What is a CLUE report, and why does it matter to a buyer?
If you are about to buy a home in New Braunfels, you are already lining up an inspection, an appraisal and a lot of paperwork. There is one more report I would add to that list, and it is free for the seller to get. It is called a CLUE report, and it shows the home’s insurance claims.
CLUE stands for Comprehensive Loss Underwriting Exchange. The Texas Department of Insurance (TDI) says a CLUE report shows the claims filed on a house for the past seven years. TDI also explains why this matters before you buy. Its consumer tip says insurance companies use a property’s past claims as a factor in deciding what you will pay for homeowners insurance, and its blog points to past claims when one household pays more than a neighbor. Seeing that history before you commit means fewer surprises when the quote comes back.
For each claim, TDI lists the date of loss, the type of loss and the amount paid on the claim. Each of those gives you something concrete to ask about.
A claim on the report tells you something happened, what kind of loss it was and how much was paid. Whether the repair was done well is a separate question, and your inspection and the seller’s records help answer it.
An empty report has limits too. TDI describes the report as a record of claims filed, and two of its pages say most insurance companies report information based on filed claims. Damage an owner repaired out of pocket, without filing a claim, would have no reason to appear on it. That is one reason the inspection still matters as much as the report.
Who can get the report, and when should you ask?
TDI describes two routes. An owner can get a free copy of the report on property they own each year by contacting LexisNexis and using its request for a consumer disclosure report. And if you are buying a home, TDI says you can ask the current owner to show you the report.
So as the buyer, you are asking the seller to order it and share it.
Timing is the part I would plan for. The seller is the one who places the LexisNexis request, so build in time for it. If you wait until the last day of your option period, you may not have it in time to use it. Ask in the same message that confirms the offer was accepted, or even when you send the offer.
If the seller finds something wrong in the report, TDI says the owner can contact LexisNexis to dispute incorrect information or add an explanation. That is the seller’s step to take, not yours.
What if the seller will not order it? Ask your agent to explain what the report is and why you want it, and offer to keep your questions to the claims on it. If the answer is still no, lean harder on the disclosure, the inspection and your own insurance quote, because the inspection and the quote are in your hands during the option period.
How do you read it next to the disclosure and the inspection?
Put three documents side by side: the CLUE report, the seller’s disclosure and your inspection report. Each one covers ground the others leave out.
The Texas seller’s disclosure notice, in Property Code Section 5.008 and on TREC’s Seller’s Disclosure Notice form, asks the seller several questions that line up with insurance claims:
- whether the seller ever filed a claim for flood damage with any insurance provider, including the National Flood Insurance Program
- whether the seller ever received FEMA or Small Business Administration assistance for flood damage
- whether the seller is aware of known defects or malfunctions in the roof
- whether the seller is aware of previous structural or roof repair, previous fires, or water damage not due to a flood event
- whether the seller is aware of any item, equipment or system in need of repair
- the roof type and its approximate age
The disclosure stops short of a full claims list. It asks about conditions and repairs the seller knows about. A hail or wind claim on the roof, for example, may show up on the CLUE report, and on the disclosure you would look for it under roof defects, previous roof repair or items in need of repair. Reading both together is how you spot a claim that the disclosure answers do not explain.
Here is how I would line them up:
| If the CLUE report shows | Check on the disclosure | Ask your inspector |
|---|---|---|
| A roof or wind claim | Roof defects, roof age, previous roof repair, items needing repair | Condition of the roof covering and flashing, and signs of a patch |
| A water or fire claim | Water damage not due to a flood, previous fires, previous structural repair | Staining, soft spots and moisture at the area involved |
| A flood claim | The flood claim and FEMA or SBA questions | Visible signs of past water entry at lower levels |
Then ask the seller, through your agent, for the invoices or contractor paperwork for each repair. A paid claim with a matching repair invoice is a very different story from a paid claim with no record of what was done. My guide to common New Braunfels inspection problems covers how to read the inspection report.
When the three documents line up, you can move on with more confidence. A roof claim, a matching repair invoice, a disclosure that mentions the repair and an inspector who finds a sound roof is a consistent story. When they do not line up, write down the specific gap in one sentence, such as a paid water claim with no matching disclosure answer and no invoice. That sentence is what you hand your agent, and it keeps the conversation with the seller about facts instead of worries. If the gap involves something structural, ask your inspector whether a specialist should look at it before the option period ends.
How does the option period give you time to act?
On the TREC resale contract (Form 20-19), Paragraph 5B gives the buyer an unrestricted right to terminate by giving notice to the seller within the option period. The notice has to be given by 5:00 p.m. local time on the last day. If you terminate in time, the option fee is not refunded and your earnest money is. Paragraph 5D adds a condition. That unrestricted right only exists if a dollar amount is stated as the option fee and you deliver the fee on time.
That is why the CLUE report belongs early in the option period. If it shows a claim that the disclosure and the inspection do not explain, you still have time to ask questions, get a contractor’s opinion or a fresh insurance quote, and decide. My guide to earnest money on New Braunfels offers explains when a buyer can get earnest money back.
The seller’s disclosure has its own timing rule, unless the sale falls under one of the exemptions the statute lists. Under Property Code Section 5.008, if you sign the contract without the notice, you may terminate for any reason within seven days after you receive it. Paragraph 7B of the TREC resale contract also gives a seven-day termination window after the notice arrives, ending at closing if closing comes first, and lets the buyer terminate any time before closing if the notice never arrives. The same paragraph has a box for a seller who is not required to furnish the notice.
What if new damage happens after you sign?
A CLUE report looks backward. If any part of the property is damaged or destroyed by fire or other casualty after the contract’s effective date, Paragraph 14 of the TREC resale contract, Casualty Loss, takes over. It says the seller must restore the property to its previous condition as soon as reasonably possible, and in any event by the closing date.
If the seller fails to do that because of factors beyond the seller’s control, the paragraph gives the buyer three choices. You can terminate and get the earnest money back. You can extend the time for performance by up to 15 days. Or you can accept the property in its damaged condition with an assignment of the insurance proceeds, if the seller’s insurance carrier permits it, plus a credit at closing for the amount of the deductible. Which choice makes sense depends on the damage, so get the repair scope and your agent’s read before you pick one.
What should you do before the option period ends?
Here is the short list I would work through:
- Ask for the CLUE report the day the offer is accepted, or before.
- Get the seller’s disclosure and mark every line about roof, water and flood.
- Match each claim on the report to a disclosure answer and a repair record.
- Point your inspector at every area where a claim was paid.
- Get an insurance quote on the exact address from a licensed agent, and ask how the history affects it. My guide to comparing insurance before an offer walks through that step.
- Decide before 5:00 p.m. on the last day of the option period.
For the wider buying process, start at the buyer resources page.
