Do You Have a “CLUE” When Buying a Home?

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Comprehensive Loss Underwriting ExperienceAre you in the process of buying a home? If you wait until the last minute before closing to obtain a property insurance policy, you might not arrive at the closing table with a policy in hand. Many times it’s because you don’t have a CLUE (Comprehensive Loss Underwriting Experience)! While property insurance is often put on the back burner, it’s actually one of the very first items you should address, especially in today’s market.

Insurance companies require a CLUE report to be obtained on both the person trying to obtain insurance (the buyer) and the property to be insured (the asset). When a person files a claim on an insurance policy, that record is submitted to CLUE, and is usually on record a minimum of 5 years. This report is one of the tools used by insurance companies to determine whether or not they want to write a policy on a risk. The risk includes both the individual and the property being purchased. The number and type of claim(s) within the 5 year period greatly affects the number of insurance companies willing to assume the risk as well as the price of the policy.

The types of losses or prior claims that cause insurance companies concern on the property being purchased are:

Water Damage – Two or more water damage claims within a 5-year period indicates there is probably a plumbing issue in the house. Water damage claims year in and year out are the most costly to insurance companies. There are costs associated with drying the house so repairs can be assessed and made, plus there are costs to replace carpet, hardwoods, ceilings, walls, insulation and personal property, which can be significant. Now, if the plumbing is torn out and replaced, the concern is alleviated and the risk is considered desirable.

Theft or Vandalism – Two or more of these type of losses within the 5-year period is an indication the property may be located in a high crime area. However, the possibility also exists that a theft loss occurred away from the property. For example the prior owner filed a claim for items stolen from a hotel room. In this case, the loss is not considered as having occurred on the property location and is not a factor.

Flood Damage – Homeowners were required to file a flood claim during the September 2009 rains in Georgia by the Federal Government in order to be considered for financial assistance. These loss reports will show up when a CLUE report is pulled, disclosing to a future buyer the home had previous flood damage.

Wind and Hail – 2008 and 2009 were record years for Catastrophe Claims from wind and hail damage in Georgia. Some people have not repaired or replaced their roofs even though payment has been made by an insurance company. A future buyer will not be able to get insurance on a home that has been damaged and not properly repaired. The CLUE report will “clue” a buyer in to the fact that money was paid for the damages, yet the roof is still in bad shape.

Insurance is made available for the risks that insurance companies are not willing to write through the Georgia Fair Plan, but the price for these policies is quite astronomical. However, it is a solution to not being insurable on the open market. For more information, go to georgiaunderwriting.com. 

My advice is as soon as a contract is underway, buyers should obtain a quote from an insurance agent. Part of the quoting process includes the agent obtaining the CLUE report prior to binding the coverage on the home. If the issues are addressed well in advance of the projected closing date, it will eliminate any surprises and make closing on your new home that much easier!

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8 Responses to “Do You Have a “CLUE” When Buying a Home?”

  1. Mary Ann Varner Says:

    Great post Glen. These issues: water and flood damage, etc. are what I review with my client when we first go over the home buying process as well as what it takes to get to the closing table. This is where the buyer appreciates and respects the difference between: The Buyer as a Client and The Buyer as a Customer.

  2. Tim Howell Says:

    Glen, Thanks for the CLUE. It is great information to help clients prepare for the biggest buy decision in thier lives. First time home buyers need all the coaching they can get to help them along the path to becoming a homeowner.

  3. Dennis Doll Says:

    Great information Glen. It’s time for buyers to know (and agents also) that this is information that should be gleaned during the due diligence period. Waiting until the day before closing is too late!

  4. Deborah Gaither Realtor Delivering On The Promise Says:

    Glen
    This is a great article..
    The information regarding possible denial for coverage for property that has been damaged and not properly repaired is very useful information that I plan to share with all my clients and new buyers/sellers. Having this knowledge will help to avoid problems prior to closing.
    Thanks for sharing!

  5. Yvonne Thomas-Brooks Says:

    After years of drought, who would have thought we’d need an ark in Atlanta! Insurance is the one thing you can count on when an emergency happens in your life! Some Metro Atlanta Homeowners have unfortunately seen that up close and in person this last year! A good REALTOR® will make sure that insurance is at the top of any home buyer’s priority list. We’re lucky to have such fantastic Partners in Insurance, Finance, and Closing Services at BHGRE Metro Brokers!

  6. Mark Broyles Says:

    Great post Glen! You remember last year when my clients found out about a $12,000 roof claim with the CLUE Report. Funny thing was that the seller did not replace the roof! Good thing for the buyer to know, don’t you think! You guys do a fantastic job for the Metro Brokers Realtors. Couldn’t do it without you!

  7. Britt Argo Says:

    Great Information about Insurance. I’m saving this as a pdf to put in my “First Time Home Buyer” class books. And sharing with all buyers. They always book insurance in the last week (like getting utilities) and now we are finding more and more that the insurance reps need a copy of the contract, a copy of the appraisal, and some are even sending out someone to take a picture of the house too. The insurance agent needs to be involved the moment we go under contract now–in order to get the policy in time for closing. We had a buyer go past their Due Diligence and then try to get insurance, and realize the property was in a flood plain, and the cost was much higher than they budgeting for. Definately would have helped them to know this before Due Diligence was up. –Great Info, I will share this Blog with All.

    Britt Argo
    Realtor-The Broyles Team
    MTBR North Fulton Office

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