Understanding Real Estate Agent & Broker Bonds

In each of the 50 states, individuals who sell or serve as brokers for the sale of real estate are required to obtain both the pertinent licenses and real estate agent bonds and/or real estate broker bonds in order to legally conduct business. For these types of surety bonds, the respective state is the obligee (entity requiring the surety bond), while the real estate agent or broker becomes the principal by the nature of them being required to post the bond.

What exactly do they guarantee?

States require these surety bonds in order to guarantee that real estate agents and brokers will abide by all applicable laws governing real estate sales.  They also guarantee that agents and brokers will correctly account for and remit money held in trust for their customers.  Furthermore, real estate agents and brokers bonds provide protection for the public against any misrepresentation or fraud attempts.

Are real estate agent and broker bonds written freely?

While real estate agent bonds and real estate broker bonds are written frequently, underwriters do apply necessary scrutiny when writing these types of surety bonds.  As with most bond types, underwriters are required to conduct a thorough review of both the applicant’s business and personal financial statements.  They also take a look at the agent or broker’s business experience, their reputation with their local real estate board, and their procedures for handling and account for customer funds.