Brandi Wright, a realtor in Arlington, Texas sent me a text message earlier today asking a really interesting question, “Is there a way to find out if a home has ever had a flood claim?” Adding to the “Twilight Zone” coincidence factor, was an article appearing on Insurance Journal in my email this morning entitled, “States with the Best, Worst Home Flood Damage Disclosure Laws.” Let’s look at a couple of interesting notes related to the home buying experience and flood insurance.
CLUE Report: The CLUE report, or Comprehensive Loss Underwriters Exchange, is a database most home insurance companies contribute claims history to. It’s one or the reports I pull when quoting a prospective client’s home insurance as it lets me know if their dream home has had any claims in the past five years such as fires, theft, vandalism, water damage and weather-related claims (wind, hail, lightning strike, etc.). It may also include flood claims if they’ve happened during that time.
There are a couple of reasons a CLUE report may be blank including;
- The homeowner hasn’t filed any during the past 7 years (most Texas home insurance companies only look back 5 years).
- The home is insured by a company that doesn’t participate in CLUE
- There has been more than one homeowner during that time (claims filed under a previous homeowner are not included in the report).
Flood Zone Determination: If the home is near water such as a stream, river, lake, or on the coast, I also recommend pulling a flood zone determination. I do this in most cases, so the buyer is not faced with an insurance surprise before the end of the option period. It’s much better to find this out early and know what the cost of flood insurance is than to be faced with having to come up with an additional $1,000 or more for closing.
If you find that your dream home is in a mandatory flood zone, see if the seller has an elevation certificate. This can help reduce the cost of flood insurance if the foundation sits above the flood zone. If it doesn’t, it will help verify the cost of flood insurance.
Sellers Disclosure: The seller should disclose if they’ve had any prior flood losses since they’ve owned the house or if it’s located in a flood plain. Texas law requires this disclosure, however, they don’t have to disclose whether flood insurance is mandated. Additionally, the seller may not be aware of a flood claim if they’ve been in the home less than 5 years. Some states like Missouri and Florida don’t even require that level of disclosure.
Texans have a good likelihood of experiencing a future flood as past events such as Harvey, flooding in San Antonio and other parts of our state show. Home buyers should find this out before the option period expires instead of before closing. What do you think? Share your comments, questions or experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!