You might not be aware of it, but you may be buying a house with a history. There are certain conditions that a seller is required to disclose before selling a house, and waving these disclosures is a very good way to get some very unpleasant surprises. Insurance companies have access to two databases that contain property claim history. The first one is CLUE – Comprehensive Loss Underwriting Exchange – and the second is A–PLUS – Automated Property Loss Underwriting System. Both of these systems provide details on prior insurance claims filed by individual insureds and on individual properties.
When you have a house that you are seriously considering purchasing, you should ask about the claims history, a record of any damages and subsequent repairs, and any work undertaken that would require a permit. Since only the property owner can order a report, you may need to make this a part of your contract. A house with a problematic history may be more for a buyer to insure, simply because the policy may be more difficult to underwrite. A CLUE seller’s disclosure report provides a loss history for the prior five years for a given address. It does not divulge any information about the property owner. Since this report is also what insurance underwriters are looking at before insuring the home, a clear CLUE report is becoming the sine qua non of savvy homebuyers. Smart sellers and real estate agents should be ready to produce this on command or watch a buyer walk away.
It is understandable that novice homebuyers may fall prey to less than honest sellers in search of an affordable home. Purchasing a home as is, or waving sellers disclosures is a very good way to be saddled with a property that cannot be insured, or cannot be insured without a significant financial hit. This is the primary reason that new homebuyers need to consult with an experienced and licensed real estate agent and experienced and licensed insurance agents. Talk to an independent insurance agent about the types of coverage your new home would need in terms of homeowners policies, flood insurance, sinkhole insurance, windstorm damage insurance, and other hazards.
If a seller declines to provide this report, or you suspect that the seller’s disclosures may be less than honest, or the county tax records record a three bedroom two bath single-family house where you see a duplex, run quickly in the other direction. We would all like to assume that once in a while we luck into a real deal, but the old saying holds that if it sounds too good to be true it very likely is. We hope that you never run up against any of these conditions, but it is worthwhile to know that they do exist and to therefore be prepared. We hope that you find the home of your dreams, and that it will give you many years of comfort and joy to come.