DEAR BOB: We had our lot recently surveyed and found our neighbor's fence encroaches on our side of the lot line by about four inches. He refuses to move it. What should we do? James K., Falls Church.

DEAR JAMES: Consult your attorney. Unless the land is extremely valuable, he will probably agree that a trivial encroachment of only four inches probably isn't worth a legal battle.

Should you decide to go to court, the judge would weigh the cost of moving the fence against the benefit to be gained by you. If it was a big encroachment, then the benefits might justify the costs. But four inches probably isn't worth fighting about.

DEAR BOB: My husband is a Vietnam War veteran. If I can convince him we should buy a house, and use his VA mortgage entitlement, how much cash down payment is required? We have about $3,500 available. Is that enough? Margo F., Washington.

DEAR MARGO: It's more than enough. VA home loans finance 100 percent of the purchase price of the home for qualified veterans. While there is no maximum VA loan limit, most VA lenders won't loan over $100,000 without a cash down payment. Your $3,500 should be more than enough for the closing costs.

To get full VA loan eligibility details, talk to a loan officer at a local VA-approved lender such as a bank, savings association, or mortgage broker. VA home loans are one of today's best home finance bargains.

DEAR BOB: Thank you for writing, some time ago, about the finance contingency clause in home purchase offers. We used such a clause recently. It saved us from losing our deposit when we couldn't qualify for the mortgage we needed to buy the house. As a result, we got our $1,000 deposit refunded with no hassle. Hervey F., Laurel.

Dear HERVEY: Finance contingency clauses are more important than ever since many buyers have trouble qualifying for today's high interest rate mortgages. I'm glad that you made your home purchase offer contingent upon getting a specific mortgage, since this enabled you to get your deposit refunded when a mortgage proved to be unavailable.

DEAR BOB: I'm trying to sell my house. So far the agent has brought me two good purchase offers. But the first buyer couldn't qualify for a mortgage. The second one's deposit check bounced and he has so many debts he can't get a mortgage either. After receiving each offer, my house was off the market for over a week. When the agent finds me another buyer, what can I do to avoid this unpleasantness? Augusta M., Bowie.

DEAR AUGUSTA: To avoid taking your house off the market while your next buyer qualifies for a mortgage, it's a wise idea to continue showing the house and taking back-up offers.

A back-up offer is one which the seller accepts contingent upon being released from a previously accepted offer. Then if the sale to the first buyer doesn't work out, you've got a second buyer waiting to step in.

DEAR BOB: If we sell our part-time Florida home is it true we can't defer our profit tax by buying another one. Jane H., Washington.

DEAR JANE: Sorry, but the "residence replacement rule" of Internal Revenue Code section 1034, allowing home sale and tax deferral if a more expensive replacement is bought within 18 months before or after theale, only applies to your principal residence. Other property can't qualify. Your tax advisor can explain further.

DEAR BOB: Two years ago, we sold our home. We wanted to get top dollar, which we did, so we didn't charge the buyer any interest on the mortgage we took back for him. Now the IRS says we must declare some of our income received from the buyer's payments as interest at 7 percent. Is this legal? Mary R., Annandale.

DEAR MARY: Yes. If a property seller doesn't charge the buyer at least 6 percent interest on an installment sale obligation, the IRS can impute interest at 7 percent. Interest income is taxed as ordinary income.