When you work in the real estate industry, trust is everything. Clients are looking for someone to help them navigate the often-complicated process of buying or selling a property.
Real estate brokers act as intermediaries between buyers and sellers, helping to ensure a smooth transaction. However, given the high stakes in real estate transactions, brokers must also be held to a high standard of ethical conduct. That’s where surety bonds come in.
What is a real estate broker surety bond?
A real estate broker surety bond protects the public from financial harm from a broker’s illegal or unethical actions (if necessary). State governments typically require this license bond as part of the licensing process. If a broker engages in fraudulent or unethical behavior, the bond can be used to reimburse clients for any financial losses they incur.
In many states, real estate agents, appraisers, and brokers will need this bond. If you’re unsure of your requirements, call us at (888) 435-4191. Or check with your state’s Real Estate Commission or Department of Consumer and Business Services.
Get Your Real Estate Broker Bond:
- If a real estate broker engages in fraudulent or unethical behavior, the bond can be used to reimburse clients for any financial losses they incur.
- In many states, real estate agents, appraisers, and brokers will need this bond to become licensed.
- Generally, the cost of a real estate broker surety bond can range from 1% to 10% of the bond amount per year.
- Once you’ve obtained your real estate broker’s license and bond, you must renew them regularly to continue working as a broker.
How does a real estate bond work?
In a real estate broker surety bond agreement, there are three parties involved:
- Principal: The real estate broker required to obtain the bond as a condition of receiving their license.
- Obligee: The party requiring the broker to obtain the bond to ensure compliance with ethical and legal standards. This is typically a government agency or regulatory body that oversees the real estate industry.
- Surety: The party that issues the bond and provides financial protection to clients and other parties who may be harmed by the broker’s unethical or illegal behavior. The surety is typically a third-party insurance company with the resources to pay out claims if necessary.
If someone files a claim against the bond, the surety company that issued the bond will investigate the claim and determine whether it’s valid. If it is, the surety company will pay out the claim amount up to the bond’s limit. Then the real estate broker must repay their surety in full – plus interest and fees.
Why are real estate surety bonds required?
Real estate broker surety bonds provide extra protection for clients and the public. Knowing they’re required to obtain a bond can incentivize brokers to act ethically and responsibly, as they know that their actions could have financial consequences for themselves and their clients.
How much does a surety bond for a real estate broker cost?
The cost of a real estate broker surety bond can vary depending on several factors, including the broker’s credit history, the bond amount, and the specific requirements of the state where the broker is licensed. Generally, the cost of a real estate broker surety bond can range from 1% to 10% of the bond amount per year. Typically, the higher your credit score, the lower your bond premium.
For example, a small bond of $10,000 might cost around $100 to $1,000 per year, while a larger bond of $100,000 or more might cost several thousand dollars annually.
Other Helpful Information
The specific requirements for obtaining a real estate broker license can vary depending on the state where you plan to work. But in general, you’ll need to meet specific educational and experience requirements. Here are some standard requirements for obtaining a real estate broker license:
- Education: Most states require brokers to complete a certain number of pre-licensing education hours, ranging from 60 to 300.
- Experience: Besides completing pre-licensing education, most states require brokers to have some experience working as a licensed real estate agent. The required experience can vary, but it’s typically around 2-3 years.
- Exam: Once you’ve completed your education and experience requirements, you must pass a state licensing exam to obtain your license.
- Background check: Many states require brokers to pass a background check as part of the licensing process. This may include a criminal history check and a review of your financial and credit history.
Once you’ve obtained your real estate broker’s license, you must renew it regularly to continue working as a broker. Here are some common renewal requirements for real estate broker licenses:
- Continuing education: Most states require brokers to complete a certain number of continuing education hours to renew their license.
- Renewal fee: Brokers must also pay a renewal fee. The amount can vary depending on the state.
- License expiration: Real estate broker licenses will typically expire biennially. If you fail to renew your license before it expires, you may need to complete additional education or experience requirements to reinstate it.
Get Your Real Estate Broker Surety Bond
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to get bonded in a flash!
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.