Auctioneer Bond

Just like many other professional occupations, going into business as an auctioneer or auction house involves obtaining a surety bond. Generally, local and state governments require these bonds to protect the consumer from any misconduct, and the auctioneer bond is no exception.

The auctioneer's bond protects both consumers and the obligee (usually the state or locality) against fraud, substitution of goods, and misrepresentations of auction items

Protection

There are three parties involved in each bond the auctioneer — the person who purchases the bond, the obligee — the person who requires the bond, and the surety — the company who issues the bond.

Besides being required by the state and locality, the auctioneer's bond often increases buyers' confidence in the auctioneering service since they know the bond protects their bids and purchases.

Qualifying

Auctioneer bonds are subject to credit approval just like other surety bonds. The application process includes a credit check and financial analysis. Since, in the event of a claim, the auctioneer will be expected to pay the amount of the claim against the bond, it's imperative that he or she is financially fit enough to do so.

If the auctioneer's credit score or financial statements are not in the "excellent" range, the auctioneer may have to obtain his or her bond through a special agent or bond company that specializes in sub par credit bonds.

Purchasing and Costs

Auctioneer bonds can be purchased wherever other bonds are sold, but they are typically purchased through companies that specialize in the sale and distribution of all types of bonds. They can also be purchased through some insurance companies, however, surety bonds are a form of credit, not insurance.

The amount of an auctioneer's bond varies from state to state, but it is usually between $2,000 and $50,000. The amount is equal to the penalty the auction house might pay in the event of a claim. A higher amount will necessitate the auction house or auctioneer to meet a more stringent financial requirement.

Costs vary widely from company to company and depend heavily on the auctioneer's credit score, but a typical annual premium for a $20,000 bond is around $350. The bond will most likely need to be renewed every two to three years, and the process may require additional credit checks.