Learn more about auction bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Auction Bonds?
Auction bonds (or auctioneer bonds) are a type of license and permit bond required by many states as part of the process of becoming licensed as an auctioneer or to operate an auction house. They protect consumers against financial loss resulting from the unlawful or unethical acts of an auctioneer, such as misrepresenting auction items to increase their perceived value.
The surety bond is essentially an auctioneer’s pledge to conduct business in an ethical manner that complies with all relevant rules and regulations.
Who Needs Them?
Auctioneers are licensed on a state level, though not all states require auction bonds. If you plan to work as an auctioneer or operate an auction house in a state that does require bonding, understand that they are issued only to individuals, not to companies.
How Do They Work?
The bond is legally binding on three parties:
The state agency requiring the bond (the obligee)
The auctioneer required to purchase a bond (the principal)
The company underwriting and issuing the bond (the surety)
The surety guarantees payment of any valid claim made against the bond, but the principal must subsequently reimburse the surety for the full amount paid out to any claimant.
The nature of the auction business carries the risk of unethical behavior that can cause financial harm to consumers. The legal basis for deciding whether an auctioneer has committed fraud is that the auctioneer knowingly made a false representation of a material fact that a buyer reasonably acted upon to damaging effect.
For example, an auctioneer might sell a painting as an original despite knowing it is a forgery. Auctioneers who commit such acts may be subject to criminal prosecution as well as liable for claims against the bond.
What Do They Cost?
Each state sets the required bond amount and how often the bond must be renewed. The surety sets the premium rate for each applicant, usually based on the applicant’s credit history. The surety may also consider the applicant’s financial statement and industry experience, though in some states no credit check is required. An applicant with good credit typically pays in the range of 1% – 5% of the bond amount as the annual premium.
Use our convenient online system to apply for an auctioneer bond today.
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Miguel and Rita, TampaUsedCars.com