Before purchasing a new rental, you want to inspect the property and investigate any potential issues. However, some buyers also request a Comprehensive Loss Underwriting Exchange (CLUE) report from the sellers. A CLUE report indicates previous insurance claims for damages, thefts, and more. So, what exactly is a CLUE report in real estate and why is it important?
What is a CLUE Report in Real Estate?
A CLUE report gathers insurance information about a property. It includes any insurance claims made within the last seven years. For buyers, this means you can see if the previous owner filed any damage claims. It's essential to have this information to make an educated decision about the property.
Typically, a CLUE report contains claims related to storm damage, water damage, flooding, fires, and thefts. You can view the details of each claim, including the date of loss, type of loss, and the amount of funds paid. Additionally, you can see the insurance company's name, policy, claim number, and whether any claims were denied.
While a CLUE report cannot replace a professional home inspection, it can provide valuable insights into potential issues with the property. This knowledge allows you to make a more informed decision about whether it is a good investment or a potential money pit.
Importance of a CLUE Report in Real Estate
Requesting a CLUE report when buying real estate offers several advantages. It can either give homebuyers peace of mind or warn them about any concerns related to the property.
If you receive a CLUE report with several claims filed within the past seven years, it's typically a red flag. This may indicate that the property is aging or has underlying issues. For instance, multiple claims for flooding or storm damage should prompt you to investigate the property for mold and consider flood insurance.
Similarly, multiple break-ins or thefts should be investigated. While it could indicate carelessness or lack of security by the current owners, it could also mean that the property is in an undesirable location.
On the other hand, if you find that a claim resulted in a significant improvement, such as a new roof or siding, that's one less thing you may need to fix in the future.
To make an informed decision, it's crucial to discuss each claim with the owner and have a licensed inspector thoroughly examine the property before making a purchase.
How to Get a CLUE Report
Only the property owner can request a CLUE report. If you're looking to buy a property, you'll have to ask the owner for access to that information. CLUE reports can be ordered over the phone or the internet through LexisNexis.
Most home insurance companies report claims to the CLUE database maintained by LexisNexis. However, not all insurance companies contribute claim history information. If you receive a blank CLUE report, it could mean that either the owner didn't make any insurance claims or the insurance company didn't report any claims to LexisNexis. It's important to remember that a blank report doesn't mean that no damages occurred. Ensure you discuss any past damages or insurance claims with the current owner before buying real estate.
What to Do With a CLUE Report
After requesting a CLUE report, it's crucial to read it carefully. You can consider obtaining a CLUE report for your current home if you're thinking about buying a new property. Looking at your report before buying insurance can help you determine if there are any inaccuracies. Incorrectly listed claims on your CLUE report can significantly affect your insurance rates. By reviewing your report beforehand, you can dispute any mistakes and potentially lower your rates.
Another valuable use of a CLUE report is when assessing your own home before selling. Showing prospective buyers a CLUE report can give them peace of mind regarding any previous insurance claims.
However, it's important to note that a CLUE report is not a home inspection. It provides information about past insurance claims but doesn't give you enough details to determine potential issues with the property. So, along with requesting a CLUE report, it's crucial to hire a licensed inspector to thoroughly check the property.
A home inspector will examine the property for potential damage concerns, safety hazards, or maintenance issues. They will identify significant structural, electrical, or plumbing problems, giving you a better understanding of any renovations required.
Remember, although a CLUE report is important when buying real estate, it doesn't replace a home inspection, especially for rental properties. The rental inspection process is crucial, as it can inform you of lease violations, property damage, and more significant issues.
Keep Your Records Straight with Property Management
Researching, paperwork, and due diligence are essential when buying or renting real estate. Managing properties, however, can quickly become overwhelming for landlords. That's why most property owners hire a comprehensive property management team to help with day-to-day tasks.
If you need advice or assistance, contact our team of qualified professionals at Bay Property Management Group. We can manage your properties with ease, providing services in Baltimore, Philadelphia, Northern Virginia, and Washington, DC.