Most states require home sellers to complete a property condition report disclosing the history of damages, repairs, and deficiencies in the house. But your sellers can go an extra step for potential buyers by giving them a CLUE report on the listing. So just, what is a CLUE report?
Being transparent with buyers
CLUE stands for Comprehensive Loss Underwriting Exchange. This information network makes claim histories on homes and automobiles available to the insurance industry. A CLUE report is similar in function to a credit report.
CLUE reports are important to home buyers and sellers because insurance companies consider them to determine the risk of insuring a house and set rates accordingly. The report tells insurance companies about prior property damage, when it occurred, whether loss claims were accepted or denied, and the amount the insurer paid. Insurance claims show up on CLUE reports for five to seven years and then drop off.
Homeowners can order a free copy of their report once per year. A subscription to the report provider, LexisNexis, is the only cost. You can also get a free report if an insurance company takes adverse action against a homeowner, such as denying coverage or canceling a policy.
Why and when to provide a CLUE report
Because it’s an official, independent report from the insurance industry regarding damage claims on a home, a CLUE report provides buyers with peace of mind.
From the buyer’s perspective, a clean report can mean one of three things: that there have been no claims, that past claims have expired off the report, or that any damages were sufficiently small to be under the home’s deductible amount and not worth filing. On the other hand, a history of a specific recurring problem can be a red flag. Besides telling the buyer that the property has an issue, it indicates that insurance rates for the home will be high or that insurers might even decline to cover, depending on the situation.
Buyers cannot order a CLUE report on a home; the reports are available only to insurance companies and homeowners. The buyer may ask for one if the seller doesn’t volunteer a report. The seller is under no obligation to provide one. It is simply an act of good faith.
A CLUE report is unnecessary if the house is relatively young and has no claims history. If the home is older, however, has a history of claims, or both, providing a report along with the seller’s disclosure shows buyers transparency about the home’s history and whether problems were repaired.
Disputing a CLUE report
Only filed claims should appear on a CLUE report. If the homeowner merely calls an insurer with questions about damage but does not file a claim, the inquiry should not appear on the report. If the CLUE report shows claims information considered inaccurate, it can be disputed similarly to challenging inaccuracies on a credit report.