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Be informed.

What Is a Surety?

For the average person, purchasing a home will be the largest and most important investment they ever make. It can also be a confusing and stressful process given the complexity of the transactions involved and the importance of the outcome. Prospective home buyers are required to navigate a seemingly endless number of steps before they finally become a homeowner. A buyer also typically commits to repaying a sizeable mortgage loan as part of the home buying process. Relying on professionals to assist throughout the home buying process certainly helps; however, as recent scandals have proven, even well-known individuals and institutions in the financial industry are not always above reproach. Fortunately, consumers can usually rest assured that their hard earned money is safe in a real estate transaction because government regulations typically require the use of a surety.

People often use the term “surety” and “insurance” interchangeably; however, they are not the same. A surety is a type of bond. In a real estate transaction, a surety bond is a contractual agreement involving three parties:

  • Principal – in this case the Principal is the broker who is helping the buyer (or seller) in the real estate transaction
  • Obligee – in this case the obligee is the government agency requiring a real estate broker to obtain a surety bond.
  • Surety – company that issues the surety bond

The purpose of a surety bond is to ensure that the Principal performs his/her job in a professional and legal manner. Because a Broker will often be entrusted with large sums of money or assets, it is understandable that clients want some type of assurance that should the Broker abscond with those assets, or otherwise fail to perform his/her duties according to the law, they will not be left holding the proverbial “bag.” That is where the surety comes into the picture, if need be.

Should the worst occur, and a Broker fail to perform in a professional manner, the surety’s duty is to step in and resolve the matter, often by financially compensating the buyer/seller for their losses that occurred because of the Broker’s misconduct.

State law governs the use of surety bonds in the various professional industries. As a result, the surety bond requirements for a Broker in New York, for instance, might be very different than the surety bonds requirements for a Broker in Pennsylvania. For this reason, it is always in your best interest to consult with an experienced Conshohocken, Pennsylvania real estate attorney if you specific questions or concerns about the role a surety will play in your real estate transaction.

If you have additional questions concerning contact the real estate law attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.

Real EstateScott Rothman