As a home inspector in NJ we are always learning. One of the things I learned about recently was that the insurance claims history for a home is available to potential buyers. These reports are called CLUE reports. CLUE stands for Comprehensive Loss Underwriting Exchange. This is a claims data base that allows insurance companies to obtain consumer claims information when they are underwriting an insurance policy. These reports can play an important part in a real-estate transaction. Recently I have had several clients ask about these reports and as a result I wanted to learn more about them.
CLUE was established in 1992 and is managed by a company called LexisNexis, which is a data management and aggregation company. There are over 600 homeowners’ insurance companies that contribute to the claims data which is about 90% of insurers in the United States.
Most insurance companies renewing a given insurance policy will not access CLUE however when a new policy is opened the insurance company will access a CLUE report. There are times that real estate attorneys on behalf of their clients will request the seller of the home to provide a CLUE report.
A clue report contains claim information provided by the insurance companies. Information such as the date of any losses and the dollar figure paid is included in the report. Loss history data is reported on over the last five years. A description of the property is also provided. No other data is reported on such as lawsuits or criminal records.
Clue reports can inform potential home buyers about damage, mold, flooding, fires, and other issues that can affect their living in the home as well as obtaining homeowners insurance coverage. Clue reports help buyers understand previous insurance claims on the possible home they are buying and can inform them on the possibility of homeowners insurance being expensive or not being available at all due to previous claims that occurred in the home.
In a typical real estate transaction, the buyer acquires the home. Imagine if the buyers get informed by their insurance company that coverage is no longer available or is available at a substantial cost due to past issues in the home. You can Imagine that a buyer would be dismayed at this situation. Lawsuits can be the result where the seller, agent and home inspector are all sued. This situation can be avoided if the buyer requests a clue report from the seller.
It is important to understand that a person cannot order a clue report for a home that they are thinking about buying. The current owner of the home must be the one to order and obtain the report. Not all sellers will be willing to provide these reports. Buyers should ask because the more information they are provided with the better and more informed decisions they can make about the potential home.
Why should NJ home inspectors care about CLUE reports?
During a New Jersey home inspection, the home inspectors’ job is to tell the client about and report on material defects present in the property. As a reminder these defects affect the habitability, safety, and value of the home. If the home inspector locates previous damage that has been repaired, he or she may be advised to request the buyer ask the seller for a CLUE report on the home. For example, previous flood damage from years before can make the property difficult to insure. More and more New Jerey home inspectors are incorporating language in their home inspection reports requesting their clients ask for CLUE reports on the properties. This not only helps protect the home inspector and client, but it also helps to protect the agent as well. Most agents will be bought into a lawsuit as well, especially if they referred the home inspector.
Homeowners can acquire a clue report for a fee. If the home is located in New Jersey, the homeowner can request a free copy of their CLUE report. CLUE reports are playing a more important role in real estate transactions. NJ home inspectors should be familiar with why these reports are important and be ready to possibly direct their client to request one before they purchase the home.