCo will result in legal action by The Exchange Insurance Company to recover funds from you the buyer.

Seller's questions

24. What happens if a buyer does not complete the complete the purchase contract?

    A buyer is legally obliged to complete the purchase contract. If they fail to complete the purchase, the seller will be able to forfeit the deposit - which in this case means that the seller can make a claim on The Exchange Insurance Company Limited under the Exchange Bond^® for the deposit amount. The Exchange Insurance Company will then seek immediate reimbursement from the buyer.

25. What if the buyer withholds a portion of the purchase price?

    The Exchange Bond^® is not available to cover a shortfall from the buyer. Any amounts paid towards the purchase price automatically reduce the amount available under the Exchange Bond^®.

26. Does an Exchange Bond^® work with stage payments?

    We are aware that some property developers will require payment being made during the construction phase. An Exchange Bond^® will effectively secure the initial deposit typically paid by the buyer at exchange of contracts, and the stage payments will then be made by a lender as normal. At completion the buyer will simply pay the total cash balance. Stage payments will not reduce the amount payable by ExCo for a claim under an Exchange Bond^®.

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