Although an offer may be more enticing to the seller's with minimal contingencies, it isn't always in your best interest as the buyer and should not scare away a seller. In this blog, we are going to tackle the Insurance Claim Loss History Contingency and why we highly suggest it to all our buyer clients. We also prep our seller's to have this information on hand for when an offer comes in, making it less of a contingency but rather part of the process.
WHAT IS AN INSURANCE CLAIM LOSS HISTORY REPORT
Often known as the CLUE Report, an Insurance Claim Loss History Report, is the claim history for your home within the past seven years. I like to think of it like your driving record, no matter where you might get pulled over, that law enforcement officer can pull your driving history for the past so many years. The insurance companies have a similar database in which they can pull your home or the one you are planning to purchase claims history.
WHY DOES THE CLAIM HISTORY MATTER
Unlike, being pulled over and having to pay for a speeding ticket even though you recently had one. Insurance companies are not going to pay out for the same claim.
For example, if the previous owner had hail damage to their siding, put in a claim with their insurance company, received a check for the work to be done - BUT they never fixed the hail damage on the siding but rather spent the money however they wanted. You move in, are loving your new home but a hail storm rolls through, causing damage to the siding. You call you insurance company and request an adjustment but when the adjuster comes to checkout the damage, they see there is previous hail damage on the siding that was not fixed for a claim already paid out on and is not going to fulfill your request.
Now what! Most likely, you are out the insurance money since the contingency wasn't in place when you purchased the home or you could attempt legal action but that also comes with a price tag and not guaranteed to end in your favor.
HOW TO PROTECT YOURSELF WHEN BUYING AND SELLING
In the state of North Dakota, most agents use the Statewide Purchase Agreement which includes a box for the Insurance Claims Loss History and the Insurance Adjuster's Report Contingencies. Please make sure you discuss this with your agent and the importance of it. If they are unfamiliar with it, share the example above on why you would like it as a contingency.
When selling your home, be prepared to have this information ready. It is usually as simple as contacting your home insurance company and requesting your CLUE report. They will send you a letter that states whether or not there has been a claim on your property. They may ask the time frame you would like them to go back to. We suggest if 5-7 years or if you have lived in the home less than that, for the time you have lived in the home.
WHAT TO DO IF YOU HAD A CLAIM & ARE SELLING YOUR HOME?
This may be the most difficult part of the process, as the buyer is going to want proof that the claim was fixed. This will require additional request to the insurance company for the Insurance Adjuster's Report (buyer's make sure you are requesting this with the contingency). This will allow the buyer's to see how much was paid out by the insurance company. Next, to have ready, are the paid invoices for the work completed, again, proof the money was used as intended.
WHAT IF WE DID NOT HAVE OUR CLAIM FIXED AND CASHED THE INSURANCE CHECK
If you are selling your home, it is suggested you do the right thing and fix the issue you were paid to fix. If that is not feasible, be ready to possibly reduce your sale price in order to accommodate the buyer to get the claim fixed after they have closed on the home if their lender will allow it. There are options, but best not to hide this information and have a plan in place.
SUPPORTING YOUR DREAMS BY TAKING THE EXTRA STEPS
Trust me, this is definitely not an easy part of being on either side of a sales transaction and as agents, we have seen push back. We have also seen our fair share of incomplete insurance claims, reminding us of the importance. It would be easier to pass on these boxes, and yes may make your offer more attractive with less contingencies but remember these are in place to protect you and allow us to help you support your dreams of home ownership.
Looking to buy or sell - we would love to chat!
RAFTER REAL ESTATE
Central North Dakota :: Kelsi Hach :: 701-471-6198
South Central North Dakota :: Danny Imdieke :: 701-321-0414
Eastern North Dakota :: Amanda Wolf :: 701-200-6048
Comments