Beautiful features and appliances can make any home buyer overlook even the most questionable of flaws. Or worse, the buyer might neglect investigating the existence of unseen defects. For the biggest purchase of your life, shouldn’t you heed the call, “buyer beware”? One of the ways you can do due diligence is to ensure you see the home’s CLUE report. It’s a buyer’s tool that could potentially save you from big long-term costs and headaches.
What’s a CLUE Report?
A CLUE report is a Comprehensive Loss Underwriting Exchange that includes a record of insurance claims and losses associated with a home (it’s also used for cars). It describes the type of policy that was in effect and whether a loss was related to a specific catastrophe, such as a hurricane. The report cites the location of the loss (on or off property), the amount paid, and the cause of the loss. The best way to obtain information from the CLUE report is to get your prospective insurer to list the home’s history of losses.
How Does the CLUE Report Help Buyers?
Today the insurability of a home is a contingency in the home purchase contract—it wasn’t always so. That’s because prevalent issues like asbestos and mold have become problematic enough that insurers need to know their risks in taking on customers. Just as important, buyers want don’t want to move into a home with a major problem that could cause health issues or large repair costs. A CLUE report can provide loss information that might cause a buyer to reconsider their purchase decision.
A Real-Life Example of a Seller Trying to Hide Something
Let’s take a look at how a CLUE report helped one local buyer find out about serious water damage during the contingency process. The seller had not revealed any water intrusion on their Residential Property Disclosure Form. The buyer found out from the CLUE report that there was a claim close to $20,000 (about 15% of the purchase price). The buyer brought up the insurance claim with the seller and requested documentation. The seller showed estimates from a restoration company and paid invoices from vendors who worked on the property. With documentation in hand, the buyer noticed the last name on the insurance claim differed from the name on the deed. Upon further questioning, the buyer learned the two names represented the same person, which revealed that the estimator of the restoration work was indeed the home owner himself and the company that completed the work was his father’s. The lack of information provided upfront certainly created a question of trust regarding legitimacy of the restoration work.
Investigate Early During Your Contingency Timeline
Buyers should get the CLUE report and apply for insurance coverage as early in the contract process as possible. Your contract contains deadlines that you need to meet in order to legally terminate, if necessary. It’s better to find out bad news before getting too far in the transaction and incurring further costs.