Maryland Contractor Bonding- The Powerful Word That Does Nothing to Help You.


This is a phrase that sound good rolling off the tongue but, in reality, it is sign to potential contractors that you really don't know what you are talking about. No big deal, however, most pros know the reason you hire them is because you don't know how to make a repair or install "that item" so this is not New News. However, if dishonest, it might be a sign and a bad contractor uses this to take advantage of you (quick story at end of this on how).
You see, in home improvement (residential, specifically here in Maryland), bonding has little to no benefit to a homeowner. In fact, only if their bond specifically names the homeowner, does it help. Further, all licensed contractors in Maryland are technically "bonded", so the "bond" as typically referenced, is kind of repetitive (even though the original bond, does not apply to homeowner).  

<let me explain>

The Maryland Home Improvement Commission (MHIC) has the Guarantee Fund. All licensed contractors pay to be a part of this fund. When a problem arises and is not remedied, any homeowner can file a claim with the Commission which will pay up to $25k.
A "bond" works the same way. Once upon a time I had a commercial construction company and most of our contract required me to post a bond. Upon signing a new contract, I had to call my Bonding Agency and get a new bond. This was typically a one-off, one bond per contract deal. 

MHIC has this same rule for the guarantee fund. When obtaining his/ her home improvement license, the potential contractor must prove they have either (1) prove $25k in net worth, or (2) obtain a bond. Regardless of the option they choose, their customers are still covered under the fund when they use a licensed contractor. You protection remains the same no matter what.

So, in reality, when a contractor says they have a bond- what they are likely referring to is the Bond they were required to get with the State of Maryland. It should be noted this bond has no effect or added protection to you. In fact, it is only there to repay the State should the Fund issue you an award and your settlement in not effected by it's existence. 
In summary, when a contractor says they are "Bonded", unless you are specifically named on that bond and your specific Contract is referenced, it adds no value to the transaction. 


*** Side Story- My sister owns a rental property in Annapolis. She called a HVAC technician a few weeks ago for a simple repair. He knew she lives out of state and with this knowledge definitely tried to take advantage of her.  However, he did not know that while growing up, our Father was a home improvement junkie which meant his kids went on countless service calls and repairs in the shotgun seat. 

For a simple repair, he wanted to turn a project into what might have been the initial funding for his kids 529 College Plan, it got that out of hand. 

I don't know what he was thinking when my sister called him, but this "bonded" contractor would've probably performed on the task with flying colors. However, my sister would have spent 5 times the amount of money she needed to- in this case the "bonding" was a ploy to try and get her to sign a contract (one which he used). Good thing my sister kicked this guy to the curb!

This story was compiled by Settle Rite Home Inspection Repairs. We help home sellers perform inspection repairs and per-market upgrades and renovations.

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