Most states require home sellers to complete a property condition report disclosing the history of damages, repairs and deficiencies in the house. But you can go an extra step for a potential buyer by giving them a CLUE report on your home. Just what is a CLUE report?
Being transparent with buyers
CLUE stands for Comprehensive Loss Underwriting Exchange. This is an information network that makes claim histories on homes and automobiles available to the insurance industry. A CLUE report is similar in function to your 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 will set rates accordingly. The report tells insurance companies about prior damages to the property, when they 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 your insurance company takes adverse action against you, such as denying coverage or canceling your 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. A history of a specific recurring problem, on the other hand, 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 issue.
Buyers cannot order a CLUE report on a home; the reports are available only to insurance companies and homeowners. If you don’t volunteer to provide a report, the buyer may ask for one. You are under no obligation to provide one. It is simply an act of good faith.
If your house is relatively young and has no history of claims, a CLUE report is unnecessary. If the house is older, however, has a history of claims, or both, providing a report along with the seller’s disclosure shows buyers that you are transparent about your home’s history and have taken care of problems.
Disputing a CLUE report
Only filed claims should appear on a CLUE report. If you merely call your insurer with questions about damage but do not file a claim, the inquiry should not show up on your report. If your CLUE report shows claims information that you consider inaccurate, you can dispute it in a fashion similar to disputing inaccuracies on your credit report.