Get a CLUE! Part 1

Attention buyers and sellers of real estate! I cannot understate the importance of getting a CLUE report when you purchase or sell property.

CLUE = Comprehensive Loss Underwriting Exchange; you are probably asking 'what is it and why do I care'? It's a term used in the insurance world; this is a report that tracks all homeowner's insurance claims on a property.

Here's the basics: insurance companies in general insure using one of two principles; property loss history or personal loss history. Let's say you currently own a home and have not filed any claims against your property. You probably enjoy average prices for homeowners insurance. Now that you've sold your home and have a purchase and sale agreement accepted on another you are ready to move. Part way through the escrow process you find out your homeowner's insurance is going to be exponentially higher - why? Previous property owners had filed a claim against the property for, let's say, a tree that fell through the roof. Now what???

Most people probably aren't aware of the two basic principles of insuring and wouldn't even know to check with other insurance companies for better rates. Your insurance company isn't going to tell you, because that would mean they will lose your business to a company that insures against personal loss history.

True Story: I was representing the buyer purchasing a home during the boom days of real estate when every property received multiple offers well over the asking price; we were the successful 'bidders'. The buyer looked over the seller disclosure statement and everything seemed in order. There was a stipulation in the contract that the seller deliver us a CLUE report within 5 days of acceptance. When we got the CLUE report it indicated there was a $50,000 claim due to a fire in the garage! Well, that changes things - not only does the buyer need to consider the previous fire but we have a seller that did not disclose this material fact. The buyer decided he would only continue with the purchase if the seller agreed to reduce the purchase price back to the original asking amount. Basically - the buyer was no longer willing to pay over asking for the home. Fortunately the seller agreed and we continued to a successful closing.

So, having the CLUE report allowed us to 'uncover' a non-disclosed fire and properly shop for homeowner's insurance by finding a company that bases their rates on personal loss history. In the end, this very valuable report saved my client a lot of money!

Next time: what could the seller have done differently, how might it have affected their bottom line and how you as a seller can use this as a tool in today's market.

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Tina Faust, GRI
RE/MAX Champions
425-374-2728
http://www.tinafaust.com/
Tina@TinaFaust.com