Bonding For New Home Building

TNGHomes

Anyone ever been asked to provide Bonding of a New Home? The customer had asked once if I were bonded, the problem is I am a DBA and I have been told by numerous insurance companies that for a Sole Proprietor to be bonded would be extremly difficult seeing I have only been in business for 3yrs. I have never been asked to provide Bonding papers before (yet have built many homes)....are Bonding papers to protect them only or myself as well...

KentWhitten

The insurance thing is not true. Call any insurance broker and talk to him. We had to be licensed, bonded, and insured in WA state. The bond costs like 300 for the year or something.

Price depends on how your credit is. Bad credit = higher premiums.

Even for a balls-to-the-wall contractor who pulls in millions was only required to post $6k bond.

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Custom Cabinetry - Portland, Cape Elizabeth, Scarborough, Kennebunkport, Yarmouth, Falmouth, Cumberland, Ogunquit, Maine

Salmon Falls Cabinetry

skyhook

Sounds like they are asking for a completion bond. If the job is worth it, should be no problem (if you are dully licensed) to obtain. Construction lending companies require them to gaurantee that the funds will be used properly.

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NSolano

Depends on the type of bond the owner or contractor requires. We have only worked with performance and payment bonds. The reason for this is because the contractor wants to make sure of a couple of things
1.) that you have at least 3 years of experience
2.) your company is financially capable of handling the project
3.) In case you cannot complete the project the contractor/owner have some sort of insurance that your bonding company will pay for the unfinished work or pay for a different contractor to finish it.

If I missed anything is because I am not an expert in bonding, so please let me know what else I missed.
The bond also depends on the amount of the contract, for example, for you to able to qualify for a performance and payment bond of say about $ 1,000,000, your company PROFIT for the previous year must be in the area of $ 100,000, I believe revenue of at least half, so $ 500,000 revenue.

Kgmz

Your business structure should not have anything to do with it. Sole Proprietor, Partnership, LLC, Incorporated, etc.

We are also licensed in Washington State so a bond has always been required to get our contractors license. We have also had performance bonds through the years for government and commercial jobs.

A bond is really not as important as your insurance to the homeowner, unless they want a performance bond. What I mean by this is like for us a $12,000 bond is required for our license. This is really not going to pay for much of anything if things go wrong, its our insurance that is going to foot the bill. But if we don't make things good and they do go after our bond, then we will really have problems getting a bond later or are going to really pay for it.

Depending on the bond besides your financial condition and history, a bond will also be based on your work history, i.e. number of jobs completed successfully, size of jobs, etc. etc.

jwbond

Looks like you are getting some misinformation on bonding here...Let me try to clear a few things up for you.


The fact that you are a sole-proprietor is not so much a problem. However, the fact that a homeowner is requiring it is...What do they want the bond to guarantee? The contract? If so, you likely will not be able to obtain the bond.

If your state of local municipality requires a bond to be filed with your license you can easily apply for one and provide them a copy.