The Dangers of Swimming in the Surety Bond Pool

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The Dangers of Swimming in the Surety Bond Pool

We all know the drawbacks of security deposits.
 
Because they can be so large, prospects are struggling to pull together the necessary funds to secure a simple lease. In fact, Zillow’s 2019 Consumer Housing Trends Report found that 49% of adults say they would not be able to cover an unexpected $1,000 expense. Broken down into a demographic perspective, 46% of Millennials, 40% of Gen Z, 52% of Gen X, and 62% of Boomers and the Silent Generation are not able to cover that $1,000 expense.
 
Beyond the steep cost of a security deposit, residents are virtually guaranteed to be upset with the lesser-than-expected amount of their deposit refund. Their anger can lead to nasty online reviews, and require that associates devote a hefty amount of time managing departed unhappy residents.
 
As an alternative to security deposits, many apartment communities have turned to surety bonds – only to find that bond pools present their own brand of headaches.
 
Surety Bond Primer
Apartment operators have opted to offer optional surety bonds as a way to increase conversions and occupancy rates at their communities, however, these same operators have experienced low adoption rates of surety bond programs, negating their prospect as a wider solution.
 
Surety bonds are a three-party system that typically consist of the resident, the property, and the bond guarantor. The resident pays a portion – usually 17.5% – of the total deposit amount at move-in as a non-refundable fee. So, instead of paying a hypothetical $1,500 ……