'Funding' a Living Trust

DEAR BOB: We are selling our home. We interviewed three agents, as you suggest, and they each provided us with comparative market analyses. However, they used mostly different comparable recent home sales in our area. We have an average house in a desirable neighborhood. The agents set the market value of our home at $475,500, $560,000 and $625,000. These are all experienced local agents. How can they set the market value of our home so far apart? -- Joseph H.

DEAR JOSEPH: You should be aware that the agent doesn't set the market value for your home -- the local market does. Something is seriously wrong with those comps, especially if they didn't use the same recent sales. One of those agents may have tried to "buy" your listing by estimating a high market value, and another may have estimated a low market value, hoping to make a quick sale. Keep interviewing agents.

DEAR BOB: My house, which I want to sell, was rented to tenants from 2000 to 2004. I moved back 26 months ago. Can I still do a Starker tax-deferred exchange? If not, would there be any benefit to carry back the mortgage for my buyer? I am single, if that makes a difference. -- Lisa Z.

DEAR LISA: You don't qualify for an Internal Revenue Code 1031 tax-deferred exchange because the property is your personal residence, not a rental or business property. To make the property eligible for a tax-deferred exchange, you must move out and rent the property to a tenant. However, because your property is eligible for an Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 for a single homeowner, that might be your best choice.

If you carry back the mortgage for your buyer, that is called an installment sale. It will spread out the tax on your profit over the life of the mortgage payments you receive. The capital gains portion of each payment you receive will be taxed at the current federal 15 percent tax rate, plus applicable state tax. Of course, the interest income you receive is taxable as ordinary income. Consult a tax adviser for details.

DEAR BOB: My friend owns a condo and is paying $300 per month to the homeowners association, but the garden and maintenance of the building have not been kept up. I told her to call someone to audit the books. What should she do? -- Elaine F.

DEAR ELAINE: Don't jump to conclusions. Your friend should attend the monthly homeowners association board of directors meetings to ask why the garden and other maintenance is so poor. Maybe there is a good reason, such as high costs for unexpected roof repairs.

For example, I own a second-home condo where an old rock retaining wall recently collapsed. The unexpected replacement cost would be $26,000. Fortunately, our well-managed association has several times that amount in reserves, so a replacement wall can be built without affecting other, budgeted maintenance expenses.

Your friend should investigate first, then complain only if management seems out of line.

DEAR BOB: I bought my home 13 years ago. My neighbor's fence is on my property by about two feet. I allowed the original neighbor to leave the fence there. However, after a new neighbor bought about a year ago, I asked her to move the fence according to my survey. She has not. What recourse do I have? -- Julie H.

DEAR JULIE: From your description, it appears that the fence is on your property. Therefore, it is your fence. You can remove it if you wish, but you can't force the new neighbor to pay the cost of tearing down your fence and rebuilding it on the other side of the boundary.

DEAR BOB: About three years ago, my son wanted to buy a condominium. He was earning about $75,000 per year as a certified public accountant at a big firm. However, his credit score was horrible, about 600, because he failed to pay credit card bills on time when he was in college. So I agreed to take title and obtain the mortgage in my name. Since then, he has paid all the mortgage payments on time. I recently signed a quitclaim deed adding him as a joint tenant with right of survivorship. When he approached the mortgage company about transferring the loan to him so he can improve his FICO score, he was told that he would have to pay a 1 percent assumption fee, which would be about $3,600. He wants to do this so he can deduct the mortgage interest and property taxes on his income tax returns. Do you think he should do so? -- Dan F.