Clark Howard's Tips
Playing the foreclosure-buying gameFebruary 5, 2008
The media is full of heartbreaking stories about foreclosures and families getting thrown out on the street. As an undercurrent to that, the "Dare To Be Great" schemes promise to show you how to profit from the foreclosure trend.
Clark has been buying foreclosures since 1978, along with "people problem" houses. Yesterday he closed on another one. As he walked through the property, it really struck him that this house was someone else's hope and dream; it was new construction that was lived in for just 6 months.
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CLARK'S TIP TOPICS
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Clark bought this foreclosure much like he did the other 4 he's picked up over the years. He never buys on the courthouse steps, but rather only goes after REOs (real-estate owned properties).
Basically, he waits until the lender takes the property back and then buys from their inventory. His rule of thumb for single-family homes is to always buy 20 percent below fair market value. When it comes to condos, the number bumps up to 30 percent below fair market value. Remember that you'll have to pay for multiple repairs to the distressed property. So all this "Dare To Be Great" stuff about buying for mere pennies on the dollar is malarkey.
Clark also wants to address some recent critiques about him being, as one man put it, too happy about dancing on people's graves. He has nothing to do with the fact that the previous owners couldn't pay their mortgage. It was the bank who put them out on the street. At that point, it's like buying any other investment. Remember the best money is made when everyone else is afraid. Zig when others zag. The best deals over the next 1-3 years will be in second-home communities including resorts, beach communities and mountain communities. When there's not enough money for all the bills, a second home is way down on the list of priorities behind a primary residence.
