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Thread: The Racket called "Indemnity Bonds"

  1. #1
    Senior Member The Stig's Avatar
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    The Racket called "Indemnity Bonds"

    I am curious as to how many people here have had to purchase an indemnity bond.

    After my paperwork was sent in to support my title application for the GTM, I received a letter from the NC-DMV stating that I need to have two current appraisals done on my car to determine it's value. I am then to use the highest value of those appraisals and purchase an indemnity bond to cover 150% of the appraised value.

    I have my appraisals, and the highest came in at $125,000.00. Therefore my indemnity bond would need to be set at $185,000.00.

    I already have one for 45,000 that I purchased in 2011. So I think I'll only need to meet the balance of 140,000.00.

    When I sent the initial application, I got an e-mail back asking whether or not the 185K was correct. If so, then I would have to fill out a personal financial statement, send my social security number, and have the amount underwritten...

    All I am trying to do is get my car titled for crying out loud.

    Has anyone else here had a similar experience?

    Thank you,

    Mike
    The Stig

    Some say, that I only know two facts about ducks, (both being wrong); and that if I could be bothered, I could solve the "da Vinci Code" in 47 seconds...
    All I know is that I'm called "The Stig".
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  2. #2
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    I know that CA does require bonds if the value of the vehicle is over a certain amount. I asked about this when I did my first Special Vehicle Construction license and was told that it was only needed if my receipts equaled a certain threshold. Again, this is why I always recommend that people only take in receipts for the major items like engine and transmission, along with a smattering of a few others, when attempting to register a vehicle. Especially here in CA it not only saves a lot of hassle, but can save a lot of $$ in taxes. Of course with a kit car that has an MSO you have to have a receipt for that.

    The DMV here takes copies of all the receipts you present, adds them up, and charges accordingly.
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  3. #3
    Senior Member beeman's Avatar
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    Not in Indiana. Like Crash said, need receipts for kit and major components so you can pay your 7% tax (after quick police inspection to verify drivetrain not stolen - $5 fee). Then they assign a special VIN that has to be affixed to the chassis, then you get a title. Pretty easy.

    EDIT: No appraisal. No submission of "finishing costs", ie bodywork. I titled mine in primer. In states such as yours, I would definitely title before bodywork so appraisal is low.
    Last edited by beeman; 08-08-2017 at 04:53 PM.
    MK3.1 2004 Mach 1 donor. ABS, PS, TC.
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  4. #4

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    I must be missing something because I'm failing to understand who in the process of registering a constructed vehicle would need indemnification. If the state wants the bond in place as security for the owner paying taxes on the vehicle's fair market value, then why not just refuse to issue a title until the taxes are determined in accordance with the law and paid in full? These indemnity bonds are proper on construction projects where one party stands to suffer big financial losses from prime contractors, subcontractors and material suppliers screwing things up, and that party needs a highly secure pot of money in place to cover losses if things go bad. But here the state is holding the high card, namely the power to issue the title, and also is not at any economic risk that I can see. What am I missing?

  5. #5
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    Mike-

    I'm with Jacob. Who is being indemnified, and why? The state is not at risk because they will certainly get theirs, or you won't get a registration. Where is the risk, and who needs to be protected from it?

    I have mostly heard of indemnification bonds in construction circles as Jacob describes, although I am sure there are others. However, I have never heard of one as it relates to vehicle registration.

    Mike, is it possible that you just got the wrong contractor at the local DMV? These folks are all contractors, and not state employees. As a result, they are few with long-term experience and knowledge about unique requirements. Perhaps a call to Raleigh might be of some use.

    Please let us know how things turn out!

    Regards,

    Steve

  6. #6
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    After reading the requirements...https://www.ncdot.gov/download/dmv/VR_MVR92A.pdf...it appears to me that the position is being taken that there may be some claim to some of the parts used to build said vehicle and thus an indemnity bond is required for a period of 3 years from the date of title. This allows people that might have any claim to make that claim and the funds would be available to cover any claim.

    It sounds a lot more like a scam by the insurance companies to make some $$ by getting a law passed requiring "insurance" on something that will never have any possibility of a claim. Glad there is a threshold here in CA, but it doesn't sound like there is one in NC.
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  7. #7

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    That makes a little more sense than the state being the "indemnitee" for tax purposes, although you correct in seeing this as a solution in search of a problem. Beyond the engine, transmission and maybe wheels, there is to my knowledge little to nothing else on these kit cars that could likely be reliably traced back to a stolen car, so a ceiling on the bond amount commensurate with those parts' value makes sense - unless you are in the business of selling indemnity bonds!

  8. #8
    Senior Member The Stig's Avatar
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    Thank you Jacob. You just stated my view of this situation verbatim.

    This is the second round of appraisals that I've had to have done at the cost of a few hundred dollars each.

    The Indemnity Bond will more than likely run me somewhere in the range of 3 to 4 thousand dollars: Not to mention the fact that they actually think that I am going to send them a personal financial statement along with my social security number, Just to have the car titled.

    I can't help but feel that this is nothing more than a scam leveled at custom car and home car builders.

    They can't outlaw the build of these types of cars "yet". But they can certainly make it harder for people to afford to build them.

    It just amazes me.

    Engine, Transmission, and Cost of the Kit itself. Those are the 3 elements that would ever come into question, where stolen goods might be questioned.

    I guess they feel that I could have potentially stolen the paint and body work. Or maybe I could have stolen the interior out of someone else's car and tossed it into my car...

    What bunch of dumb-a$$es...

    So the next build will be done in multiple phases.
    (1). Build the kit to the point that everything is functional, and can be driven, and will pass an inspection.
    (2). Make damn certain that no more than 30 to 40 k is spent on the build.
    (Used worn out engine that runs (LS1 - $750), and Used worn out transaxle that turns (G-50 - $1500).
    (3). Have the car appraised.
    (4). Purchase the Indemnity bond for 500.00.
    (5). Have the car registered.
    (6). Receive the tag from NC Department of Dumb-A$$es.
    (7). Put the car back into the garage, and tear it all back apart, down to the frame.
    (8). Begin to build my car, however the hell I want to, without being penalized for building a nice one.

    In the meantime, I'll continue to get screwed on this one until the very last moment...
    But with that said... whoever buys it, will have a freaking nice GTM that they won't have to worry about dealing with government dumb-a$$es, just to drive and enjoy.

    Mike
    Last edited by The Stig; 08-09-2017 at 08:12 PM.
    The Stig

    Some say, that I only know two facts about ducks, (both being wrong); and that if I could be bothered, I could solve the "da Vinci Code" in 47 seconds...
    All I know is that I'm called "The Stig".
    GTM #0081

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