Real Estate Broker Bonds

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Learn everything you need to know about real estate broker bonds, and request a quote from Surety Bond Professionals today.

What Are They?

Every state’s real estate industry is highly regulated due to the large sums of money involved and the trust that buyers and sellers place in the agents and brokers who help them. Most states rely on surety bonds to ensure that real estate brokers operate in a completely legal and ethical manner.

A real estate broker bond provides financial protection for the state and for consumers of the broker’s services. Bear in mind that the bonding requirements differ across the country, so you’ll need to find out what they are in your specific state. Contact an agent to discuss your specific needs.

Who Needs Them?

In many states, a real estate broker bond must be purchased as part of the process of becoming licensed as a broker. When a bond is required as a condition for licensing, it’s known as a license bond.

How Do They Work?

There are three parties to every surety bond agreement, which is a legally binding contract: the obligee, the principal, and the surety.

  • The obligee is the state agency that licenses real estate agents and brokers and regulates the real estate industry. The obligee establishes the required bond amount (also called the bond’s penal amount) and specifies the laws, regulations, and industry standards that the broker must abide by to avoid claims against the bond.
  • The principal is the real estate broker who must do business in accordance with the terms of the surety bond. A violation obligates the principal to pay claims filed any party that has incurred a financial loss due to the principal’s noncompliance.
  • The surety is the company that underwrites and issues the bond. The surety sets the premium rate for each broker.

The principal bears the legal responsibility for paying claims against the bond. But if the principal is unable to do that right away, the surety typically steps up and pays it on behalf of the principal. The principal must then repay the surety, who is indemnified by a clause in the surety bond agreement.

What Do They Cost?

The principal pays an annual premium that is a small percentage of the bond’s total penal amount. The premium rate is established by the surety on a case-by-case basis. The biggest factor in determining the premium is the principal’s personal credit score, though other factors are also considered.

The higher the principal’s credit score, the lower the premium rate and vice versa. With excellent credit, the premium rate for a real estate broker bond could be as low as 1% to 3%.

Get A Quote

You can count on our expert staff to help you obtain the surety bond you need to operate as a real estate broker in your state. Request a quote today.