What is a C.L.U.E. Report and Why You Should Request One During the Option Period

When you’re in the process of purchasing a home, having all relevant information about the property’s history is essential, particularly when it comes to its insurance record. One critical resource for this is the Comprehensive Loss Underwriting Exchange (C.L.U.E.) report, which provides a record of the insurance claims made on the property within recent years. This report can have a substantial impact on your ability to obtain insurance, which, in turn, affects your ability to secure a mortgage. Here’s everything you need to know on why a C.L.U.E. report is such an essential part of your due diligence, how to request it, and how it can shape your decision to move forward with the purchase or negotiate on certain issues.

What is a C.L.U.E. Report?

A C.L.U.E. report, provided by LexisNexis, is a detailed record of insurance claims made on a property over the past seven years. This report includes information such as the type of claim (e.g., fire, water damage, theft), the amount paid out, and the date the claim was filed. Essentially, the C.L.U.E. report offers a comprehensive history of any insurance-related incidents associated with the property, providing insights into potential issues that may not be immediately visible during a property walkthrough.

Understanding the C.L.U.E. report is crucial for identifying recurring problems or significant past damages that could affect the property’s future condition and your insurance premiums. For example, multiple claims for water damage might indicate persistent plumbing issues, potentially leading to costly repairs down the line.

Why Is the C.L.U.E. Report So Important?

When buying a home, most lenders require homeowners insurance to protect their investment, and without insurance, obtaining a mortgage is next to impossible. The C.L.U.E. report plays a crucial role here, as it can reveal any red flags that might make insurers hesitant to cover the property. For instance, if the report shows multiple claims for water damage or fire, certain insurance companies may either increase their rates significantly or even decline coverage altogether. This can make securing affordable insurance a challenge, potentially impacting your monthly costs long-term.

If you’re able to obtain insurance, the claims history outlined in a C.L.U.E. report can still affect your premium. The more recent and frequent the claims, the higher your insurance rates may be. Some claims history may even “follow” the home to your policy for more than a year, making it difficult to reduce your premiums even after you’ve owned the property for some time. Having this insight in advance allows you to consider if you’re comfortable with potentially higher insurance costs or if you’d prefer to negotiate or reevaluate your options.

How Insurance Companies Use C.L.U.E. Reports

Insurance companies have varying standards for how far back they review a property’s claim history. Some will look at claims from as recently as three years, while others may go as far back as seven years; however, the standard timeframe is usually around five years. This variability means that each insurer’s response to a claims history can differ—one company might overlook an older claim, while another may see it as a red flag. Knowing the claims history through a C.L.U.E. report prepares you to shop around if one company responds unfavorably to the property’s insurance history.

Why Request a C.L.U.E. Report During the Option Period?

The option period is a critical phase in the home-buying process, typically lasting between 5 to 10 days. During this time, buyers can conduct thorough inspections, review documents, and negotiate terms based on their findings. Requesting a C.L.U.E. report early in the option period offers several advantages:

Risk Assessment: The C.L.U.E. report helps you assess the overall risk associated with the property. High claim history can indicate underlying problems that may not be immediately apparent but could lead to significant expenses in the future.

Informed Decision-Making: The C.L.U.E. report provides an in-depth look at the property’s history, supplementing the seller’s disclosure. While sellers are obligated to disclose known issues, the C.L.U.E. report may reveal past damages or claims that the seller isn’t required to mention, especially if the issues were repaired to code.

Insurance Considerations: A C.L.U.E. report is often required by insurance companies when issuing a homeowners policy, which is a prerequisite for obtaining a mortgage. If the report reveals multiple claims, it can make securing insurance more challenging or result in higher premiums. Understanding these factors early on can save you from unexpected costs and complications later in the process.

Negotiation Leverage: Armed with information from the C.L.U.E. report, you can negotiate more effectively. For instance, if the report indicates frequent roof repairs due to hail damage, you might negotiate a lower purchase price or request that the seller address the roofing issues before closing.

How to Request a C.L.U.E. Report

Access to a C.L.U.E. report is protected under the Fair Credit Reporting Act (FCRA), ensuring your information remains secure. Only the current property owner can request a C.L.U.E. report for their property. If you’re interested in purchasing a home, you’ll need to ask the seller to obtain the report on your behalf. Here’s how the current owner can request a C.L.U.E. report from LexisNexis:

• By Phone: Call 1-866-312-8076
• By Email: Send a request to consumer.documents@LexisNexis.com
• Online: Visit consumer.risk.lexisnexis.com

It’s advisable to request the C.L.U.E. report from the seller as soon as possible, ideally right after your offer is accepted. This timely access allows you to review the report and incorporate its findings into your decision-making process, potentially saving you from incurring additional costs on inspections and other fees if you decide to walk away from the deal.

Why Sellers Should Have a C.L.U.E. Report Ready

From a seller’s perspective, having a recent C.L.U.E. report ready to share with prospective buyers can offer a transparency advantage. This proactive step not only speeds up the due diligence process but also reassures buyers that you’re providing a complete history of the property. If the claims history is favorable, it can even work to your benefit, reducing any potential concerns buyers may have about the property’s condition or insurance costs.

Final Thoughts

A C.L.U.E. report is a powerful tool in the home-buying process, offering invaluable insights into a property’s insurance claims history. By requesting this report during the option period, you equip yourself with the information needed to make informed decisions, negotiate effectively, and ensure that you can secure the necessary insurance coverage for your new home. Whether you’re a first-time homebuyer or an experienced investor, understanding and utilizing a C.L.U.E. report can safeguard your investment and pave the way for a smooth and transparent transaction.

Working with a knowledgeable real estate agent who recognizes the importance of a C.L.U.E. report can further enhance your home-buying experience. They can guide you through the process, help interpret the report’s findings, and assist in leveraging the information to your advantage. Don’t overlook this essential document—request a C.L.U.E. report early and make a confident, informed decision on your path to homeownership.