November 16, 2018
No matter where you are in the country, if you want to work in the real estate field as a broker or agent, you need adequate licensing and bonding to sell or serve. While this bit of information may be common knowledge, those just starting their real estate professional career or looking to get into it have to be aware of the importance of it to avoid legal issues.
In all 50 states, there is the requirement to have licenses and bonds to legally conduct business, specifically surety bonds. The state becomes the obligee, while the real estate professional becomes the principal by being required to post the bond.
How Surety Bonds Work
In the real estate world, having surety bonds in place is just as important as having real estate insurance. Real estate insurance protects professionals in the field by supplying the right financial aid when legal issues arise, and, given the industry, there are plenty of risks at hand when dealing with helping people find a home to live in.
Surety bonds are a contractual agreement between a few different parties including the surety, the principle (in this case, you, the real estate professional), and an obligee (i.e. a state, for example). Surety bonds come across as insurance policies, but they serve different purposes. That’s why having real estate insurance in place, as mentioned above, is a necessity. Surety bonds are a more preventative measurement. The principal will be responsible to repay any damages should a claim be filed against them.
Are Surety Bonds Guaranteed to Anyone?
Not necessarily. While real estate agent bonds and real estate broker bonds are written on a regular basis and are very common, underwriters do apply necessary scrutiny when writing surety bonds. Underwriters want to make sure they have the best interest of the obligee in mind when giving out a surety bond.
A thorough investigation needs to be done to ensure that a responsible real estate professional is pursuing the industry with the utmost honesty and ethics in mind. Underwriters will look at the agent or broker’s business experience as well as their reputation with the local real estate board.
How Much Does This All Cost?
Bond costs and requirements vary from state to state due to regulations being established on the state level. But even though you need to do your own digging on price, you can still take measures beforehand to try to save a some money on obtaining a surety bond. One option is to work with a surety bond expert who can help you find a personalized bond that works with what you’re trying to accomplish on a professional level.
About Associations Liability Insurance Agency (ALIA)
The ALIA Team (part of the Riverton Insurance Agency Corporation), specializes in helping real estate professionals find the affordable and comprehensive coverage they need, without the hassle. ALIA dates its roots to 1991 with the founding of FREA, Foundation of Real Estate Associates. In 2013, ALIA was created to work with multiple insurance companies thereby broadening the portfolio of products to customers. In 2017, ALIA was purchased by Riverton Insurance Agency Corp.