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There are some exceptions in the case of divorce, death or illness that would allow you to sell the home and keep a fraction of the profit tax-free. You'll want to read IRS Publication 523, "Selling Your Home," for details. It is available at http://www.irs.gov.

Q: We need to reduce our 5.1-acre property to less than five acres to qualify for my husband's employer's relocation program. It has been suggested that we give two-tenths of an acre to one of our neighbors. Are there any other options we should consider? If not, how do we begin the process?

A: It seems the best and easiest solution would be to see if your employer's relocation program manager would waive the "less than five acres" requirement for you. If not, you have other options, some of which can be complicated, expensive and time-consuming.

As you indicated, one of your options is to reduce the size of your property. However, in some cases this might be impossible. Some municipalities have minimum lot-size requirements. If your town or county has a minimum lot size of five acres, you're out of luck.

If you're able to reduce the acreage of your lot, you may have other legal challenges. A big one might be subdivision ordinances and requirements. In an effort to regulate local land use, many municipalities have ordinances that require landowners to obtain accurate surveys of their land, along with water-flow studies, before the municipality permits the subdivision of large lots. In some cases, these local requirements might even include the review of what you propose and the approval of your division.

If you're able to overcome these obstacles, or they don't exist in your area, you could transfer that land to your neighbor. Your lawyer could obtain a legal description from your surveyor to convey to your neighbor the necessary acreage. You, in turn, would need to make sure that the local real estate taxing authority thereafter taxes your neighbor for that acreage.

Q: If a mortgage is owner-financed and the total amount is due in three years, what happens if the deadline is not met? Can they take back the house?

A: When you say the property was owner-financed, you must mean that the buyer purchased a home and the prior owner financed the purchase of the home. If that's the case, the seller should have had the buyer sign a promissory note agreeing to repay the borrowed money at a certain interest rate in a given amount of time. In addition, the borrower should have signed a mortgage giving the seller a lien on the home to secure the debt.

Whether a mortgage is owner-financed or bank-financed, if the buyer fails to pay what is owed, the lender can foreclose on the home, sell the home and use the proceeds from the sale to pay off the debt.

If the home is now worth less than the debt, the lender can continue to pursue the buyer to recover the difference. That difference is called the deficiency.

If the property was sold under what is generally called an installment contract or a contract for deed, the seller would sue the buyer to recover the amount owed or get back the property.

In either case, if the seller had the buyer sign the proper documentation, the seller should be able to sue the buyer. Whether the seller gets money or gets the property back will depend on the circumstances and on what the buyer does.

Ilyce R. Glink is an author and nationally syndicated columnist. Her latest book is "100 Questions Every First-Time Home Buyer Should Ask." Samuel J. Tamkin is a real estate lawyer in Chicago. If you have questions for them, write Real Estate Matters Syndicate, P.O. Box 366, Glencoe, Ill. 60022, or contact them through Glink's Web sites,http://www.thinkglink.comandhttp://www.expertrealestatetips.net.

© 2008 Ilyce R. Glink and Samuel J. Tamkin

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