Imagine finding your dream home and tendering an offer only to find out the offer is due immediately and you don’t have time to free up the money for a competitive deposit or produce a certified cheque. Happens all the time.
But Deposit Rocket, a nascent GTA-based company that operates countrywide, has stepped in as an alternative to conventional cash deposits and certified cheques, which risk delaying an offer on a home until it’s too late.
“Deposit Rocket allows the buyer to unlock their home equity, instantly. The guarantee stands in the place of a cash deposit until closing,” said Deposit Rocket’s CEO Don Miller. “They can also unlock equity in their liquid assets and if they’re awaiting a gift from their parents, for example, they can access the home equity that exists in their parents’ home.”
Miller noted that house hunters, especially in Canada’s major cities, often find their dream homes only to then start scrambling for enough deposit money, frequently drawing upon several sources. If it’s not as large as it could be, their offers could be rejected immediately.
“The other thing we provide is the convenience factor, because by not having to liquidate your investments, like taking cash out of stocks or mutual funds or bonds, and incur breakage fees in the process, you keep them in your account and earn interest while you wait for your home to close,” said Miller.
Many Canadians’ home equity is tied up in their homes, and because pulling it out is contingent on a bank appraisal, which can take time, that dream home risks slipping through the hopeful buyer’s fingers. However, Deposit Rocket’s partnership with Northbridge General Insurance Corporation allows it to extend deposit guarantees that are backed by an A-rated insurance company.
“So when you make an offer, you attach the guarantee to it, and if you’re a successful bidder you pay the deposit amount at closing.”
Deposit Rocket is now available and it’s built upon a successful 30+ year model that’s common overseas, notably in Australia, and to a lesser extent with Canadian real estate developers that sometimes extend deposit guarantees on preconstruction homes. Moreover, as an online platform, digitizing every facet of the procedure, from collecting signatures to delivering the offer, significantly reduces time, which, in theory, enables a disappointed homebuyer to move on to their next target without going to the bank over and over again to deal with certified deposits.
“The neat thing for the selling agent is if they’re receiving offers on a home and they like one of them, but the deposit isn’t quite high enough or it’s not certified, they can ask the buyer to upgrade it on the spot,” said Miller.
The platform is sure to appeal to millennials, a demographic known for its embrace of technology and expectations of convenience, and has already made headway in Toronto, Vancouver and Calgary, among other Canadian cities.
Miller says that it’s important to make a competitive offer on the very first home offer, which is often the most coveted, not to mention improving the close-ratio for the real estate agent and mortgage broker.
“The typical Deposit Rocket user values convenience and they’re looking to move into an entry-level low-rise home from a condo, in which they have a lot of built-up equity,” said Miller. “They have other investments that they don’t want to break, but they’re generally in a rush to make an offer, so they’re under a time constraint. But making an offer that’s less than ideal and uncompetitive could leave them sorry.”