Get a CLUE And Learn About a Home's Insurance Claim History
You probably already know shouldn't buy homes for sale without getting the properties surveyed and appraised. However, most buyers always forget to check the one thing that could make buying their dream homes impossible: the house's insurance claim history. Here's why it's important to take a look at the home's past in this area and what you can do to get the information you need to make the best buying decision possible.
The Home May Be Uninsurable
Insurance companies expect homeowners to submit claims on their properties every once in a while. A property that has had an excessive number of claims, however, is cause for concern for any insurance company. It's typically a red flag the home will continue to have problems that may result in claims in the future, and the insurance company may refuse to issue a policy on the property as a result.
Since banks require buyers to purchase and maintain homeowner's insurance while there is an active mortgage on the property, your loan may be denied if you can't get an insurance company to agree to provide coverage. This is true even if a property inspection doesn't turn up anything concerning and the home appraises well.
Because of this, you may be forced to cancel the sale or pay an exorbitant amount of money to an insurance company that issues policies to high-risk homes, and chances are good neither options sound palatable.
Ask About Claims Before Making an Offer
Luckily, you can save yourself a lot of heartache by investigating a home's claims history before you fall in love with the property. Of course, you can always ask the seller about any claims he or she may have made on the home. However, it's not always a given the seller will tell you the whole truth.
Instead, ask the homeowner to obtain a CLUE (Comprehensive Loss Underwriting Exchange) report from their insurance company. CLUE is a database that contains information on all the claims submitted on a property, and insurance companies use this tool to research both the number and the type of claims a particular property had, which factors into whether they'll insure a home as well as the cost of premiums.
As you can imagine, a CLUE report can provide you a lot of information about a home that you may not have otherwise gotten from the seller, such as whether there was water or mold damage. The only disadvantage to this report is that it only provides information about claims made in the previous five years. So, even if a homeowner made 100 claims on the home six years ago, you wouldn't get any info about them through this report. Still, this can be a great way to protect yourself from loss further.
For more information about CLUE reports or assistance with picking out a home for you, contact a real estate agent.
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