C.L.U.E Report

You're in the process of buying a home.

During the first five days of your open escrow, you make formal loan application with a lender of your choice.

The loan officer assures you there should be no problems with the loan. He reminds you of your obligation to purchase a homeowner's insurance policy to go into effect at the close of escrow.

Also, during the first five days of your open escrow, the seller delivers a completed copy of the Seller's Property Disclosure Statement (SPUDS) for your review.

The SPUDS details the condition of the property along with information as to whether the sellers have any knowledge of any known defects. Upon review, it appears that there are no problems or issues of great concern.

During the standard 10 day inspection period, you meet with your insurance agent. He or she gives you a quote of $900 a year to provide a homeowner's insurance policy.

Your insurance agent takes down the name and phone number of the escrow officer along with the name of your new lender and promises to deliver the actual policy prior to close of escrow.

Everything seems to be falling into place.

At the appointed time, you show up for the close of escrow. Additional documents are signed and you put the balance of your down payment and closing costs into escrow.

The next day, you receive a call from your Realtor congratulating you now that the deed has recorded. You meet at the house, and or she gives you the keys to your new home.

Sixty days later, you receive an unexpected letter from your insurance company. It's a notice of Cancellation for your homeowner's insurance policy.

Despite the fact that your premiums are paid in full for a year and you've done nothing wrong, insurance companies in Arizona are allowed to unilaterally cancel policies or revise them at their sole discretion.

So, what happened? What can you do?

During that time, they are completing research on the claim history of the subject property, the claim history of the buyer in his previous residence, and the credit worthiness of the buyer.

The insurance company's decision to write a policy, keep a policy in force, or increase premiums is based upon their analysis of a CLUE report.

CLUE stands for Comprehensive Loss Underwriting Exchange. These reports track claims by property address and by property owner.

In our hypothetical case, the insurance company discovered a broken water pipe claim on the property three years ago.

The seller purchased the home from was unaware of the prior insurance claim or any water pipe issues as he only owned the home for a year, and the previous sellers didn't tell him.

Some insurance companies in Arizona have adopted the posture of not writing policies for any properties that have had "non weather related claims" for the past three years.

COUNTLESS SCENARIOS OF POLICY CANCELLATIONS AND PREMIUM ESCLATIONS ARE BEING REPEATED AROUND ARIZONA AND ACROSS AMERICA ON A DAILY BASIS!

Unsuspecting property owners are getting cancellations notices based on a five-year history. Others are being informed their insurance can stay in force with a substantial premium hike.

Based on the history of the property, the insurance company is basically "black -listing" some homes or refusing to write policies on "clean" properties because the new owner has a tendency to file excessive claims.

There have been some horror stories that some insurance companies have increased premiums up to four or five times the original amount.

So as a buyer or seller what can you do? First start the process to secure an insurance policy if you are a buyer early in the escrow process. If you are a seller ensure that you put the requirement that the buyer start the process as soon as possible at the beginning of the escrow period.

For the seller, there is a "counter offer" statement that states if the buyer can not obtain insurance on the home and the failure of the buyer to give written disapproval to the seller to purchase the home during the specified inspection the buyer must purchase the home or be in "breach of contract".

The counter offer states that the seller may sell the home to someone else until the counter offer is signed by all parties.

In other words, as your Real Estate Professional, I am aware of these type and other type of issues that you as a seller should be concerned with. That is why you owe it to yourself to only hire a "True Real Estate Professional" to market and sell your home!