Beginner question ...

[Riskwriter]

Originally Posted by Unregistered

We had a dispute with a builder who threatens to file a lien on our property. Our attorney suggested obtaining a surety bond to replace the lien on the house so we are able to refinance when completed. Is that available?

This really should be a new thread- but since I don't have that long of an answer for you, here it is.

A bond to release a lien will ultimately require 100% collateral (minimum) in the form of an Irrevocable Letter of Credit- so in other words. If the lien is $100,000 - you will be required to hand over $100,000 to the bonding company for the to get comfortable with writing this bond.

This is why I personally tend to stay away from this class of bond. However, I'm sure that there is someone out there who specializes in it. There is a niche market for anything these days.

good luck

[Riskwriter]

Sure- the performance bonds are required until the contractor is approved for the bond (which of course is requested by written verification) and then poof!

isn't it interesting how the bond has been waived from the contract......

and don't we like a fool.....

Now don't get me wrong there are instances in which larger private entities have required bonds, I then tend to look at that with less skepticism. I have written final bonds for GC's for such owners as Merrill Lynch. That has obviously been successful-

[Admin]

Originally Posted by Unregistered

Bonds are required on public jobs more than private jobs because statute and law dictates that public jobs over a certain $ amount be bonded. It is certainly not unusual to bond jobs to private owners.

Correct.

Originally Posted by Unregistered

The NASBP and the SIO make a continual effort to the private marketplace outlining the value of the product (surety bond) and trying to get more and more private owners to require bonds.

Definately a good thing for everyone, I am well aware of their efforts and am glad they are doing so.

Originally Posted by Unregistered

I think they would be quite surprised if they found out surety agents didn't want to work on those bonds.

The only people that would be suprised by this fact would be people who never worked in surety. It only takes common sense to realize that an agent would prefer public work, as they know the bond will be required if the principal is awarded the job. Therefore, statistically public work bonds are written more often even when you consider the ratio or public to private bond requests.





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"The only people that would be suprised by this fact would be people who never worked in surety."

That is totally wrong - I am surprised by your statement and despite what you may think, I work in surety and know an incredible number of other surety people who would be surprised by your statement. Are there private owners looking for a free prequal - yes ... are all private bond requests looking for a free prequal -- NO.


"It only takes common sense to realize that an agent would prefer public work, as they know the bond will be required if the principal is awarded the job."

Obviously public work is great as it does require bonds, but that does not mean that private work is bad. Do you tell your clients you won't work on a bond for a private owner?

"Therefore, statistically public work bonds are written more often even when you consider the ratio or public to private bond requests."

I honestly don't have a clue what point you are trying to make with this statement.

[Surety Guy]

Originally Posted by The Fool

Are there private owners looking for a free prequal - yes ... are all private bond requests looking for a free prequal -- NO.

No one ever said all private bond requests are simply a prequal. 'Admin' simply said that most agents would prefer public work due to the possibility of private work being used as a prequal.

Please read more carefully.

Originally Posted by The Fool

Obviously public work is great as it does require bonds, but that does not mean that private work is bad. Do you tell your clients you won't work on a bond for a private owner?

No one ever said private work is bad. Agents simply prefer public work. If you read 'Riskwriter's post you will see that we do in fact write private jobs as well.

Please read more carefully.

Originally Posted by The Fool

"Therefore, statistically public work bonds are written more often even when you consider the ratio or public to private bond requests."

I honestly don't have a clue what point you are trying to make with this statement.

Looks prety clear to me, let me simplyfy it for you...

Lets say an agent receives 30 applications, 20 public and 10 private. Lets say the agent writes 15 of the 30 public jobs and 2 of the 10 private jobs.

You then have a ratio of: 1:2 for public and 1:5 for private.

Make sense?

[Admin]

If I am not mistaken, this is the same 'Unregistered' agent that likes to come on the forums, twist our agents words and attempt to make them look silly. Fortunately, people can read back to see how you attempt to change what is said.

[BondLaw]

There is an instrument called a “supply bond” that is commonly used by public agencies to guaranty the delivery of manufactured goods. But they will not cover the escalating penalty that your purchaser is asking for. With a supply bond, if the goods are not delivered the purchaser can procure them through “other commercially available means” and the surety picks up the difference in cost. From the sound of things, however, this purchaser is looking for a bond to cover the penalty and, as the other contributors have pointed out, such financial guarantees are all but impossible to place. What you might consider is negotiating with the purchaser to jettison the penalty and go with a supply bond. I think everybody would be better off that way.

[BondLaw]

To add to riskwriter's reply, not only must a release bond be collateralized, but it is not a solution to the problem. The bond will release the lien, but the contractor simply files suit against the bond. This is why the collateral is required. But the bond can be useful if there is an urgent need to clear title to the property, say for example you are trying to sell it. If this urgency is not present, you are better off just defending the lien action.

[Admin]

Well said BondLaw, your input on our discussions are always appreciated. Renegotiating the requirements with the purchaser is an excellent idea, as supply bonds are commonly placed in today's bond market.