What Is A Construction Bond In Real Estate And Why Are You Required To Pay For It?

So one of the things I learned when we purchased our condo property is the construction bond. It can also be called by other names such as a surety bond (or perhaps a construction bond is a type of surety bond) but I would say, and this is just my personal stand point... Not an insurance because no one necessarily pays a premium.



I would think that any housing project would include a construction bond upon turnover of a real estate property. But why are you required to pay for a construction bond? You might think that it's ridiculous because you have to pay for the renovation of your OWN property!?... And ridiculous it is...


However, almost all real estate developers require it and I don't know of any way yo waive it. The best thing I can advise you to do is to anticipate and prepare for it before your real estate property is turned over to you. Usually, construction bonds are issued so that when you make renovations to your property, any damage you or your men do during that period will be automatically deducted to the construction bond.

Either condo or a house, the construction bond fee doesn't seem to differ much. Like me and a friend who bought a house instead paid for the same amount. Typically, construction bonds are refundable upon completion of the project (renovation) and typically it would take a year (upon completion). Will you get a full refund? Like I said above, it depends if you damaged any part of the common areas.

Getting a full refund is less likely for a condo if your men are too clumsy compared to houses obviously for reasons that you only own what's within the surface part of your walls.

Please bear in mind that what I'm discussing here are only general possibilities and it's always better to ask your developer or home owners association about the rules that govern constructions or renovations in your area.