By Robert J. Bruss
Saturday, May 27, 2006; F08

Q: DEAR BOB: My mother, 78, owns her home free and clear. The house is worth about $450,000. When I recently visited her, I was shocked at how rundown the house had become. The roof leaks, and I could smell the mold. She finally admitted to me that she has outlived her assets, except for Social Security and a small pension. When I suggested a reverse mortgage, which you often recommend, she said her banker recommends a home equity loan to pay for a new roof and other repairs. She wants to stay in her house, especially because she likes to garden. What do you suggest? -- Thomas R.

A: DEAR THOMAS: The big drawback of a home equity credit line is it requires monthly payments of at least interest only. If your mother is on limited income, how will she be able to afford the monthly interest payments?

As you know, I often suggest a senior citizen reverse mortgage should be obtained only if the homeowners expect to stay in their home at least five years. The key reason is the upfront reverse mortgage fees are expensive unless amortized over five years or more. A reverse mortgage could solve your mother's financial problems by providing a lump sum for a new roof and other repairs. Then she can use the balance of her entitlement to provide a credit line or lifetime monthly income, as she chooses.

To find a reputable local reverse mortgage originator for your mother, I suggest you go to http://www.reversemortgage.org/ and then click on her home state. Compare the FHA, Fannie Mae and Financial Freedom Plan reverse mortgages.

DEAR BOB: A few months ago we started noticing a mysterious smell in our home, which was built in the 1960s. The house doesn't have a basement. We got used to the smell. When friends visit, they try to be polite, but they often comment about the smell. Finally, a neighbor said, "I bet you have mold under the house or in the walls." We hired a mold inspector who said there was a leak in the flashing around our chimney, which was causing extensive mold as the water drips under the house. We had the roof flashing repaired, but the smell persists. Our homeowners insurance company refuses to pay to remove the mold beneath the house. Do we have any recourse? -- Marge W.

DEAR MARGE: Most homeowner insurance policies now exclude coverage for damage caused by mold and fungus unless you bought a mold/fungus endorsement at extra cost. Consider yourself fortunate if you and your family members have not suffered any adverse health reaction to the mold. Most homes have some mold, but usually not serious. Without insurance, however, you are on your own to fix the problem. Of course, when you sell the house, you must disclose the mold problem to your buyers.

DEAR BOB: My parents are closing on the purchase of a condominium next month. I think they will be paying too high a monthly fee relative to other units in the complex with larger square footage. Are monthly condo fees based on square footage or the price paid for the condo? -- Sue S.

DEAR SUE: Condominium homeowner association monthly fees are determined by the method specified in the conditions, covenants and restrictions. Many condo CC&Rs set the monthly fees based on unit square footage. Others use the number of bedrooms. Still others use a flat-fee system. I have never heard of monthly fee assessments based on the purchase price of the individual condo unit. Read the CC&Rs or ask the homeowners association treasurer how the monthly fees are assessed.

DEAR BOB: My wife and I refinanced our house. We were disappointed to discover our new loan allows for negative amortization, which was never disclosed by the mortgage broker. Originally, we wanted to take out $50,000 to pay some debts but were persuaded to borrow the maximum of 80 percent of market value. We admit we made a big mistake in not reading the mortgage documents before signing. What can we do to make the mortgage broker responsible to the full limit the law will allow? -- Segundo C.

DEAR SEGUNDO: You have no legal recourse against the mortgage broker for not disclosing the negative amortization possibility of your home loan. It is up to home loan borrowers to read their mortgage documents before signing.

For readers not familiar with negative amortization, that term means the interest rate on an adjustable-rate mortgage can increase faster than the borrower's monthly payment adjusts. The result can be that unpaid interest is added to the mortgage balance. In the future, don't be so trusting.

DEAR BOB: My son's wife left him and their two daughters more than a year ago. She pays her $400 half of the mortgage and is now living in the same county with another man, though her address and phone are not known. My son cannot keep up with the home expenses, and I have assisted him. Real estate agents will not accept a listing for the sale of the house without her cooperation. Can he get a court order to force her to agree to a sale of the $350,000 residence, which has a mortgage of about $90,000? -- Paul R.

DEAR PAUL: Presuming there has been no divorce or legal separation agreement, and both spouse's names are on the title, your son's legal recourse is a partition lawsuit to force the sale of the house. He should consult a lawyer to be certain the wife is properly served with a summons and complaint.

DEAR BOB: You often mention inherited real estate and "stepped-up basis" to market value. I am 81 and plan to leave my rental condo to my stepson when I pass on. I have deducted about 10 years of depreciation on this property. If he sells it, will that depreciation be recaptured and taxed? -- Mary W.

