As a buyer's agent we all know we're supposed to do our best to protect the interests of our client. Have you taken the time to be sure your client will be able to insure the property you are helping them to select? Probably not. Yet another tool has come our way and we need to be sure to take advantage of it. Did you know it's entirely possible to close on a home with your buyer, who has purchased a 1 year Homeowner's policy in advance or at the closing only to be notified 30 to 60 days later that they are being denied coverage due to a previous claim on the property that neither of you knew anything about? This has happened numerous times around the country.
Every buyer's agent and every buyer should be insisting that the seller of the property they are putting a contract on not only supply a seller's disclosure but also a CLUE report. What kind of report did you say? A CLUE report. The CLUE report, which stands for Comprehensive Loss Underwriting Exchange, is an exchange akin to a Credit Reporting agency only this exchange gathers information on insurance claims. Letting your buyer go into a contract without one of these reports could be bad news in the future. A bad CLUE report for the house your buyer has a contract on could leave your buyer paying an exorbitant amount of money for premiums even if they've never personally filed a claim.
Many buyers assume that since they've never had a claim themselves that getting insurance on a new house won't be a problem, but this just isn't necessarily true. If a problem isn't discovered until after the closing, it's possible that buyers with mortgages could find themselves in violation of their mortgage agreement and cash buyers could find themselves with no coverage at all.
In talking with a couple of local Insurance agents I've found a bit of uncertainty in their ability to get a CLUE report and when. Most of the information appears to be buried in internal company software systems but most seem confident that they know when they write a policy that nothing will come back. That said, the better route is to be sure since telling the judge you asked the insurance agent may or may not be a good enough answer.
While the Seller's Disclosure we all have our seller's fill out asks about claims in the last 5 years, it is entirely possible for that seller not to know that something negative is on the CLUE report from before they owned the property.
Now for the good news. For those of you listing machines out there. Have your sellers, every one of them, go to http://www.choicetrust.com/ and have your seller request a copy of their auto and personal property reports. Federal legislation passed a couple of years ago dictates that your seller can get this report once per year, free of charge. The auto report is of course just for their information and has nothing to do with the property you are selling but you'll look like a hero. Take the property report and put a copy of it in the property file with the Seller's Disclosure and you're all set. For you Buyer's agents, make sure that you are asking the seller to provide a copy of their CLUE report before signing off on the inspections during the inspection period. I'd even go so far as to suggest adding a Special Agreement that states that the seller will provide a satisfactory copy of their CLUE report within so many days and that the contract is contingent upon satisfactory review by the buyer and the buyer's insurance agent.
Another day, another useful and necessary tool to make sure your buyers are getting the house they think they are and you're covering yourself as a seller's agent.
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