Auctioneer Bonds: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain an Auctioneer bond.
What is an Auctioneer Bond?
An auctioneer bond is a government-required surety bond that auctioneers must purchase as a prerequisite to calling bids at auction. Auctioneer bonds protect the public from financial harm if the auctioneer violates state and/or local regulations or engages in unethical business practices. For example, if an auctioneer fails to provide a consumer with any goods that have been paid for, the consumer can file a claim against the auctioneer’s bond to recoup their losses.
Many states and local governments require auctioneers to purchase a surety bond as a prerequisite to obtaining a business license, and the bond must remain active for as long as the auctioneer maintains a license. However, some states require auctioneers to purchase a separate surety bond for each auction they call.
Unlike most insurance products, surety bonds protect a third party (consumers bidding at auction) from acts that violate the law. When the surety company suffers a loss due to the auctioneer’s actions, the auctioneer must repay the surety company for any losses and sometimes court costs or other fees.
Who is Considered an “Auctioneer”?
Most states and local governments require auctioneers to obtain a license and/or surety bond before calling auctions. State definitions vary on who is considered an “auctioneer”, but the general rule of thumb is that individuals who sell property to the highest bidder at auction will need to obtain an auctioneer bond.
General exceptions to this definition include:
- Charitable or nonprofit organizations
- Executors and administrators of an estate
- Government officials acting in their official capacity
- Individuals selling their own property
Some states only require auctioneers that auction specific goods to be bonded. Additionally, certain states require auction companies and apprentice auctioneers to be bonded as well.
Who Regulates Auctioneers?
State government agencies and local municipalities regulate auctioneers based on licensing laws written by state legislatures and city councils. Additionally, many states have specific entities and boards dedicated to enforcing these statutes.
Governments enforce the law by instituting requirements such as a business license and/or permit, educational and exam criteria, background checks, and a surety bond. The surety bond ensures the public will be compensated if the auctioneer fails to comply with the law.
How Much Does an Auctioneer Bond Cost?
Depending on where the auctioneer is conducting business, auctioneer surety bonds can either cost a fixed rate (typically $100 per year) or a percentage of the bond amount. Auctioneer bonds are typically considered low-risk, so surety companies will usually not run a credit check before issuing one. However, companies will run a credit check for higher-risk auctioneer bonds to determine eligibility and pricing.
For higher-risk bonds, auctioneers with good credit and business experience can expect to pay the lowest rates, while auctioneers with poor credit will pay higher rates. Below is an example of the cost of a $10,000 auctioneer bond with a credit requirement.
$10,000 Auctioneer Bond Cost
|Credit Score*||Bond Cost (1 year)|
|600 – 624||$250|
|575 – 599||$300|
|500 – 574||$500|
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Does an Auctioneer File Their Bond?
Surety bond companies will provide the auctioneer with a completed surety bond form to be filed with the relevant government agency. Most states require the original bond with a raised surety company seal to be filed by mail or in person.
Surety companies should include the following information on most bond forms:
- Legal name of the entity/individual(s) buying the bond
- Surety company’s name and state of incorporation
- Name of the obligee and the license type being applied for
- Date the bond is signed and goes into effect
- Bond amount
- Power of Attorney
What Can Auctioneers Do to Avoid Claims on Their Bond?
To avoid claims on an auctioneer bond, auctioneers must adhere to all local and state regulations pertaining to auctions. Best practices for avoiding claims include the following:
- Do not engage in any acts of fraud, including false bidding
- Adhere to all consumer contracts
- Provide all goods that have been paid for
- Create properly written contracts for all property sold
- Maintain an accurate record of transactions
- Pay all fines, taxes, and fees
How Can an Insurance Agent Obtain an Auctioneer Surety Bond?
BondExchange makes obtaining an Auctioneer Bond easy. Simply login to your account, select the state the bond is needed in, and use our keyword search to find the “Auctioneer” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
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Which States Require Auctioneers to Purchase a Bond?
27 states either require auctioneers to purchase a bond or have municipalities that do. The following states and municipalities have bond requirements for auctioneers:
|Washington||$5,000 to $25,000|
What Other Insurance Products Can Agents Offer Auctioneers?
Most reputable auctioneers and auction houses will purchase liability insurance. Auctioneers with employees will also need to purchase worker’s compensation insurance in some states. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.