DEAR MARY: No. As has often been said, death is the ultimate tax shelter. After you die and leave your rental condo to your stepson by will or in your living trust, he will receive a new "stepped-up basis" to market value on the date of your passing.

The federal government will forgive any depreciation recapture tax that you would have to pay if you sell that rental condo before you die. Consult a tax adviser for details.

DEAR BOB. My wife and I bought our home in October for $660,000. The Internet site www.Zillow.com estimated market value at $812,000. But our neighbor's house has a $653,000 estimated Zillow value. Our home is described as two bedrooms, 1.5 baths and 1,853 square feet. It actually has 2.5 baths and is 2,200 square feet. How can Zillow place such a high market value on our home? In my opinion, the estimate is valueless. -- Robert T.

DEAR ROBERT: The http://www.zillow.com/ Web site is fascinating because it offers free "Zestimate" market values for approximately 60 million U.S. residences based on recent comparable nearby home sale prices and public records. But there is no guarantee of accuracy.

What I find remarkable about Zillow is it offers maps, or aerial photos, showing the residence location.

Personally, my home is located on an odd-shaped hilly parcel, but the aerial photo clearly outlines in yellow my lot boundaries. For another property I own, Zillow shows a map with nearby landmarks such as major streets, a lake, creek and even a railroad track.

Zillow is a great Web site to show where a residence is located in relation to adjacent properties, plus an estimated market value. At least the free price is right.

DEAR BOB: I have a title problem with my home. My wife died almost two years ago. Since then, I have been trying to clear the title to our home into my name alone. The local recorder of deeds refuses to accept my evidence of her passing, including a certified copy of her death certificate and an affidavit of my survivorship. I am told only the probate court can clear my title. Is this true? -- Clarence B.

DEAR CLARENCE: The exact legal answer depends on how you and your late wife held title to your home.

If you both held title as joint tenants with right of survivorship, in my experience as a lawyer, all that is required to clear the title after a joint tenant passes on is a certified copy of the death certificate and an affidavit of survivorship by the remaining joint tenant.

Perhaps you and your late wife held title by another method, such as tenants-in-common. If that is the situation, then title must usually be transferred by the local probate court according to the terms of the deceased's will. If no will was left, then the state law of intestate succession applies. Consult a lawyer for details.

DEAR BOB: What is the appropriate level of real estate sales commission for an expensive home, say, more than $1 million? As you know, money managers and stockbrokers reduce their commissions for large accounts and transactions. It seems that a 6 percent sales commission of $60,000 on a $1 million home sale is excessive in regard to the listing agent's sales effort and expenses. Will real estate agents negotiate commissions for expensive homes? -- Gary A.

DEAR GARY: All real estate sales commissions are negotiable between the seller and the listing agent. Agents frequently negotiate reduced sales commissions for expensive homes.

For example, in the county where I live, the top sales agent advertises a 3.68 percent sales commission for expensive houses.

But the big drawback to home sellers for negotiating a reduced sales commission is that buyer's agents won't show homes with low sales commissions if comparable homes are listed with higher sales commissions.

In today's competitive home sales market, a greatly reduced commission rate can hurt a home's chances of selling.

I just returned from a trip to the Midwest where, in many communities, the home sales market is a bit slow. One agent told me he gets "action" on his listings by getting his sellers to agree to a 7 percent sales commission although the local going rate is 6 percent. As a result, buyer's agents show his listings first.

DEAR BOB: About 12 years ago, my mother died without a will. Among her assets was a land parcel now worth around $100,000. I have been paying the property taxes, but I am getting tired of doing so. My brother and I were the only children. He died two years ago. How can I sell this land? -- Georgia H.

DEAR GEORGIA: You can't sell it until you clear the title of your brother's name. Because your mother died without a will, the land passed according to the state law of intestate succession.

That means the title can only be distributed by the local probate court. Consult a probate lawyer in the county where the land is located.

DEAR BOB: I don't understand why you constantly recommend revocable living trusts to hold title to real estate. Both of my parents died within a few years of each other. When my mother died, her will left everything to my father. Our lawyer handled everything promptly with no delays or large costs. When my father died a few years later, his will left his house and everything else to my brother and me. We were named co-executors of his will. Again, the same lawyer handled all the paperwork promptly. We paid his fee and some additional expenses, which were not excessive. There was no federal estate tax or state inheritance tax. My will leaves everything to my wife (or to our children if we both die together). I don't see any reason justifying the cost of a living trust. Isn't a living trust just a tax avoidance scheme for the rich? -- Dan VanA.

DEAR DAN: No. Revocable living trusts are for everyone who owns assets exceeding his or her state's probate court exemption amount, usually $50,000 to $100,000. Living trusts are not a tax avoidance scheme.

You and your brother were fortunate there were no complications with your parents' estates. There could have been long delays or other problems that a revocable living trust can eliminate.

