Many Realtors and lenders know that obtaining a CLUE Report as part of the disclosure process is a smart idea. We agree, and hope that this post will help you understand the WHY behind CLUE Reports. To see the solution to obtaining CLUE Reports, skip to the bottom!
Background: A CLUE Report shows the insurance claims on a property for the previous five years. Insurance agents have the ability to access this information through a number of vendors, even though this information is the property of the current home owner. However, much like an insurance agent’s license to access a Motor Vehicle Report when providing an auto insurance quote, that license to access private information is only valid for the purpose of underwriting an insurance policy, or in other words, doing our job. An insurance agent caught running MVR’s or CLUE reports for reasons other than underwriting can lose their license to obtain this information, and possibly face insurance licensing discipline form the State. (We occasionally hear stories about some dummy who pulls an MVR on an ex-girlfriend and gets caught – not smart)
Why does a CLUE Report matter in a Home Purchase? This part is critical for everyone to understand. An insurance agent can provide a quote for insurance in a matter of minutes. They even have “binding authority”, which is the ability to issue an insurance policy on behalf of the insurance companies which the insurance agent represents. However, this authority is conditional upon the property in question meeting the carriers’ underwriting guidelines. So while an agent can quickly issue a quote and even issue a policy to help their favorite Realtor close escrow, if the property does not meet the carriers’ guidelines then that carrier has the right to cancel the policy within 60 days of issue. For a home buyer, this means that 60 days after buying their home they can receive a cancellation of their policy. Not only does the cancellation create the obvious problem of not having insurance, a cancellation of insurance can become an additional underwriting concern itself, which creates even more problems in obtaining a new policy. Nobody wants to be in that situation.
And let’s be clear – when a new home buyer has their insurance cancelled, the first upset phone call is ALWAYS to their Realtor!
The Problem: We previously accommodated requests for CLUE Reports from Lyon agents and lenders by obtaining the authorization of the home owner. However, we have been advised that it is a violation of our contract with our CLUE vendor to release these reports. We will continue to access these reports in our normal process of providing a quote, but we will not be able to release these reports, even to the home owner who still has a right to the information. Unfortunately, just because the current home owner has the right to the information doesn’t give us the right to distribute it, even with their permission.
The Solution
Sellers: Home Sellers have the right to access a CLUE Report directly. Since it is their information, they can give it to whomever they choose, including their agent, lender or an interested buyer. Sellers can obtain a copy of their CLUE Report by going to https://personalreports.lexisnexis.com/. When a seller is required to disclose past claims to an interested buyer, this is how they can accomplish that disclosure.
Buyers: Home buyers still need to know that the home they are buying can be insured. Purves Insurance will still be accessing a CLUE Report on every quote that we provide. So if a home buyer wants to know if a home is insurable, they simply need to ask us for an insurance quote and we will access a CLUE Report as part of that process. We will not, however, be able to give the report itself to the buyer, agent or lender. But we will certify to the buyer or agent that we have run a CLUE Report.
To get a quote on your insurance, please call us at (800) 681-2025 or email us at quotes@purvesinsurance.com . We look forward to earning your business!