DEAR BOB: In our area there are many mobile homes located in well-kept trailer parks. Would it be smart to buy several mobile homes as investments and rent them to tenants? David N.

DEAR DAVID: Until the last few years, mobile homes depreciated in value. But in many areas, the price trend for resale mobile homes is up. This is due to improved construction quality, easier financing and strong buyer demand. However, nobody I've heard of is making huge profits by investing in mobile homes.

My consultant tells me that the tax shelter benefits of owning rental mobile homes are terrific because of the quick depreciation writeoff. At resale time, modest profits are being realized. Pitfalls to watch for include mobile home parks rules restricting rentals, rising land rental fees, maintenance problems such as water leaks, and requirements by some parks that older mobile homes be removed. Check out local conditions before buying a mobile home as an investment.

Dear BOB: Last December we contracted to buy a house from a woman whose husband died in October. She decided to sell the house and listed it with a realty agent who showed it to us. After some negotiating back and forth, she accepted our purchase offer which, our attorney says, is a valid contract. Now the lady has decided not to sell and has offered to refund our deposit. But we really want the house and have given our landlord notice that we're moving. Our attorney advises filing a lawsuit for "specific performance." Do you agree? Jan G.

DEAR JAN: You didn't indicate why the seller refuses to honor her sales contract. I presume it's because she changed her mind about selling. Real estate agents call it "sellers remorse." It's the opposite of "buyer's remorse," which occurs when a buyer refuses to complete a purchase.

Morally it isn't wrong to force someone to honor their sales contracts. Contracts would be worthless if people could change their mind and not honor their agreements. If it was you who refused to complete your purchase, the seller could sue you for damages. Specific performance lawsuits to force sellers to honor their sales contracts are quite common. It's up to you to instruct your lawyer to proceed or not.

DEAR BOB: We have just sold our old home and bought a larger, more expensive one. I understand we can defer paying our profit tax. When we qualify for that "over-55 rule" $100,000 home-sale tax exemption, does that exemption apply to both our deferred profit and the profit from the sale of our second house? Forrest K.

DEAR FORREST: Yes. Taxpayers of any age can use the "residence replacement rule" to defer paying the profit tax when selling one principal residence and buying a replacement of equal or greater cost. To qualify, the replacement must be bought within 18 months before or after the sale of the former principal residence.

The tax deferral lasts until you sell the replacement residence without buying another qualifying one. For example, this tax deferral rule of Internal Revenue Code section 1034 can be used over and over to start out with a little cottage and pyramid your to defer profit tax on your share of the sale profit. To qualify, you must buy a replacement principal residence costing at least as much as your share of the sale price of your former principal residence.

To illustrate, your home sells for $100,000 and you split the proceeds 50-50. Your share of the sales price would be $50,000. If you buy a replacement principal residence costing at least $50,000 within 18 months before or after selling your old residence, you can defer tax on your profit share. Even if your ex-husband doesn't buy a replacement residence, you can defer profit tax on your share. Ask your tax advisor to explain further.

DEAR BOB: We sold our old home 14 months ago and want to buy a more expensive one so we can defer our profit tax. The local IRS office told me that if we don't meet the 18-month deadline, it can't be extended. Is this true? Ed R.

DEAR ED: You can take up to 24 months after the sale to move into your replacement principal residence if you have a new home constructed and if construction begins within 18 months after the sale. Or if you join the Armed Forces you can get an extension up to four years to buy the replacement. These are the only two exceptions to the 18-month deadline.