For example, if a living trust principal or trustor becomes incapacitated and unable to manage their assets, perhaps with Alzheimer's disease, severe stroke or a coma, then the successor trustee can manage the living trust assets without probate court interference or the need to have a conservator or guardian appointed.

Presuming you and your wife own your home together, suppose you become incapacitated with Alzheimer's disease. Your wife decides the best thing to do is sell the house to pay for your care in a convalescent home.

However, because you are incapacitated, she can't sell the home alone without a court-appointed conservator or guardian to represent you. Such court action would not be needed with a living trust.

DEAR BOB: The city sewer backed up into our home, causing extensive damage. It cost about $15,000 to replace the carpets, floors and other components. Our homeowners insurance company refuses to pay, pointing to an exclusion in the policy. The city says they are not liable. Do we have any recourse? -- Nathan R.

DEAR NATHAN: Most homeowners insurance policies no longer include coverage for sewer backups. Cities routinely reject sewer backup damage claims. However, you might want to consult a local lawyer about suing the city if fault can be proven.

Where I live, the city recently enacted an ordinance requiring homeowners to install backflow valves to prevent sewer backups into homes. I am told a far cheaper remedy is to leave the cap on your sewer cleanout loose so any backup won't go into your home.

DEAR BOB: About four months ago, we bought our first home. It is in an older community of nice houses. Last month, when our toilets wouldn't flush properly, we called Roto-Rooter. The man informed us we have a septic tank system and our home is not connected to the city sewer, which, we learned, was installed on our street about 15 years ago. Do we have any recourse against our home seller and the real estate agent to pay the estimated $8,500 total cost to connect to the city sewer? -- Bryan R.

DEAR BRYAN: Especially in an established neighborhood, most home buyers and real estate agents presume the homes are connected to the city sewer. But that is not always the case, especially where homes were built with septic systems and the city sewer was installed later.

Unless the seller's disclosure statement falsely failed to reveal the home was not connected to the city sewer, the seller and the listing agent probably have no liability to you unless you specifically asked, "Is this house connected to the city sewer?"

DEAR BOB: I am a widow, 81, whose primary asset is my home. I have two adult children to whom I would like to leave this home where they grew up. However, as I come from a long-lived family, I am concerned I might outlive my assets as expenses constantly increase. Also, my house will soon need repairs, which I am not sure how to pay for. My two children suggest I deed my house to them now and they will pay for the maintenance, taxes and insurance. Do you think this is a good idea? -- Irene R.

DEAR IRENE: No. If you quit-claim your house to your adult children now, that could prove detrimental to both you and them.

For example, suppose you later decide it's time for you to move to an assisted-living center. If you already had given away your home, where would you find the money to pay for your care?

Another consideration is if you give your home to your two adult children now, they will take over your presumably low market value adjusted-cost basis. They would be better off inheriting the house after you pass on, thus receiving a new "stepped-up basis" of market value on the date of your death.

If you are in reasonably good health, and expect to stay in your home at least five years, look into a senior citizen homeowner reverse mortgage. You can choose from a lump sum to pay for repairs, monthly lifetime income, a credit line (except in Texas), or any combination. To find reputable local reverse mortgage originators, on the Internet go to http://www.reversemortgage.org/ .

DEAR BOB: We bought our house about two years ago. At the time, our title insurance policy included a map showing we have 50-foot street frontage. As I came home from work every day, I thought to myself, "Our lot isn't 50 feet wide." After discussing this with my wife several times, I decided to measure. It turns out our lot is only about 42 feet wide. At the suggestion of a friend, I had a professional survey made. It turns out that our neighbor's fence is 6 feet on our side of the correct boundary line. When I politely asked her to move her fence, after showing her the survey, she told me, "Get lost, pal." What recourse do I have? -- Brent R.

DEAR BRENT: Because the fence is on your lot, it is your fence. You can remove it if you so desire because it belongs to you.

However, before you do so, I suggest you consult a lawyer to discuss the possible legal consequences, such as a prescriptive easement for your neighbor.

DEAR BOB: My late husband and I were married 11 years before he died in 2005. His will left everything to his only child from his first marriage, a nasty daughter. Many times he told me, "When I die, my estate goes to my daughter but you can live in this house as long as you wish." His estate is now in probate court. The daughter has told me, "Start packing." Can she force me out? -- Marcy W.

DEAR MARCY: Consult a probate lawyer. Without written evidence that your late husband intended to leave you a life estate in his house, you have nothing. I hate to be so blunt, but oral statements mean nothing when real estate is involved.

Readers with questions should write Robert J. Bruss at 251 Park Road, Burlingame, Calif. 94010, or contact him via his Web page,http://www.bobbruss.com.

2006 Inman News Service