The bond is a form of financial guarantee and is a substitute for the usual 5% or 10% cash deposit given by buyers to sellers at the time of exchange of contracts. The property seller agrees to accept the exchange bond instead of the cash, thus saving the buyer the need to raise a cash deposit. The downside to buying off-plan is that you tie up so much money for a long time. The bond removes the problem.

The investor is expected to pay a 5% deposit on a property valued at £150,000 within 28 days. Normally you would expect to pay £7,500 within 28 days. Using the exchange bond this would cost £555. Cleary, using the exchange bond 14 properties could be reserved for the same inital cost as reserving one property using the conventional 5% reservation fee.