DEAR BOB: We are retired school teachers who worked hard to own our home free and clear. Now when we want to sell so we can move to a retirement home, we find we can't sell for cash, which we need to pay to a lifecare retirement home. Where do we go from here? -- Dorothy G., Germantown. DEAR DOROTHY: Unaffordable high home mortgage interest rates have been with us over a year with no end in sight. But just as you didn't earn your home equity all at once, you now can't expect to "cash out" all at once.

When you find a retirement home you want to enter, talk to its administrator about financing your entry. Many will accept partial cash payment with the balance payable over several years.

This will let you use your cash down payment from the home sale for the down payment. Your buyer's periodic payments on a first or second mortgage you take back can be used to pay the balance of your retirement home payments. Or you may be able to assign those pyaments to the retirement home. Think creatively to use your real estate to reach your goals.

DEAR BOB: We are buying a new $107,000 home in a subdivision where our new GI mortgage pays for the house with no down payment. The problem is selling our old house. The realty agent who has our listing suggests we take as much tax-free cash out as possible. Our house is worth about $95,000. We paid $54,000 for it several years ago.

Since our mortgage is paid down to about $23,000, the agent suggests we (1) refinance for $60,000 before the sale with an assumable mortgage, (2) carry back a second mortgage for $25,000 at 10 percent interest and (3) ask for a $10,000 cash down payment. The agent says the $37,000 net cash from the refinancing plus the $10,000 cash down payment is tax-free. Is this true? -- Brenda Van A., Springfield.

DEAR BRENDA: Yes. You have a very smart agent who knows how to sell and finance homes.

Since you are buying a replacement principal residence of equal or greater cost within 18 months before or after selling your old residence, Internal Revenue Code section 1034 forces you to defer paying tax on your sale profit. The law does not require you to reinvest any cash received from your sale into the replacement residence.

The $47,000 total cash you will receive, minus sales costs, such as the agent's sales commission, is tax-deferred. The only tax consequence of your sale is that the interest you'll earn on that $25,000 second mortgage will be taxable as ordinary income. If you follow your agent's suggestions, you'll create a very saleable home. Your tax adviser can explain the tax aspects further.

DEAR BOB: I'm a real estate agent and have worked for months to sell a very expensive house. A buyer made a purchase offer which, after haggling back and forth, the seller finally accepted. The only problem is that the seller wrote above his signature. "Subject to approval by my tax adviser." My buyer got cold feet and now his lawyer says there is no contract, even though the tax adviser approved the contract five days later. Do we have a sale? -- Mrs. E. R., Falls Church.

DEAR MRS. E.R.: No. The buyer's lawyer is correct. No contract was created unelss the buyer accepted the seller's counteroffer contingency of the tax adviser's approval.

To have a valid purchase contract, the buyer's offer must be accepted by the seller without any changes. If the seller makes the slightest change, the original offer is rejected and a counteroffer to sell to the buyer on new terms is created. Then the buyer can accept or reject the counteroffer. Since your buyer never accepted the seller's new contingency for approval by the tax adviser, no valid contract existed.

Your situation shows why property sellers should never change any term of a purchase offer unless they want to reject that offer and create a counter offer. Once an offer is rejected, it cannot later be accepted. Ask your attorney to explain further.