DEAR BOB: Please settle an argument for me. My neighbor says if he waits to sell his home until he is 65, he will have no tax to pay on $35,000 of his profit. But the way I read your articles, it seems only the profit on the first $35,000 of the sales price is tax-free. Who is right? Wendy T., Kesington.

DEAR WENDY: You are. Your neighbor is wrong. The "over 65 rule" says the profit on the first $35,000 of a qualified home seller's sale price is tax-free. To qualify, (1) the seller must be 65 or older on the title transfer date, (2) have never used the rule before, and (3) must have lived in the principal residence at least five of the eight years before sale.

If the qualifying principal residence sells for under $35,000, the entire profit is tax-free. But when the sale price is over $35,000, to estimate the tax-free profit, divide $35,000 by the home's "adjusted sales price" (gross sale price minus selling costs).

For example, if the adjusted sales price is $50,000, dividing $35,000 by $50,000 means 70 percent of the profit is tax-free. Ask your tax advisor for further details on this tax break.

DEAR BOB: We accepted an offer to sell our home. The closing is to be in 90 days. A day after we accepted the offer, another agent brought us a better offer. He didn't know of the earlier sale. He says we can conditionally accept his buyer's offer so if the first deal falls through, we then have a backup offer. Is this a good idea? Dick A., Washington.

DEAR DICK: Yes. Standby second offers are often conditionally accepted by the seller in case the first offer doesn't close for some reason. Just be sure your acceptance is worded conditionally so you're not obligated to sell the same house to two different buyers. See your attorney for details.

DEAR BOB: One of my tenants is two months behand on his rent payments. Every time I stop by to see him, he pays me $25 or $50 and says he'll have the rest next week. When "next week" comes, he always has a new excuse for not paying. He owes me about $350 now. How long should I wait before evicting him? Mae R., Washington.

DEAR MAE: Unless he is a long-time good tenart with temporary financial problem that will be ending soon, I've learned it doesn't pay to give tenants extra time to pay. If your tenant can't pay this week, he most likely won't be able to pay next week either.

The sooner you get such a tenant out, the the sooner you can re-rent the apartments to a paying tenant. By experience, I've learned to give only a maximum 15-day grace period at most. I tell the late tenant "The banks and I have a deal; they don't rent apartments and I don't loan money." Every time I've broken my rule and given the tenant more time to pay, I've lost money. It just doesn't pay to give defaulting tenants more time to pay.

DEAR BOB: We're paying $8,000 cash for a lot. The realty agent says we should buy title insurance for it. Don't you thing it's a waste of money to do since we're paying all cash? Miriam L., Rockville.

DEAR MIRIAM: No. Title insurance is never a waste of money. It not only assures good title, but protects against unexpected title looses such as those due to forged signatures on deeds, recording errors, deeds by imcompetents, and rights of undisclosed or missing heirs. It's available in every state except Iowa.

The 13-chapter Bruss Report, "Realty Tax Tips" is available for $1 sent to Robert J. Bruss, P.O. Box 6710, San Francisco, Calif. 94101.