What's All the Noise About Surety Bonding?

Put your online auction customers at ease with a service guarantee for your on-sale items.

learn more about Marsha Collier

By Marsha Collier • May 16, 2005

Opinions expressed by Entrepreneur contributors are their own.

Recently, lots of online auction buyers have been purchasing more from sellers who offer surety bonds for their items. These savvy shoppers know what they're looking for and want some sort of guarantee before sending their hard-earned money to some small e-business they've never heard of. By searching for bonded sellers, buyers can get a guarantee of up to $25,000 per transaction.

Bonding is basically a three-party agreement where the third party (the surety company) guarantees to a second party (the buyer) the successful performance of the first party (the seller). A bonded seller offers a guarantee that they'll follow through with the transaction exactly "as advertised."

The purveyor of surety bonds for eBay is a company called buySAFE, and they have a more warm-and-fuzzy explanation of the bonding process on their website:

"The concept began as a simple agreement between a king, a young farmer and a local spice merchant. When the farmer, who was not from the kingdom, wanted to care for a piece of the king's land in exchange for seven gold coins, the king was uneasy and declined the farmer's offer. To give the king peace of mind, the farmer had a well-respected spice merchant vouch for the farmer and personally guarantee his performance. With this promise, the king hired the young farmer, and the surety bond concept was born."

BuySAFE was founded in late 2003 by Steven Woda, an avid eBay shopper who got ripped off by a seller in a transaction for a handheld computer. He knew that shopping online with an unknown seller could be risky and that there were many people leery of it, so he melded his background in surety bond underwriting with eBay auctions to help make online shopping a much safer proposition.

Today, buySAFE issues surety bonds through Liberty Mutual, one of the top U.S. surety bond writers. Once buyers make a bonded purchase, they can actually view a PDF file version of their "insurance policy" online, one that lists their name, the item they purchased and the selling price of the item. This visual goes a long way toward instilling confidence in the purchase. As a matter of fact, buySAFE's recent buyer survey revealed that approximately 96 percent of online buyers prefer to buy from a bonded seller if terms and price are the same--even if the competing seller had higher feedback ratings.

As an eBay Power Seller, this all seemed pretty good to me, so I decided to investigate buySAFE a bit more by taking a look at their website. BuySAFE charges sellers a fee only on the items they bond and not necessarily on everything they list. Sounds like a pretty fair deal, so I decided to give it a try and sign up.

On the buySAFE site, there's a "brief, 3 step application" to fill out to sign up for the service. This is a bit of an understatement. The application may be brief, but it asks some pretty darn personal questions. After starting my application, I left the site twice and went back--lucky they have a special link for those who have partially filled out an application. I returned to the application the second time only after calling buySAFE support to find out why they needed all this data.

The bottom line is, it's like buying an insurance policy. These people--buySAFE and Liberty Mutual--are going to vouch for you and vouch that the items you sell are just what you say they are. I guess for that kind of assurance, they need to be sure you're an upstanding member of the community, feedback ratings aside.

Once buySAFE receives your completed application, they conduct a rigorous review of you or your company. Experience, reputation, financial stability, verifiable identity and a successful track record for meeting obligations are all considered during the review process. If you pass the review, you can then have the buySAFE seal posted on your eBay items.

I've found that my buyers really appreciate the fact that I bond my items, so now I bond everything I list since I've found that my higher sell-through rate easily pays for my bonds.

eBay Power seller Clarissa Parashar (AKA eBay user ID Perpetual-Vogue) says that her business has substantially increased since she began bonding her auctions just over a year ago. In fact, she says her business has increased more than 300 percent, which she partially attributes to buySAFE. "I bond everything through buySAFE's auto-bonding feature, and I think it makes a difference even on low cost items. My items sell over the competition's because of it."

As a bonded seller, there's a secondary benefit, too. Your eBay listings will also appear on buySAFE's safe shopping site, where all buySAFE bonded items are listed. This is a huge benefit, as more and more shoppers find out about buySAFE every day.

Marsha Collier

Author, Radio Personality and Educator

Marsha Collier is a Los Angeles-based author, radio personality and educator specializing in technology and selling online. She is the author of eBay for DummiesSocial Media Commerce for Dummies and other books about selling online.

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