DEAR BOB: As senior vice president of a multibillion-dollar S&L, I read your articles with great interest. Thanks to your comments, we have made some reforms in our loan operations that seem to benefit everyone. We now instruct the appraisers to immediately mail a copy of the appraisal to the borrower. The borrowers often disagree with the appraisal, and it is corrected immediately. But our major reform in the appraisal area has been to hire only appraisers who carry errors and omissions insurance. This change has eliminated 95 percent of our bad appraisals because the incompetent appraisers can't get or keep liability insurance if they have too many complaints from lenders. However, we've noticed some appraisers now appraise too low and we lose the loan to a competitor. So we tell our independent fee appraisers to appraise fairly and we won't complain unless their appraisal is off by more than 10 percent as judged by a review appraiser. I think the appraisal problem would be solved by (1) licensing appraisers and (2) requiring them to carry errors and ommissions insurance. -- John R. DEAR JOHN: Thank-you for sharing your valuable insights with which I agree 100 percent. Until the states pass appraiser license laws, the appraisal industry can best be cleaned up by mortgage lenders accepting appraisals only from appraisers who can qualify for errors and omissions insurance. DEAR BOB: We recently refinanced our 12-percent fixed rate mortgage with a 15-year loan at 8.75 percent just before interest rates jumped. But two days before closing the loan, an officer called to say the conservative S&L insists on PMI (private mortgage insurance). Our cost was $108 up front plus $8.90 extra per month. I challenged this unreasonable demand because our new loan is only 78.6 percent of our home's appraised value. I was told we only need to pay PMI until the loan is paid down to 70 percent loan-to-value ratio. It is a rural property, which the S&L considers high risk, although I have been with the same employer for 15 years. I understand PMI insures the lender, not the borrower. We closed the loan under protest because we didn't want to lose the good interest rate. What is our chance of getting the PMI dropped? -- Trenna U. DEAR TRENNA: No matter how ridiculous, mortgage lenders can make their own rules. You've probably heard the joke about the Golden Rule: Those who have the gold make the rules. It's true.

However, if your lender sells that loan to either Fannie Mae or Freddie Mac, their regulations require dropping PMI insurance if the loan-to-value ratio is less than 80 percent. But if the originating lender keeps your loan in its portfolio, it can require PMI as long as it desires.

You have everything to gain and nothing to lose by writing to the lender's president to request dropping the PMI and refunding of your $108. If the lender refuses, try to get it in writing that the lender will drop the PMI when the loan-to-value ratio falls below 70 percent. Be sure also to ask for notification if your loan is sold to Freddie or Fannie because then the PMI must be dropped upon your request because the loan ratio is below 80 percent.

For readers not familiar with PMI, it applies only to loans that are not insured through either VA or FHA. Lenders usually don't require it on loans below 80 percent loan to value, but your lender must be ultraconservative for requiring it on your 78.6 percent loan. DEAR BOB: Isn't it about time you exposed the condominium fraud? For the last 10 years I have been a director on the board of a 124-unit condominium association. For one disastrous year I was the president. In February I finally got smart and sold my condo. We had a well-managed complex with a professional manager, but you wouldn't believe what goes on at the board meetings. The little old lady complainers are the worst. If we didn't satisfy them by making the unreasonable improvements they wanted, they created such a fuss we got no peace and quiet. But the biggest problem was the rising assessments. Our rules said the condos were assessed for monthly maintenance fees according to the number of bedrooms. But this has no relation to reality because some of the small studios and one-bedroom units caused the most trouble if there were young renters living there. I lobbied for a rule prohibiting rentals for more than one year but was consistently voted down. Now the complex is more than 75 percent renters and rapidly going downhill. I was lucky to find a cash buyer (an out-of-towner who didn't know what he was doing). You should advise your readers to stay away from condos. -- Jesse R. DEAR JESSE: I greatly appreciate your informative letter because it alerts us to many condo pitfalls.

However, not all condo complexes are bad. My mother lives in a very desirable condo in Minneapolis where her unit has appreciated from $35,000 in 1978 to $100,000 in market value today. Her profit on a $3,500 cash down payment, $320 monthly mortgage payments, and $150 monthly maintenance fee including heat, is tremendous. But her building has a strictly enforced rule barring rentals, so I think that's why the property has appreciated so much in a soft condo market.

I often say condominiums make great personal residences but lousy investments. Condo living is democrary at its best and worst. But the biggest problem seems to be rising assessments, which are hard to control. As country cousin Jimmy Napier says: "I don't like someone else voting on my money." Only by very careful investigation before purchase can a condo buyer be sure of making the right decision. Thank you for sharing your valuable experiences. DEAR BOB: In your recent column you mentioned buying REOs. Please explain how this works and where to get information on them. -- Mrs. E.S. DEAR MRS. E.S.: REO stands for "real estate owned" by a mortgage lender who foreclosed. I find these lenders usually want to dispose quickly of the houses and other property acquired by foreclosure. I've never paid more than a 10 percent cash down payment for an REO and the lender financed the remaining 90 percent on very favorable terms.

But to find these REOs usually requires detective work. If you call a bank or S&L for their list of REOs, you will often be told it doesn't have any. That's usually not true. Since the lender probably doesn't know you, it doesn't want word getting around about its mistakes. After all, you might be a newspaper reporter.

I find the REOs by following the mortgage defaults and foreclosure sales. In most communities there is a legal or daily newspaper that publishes these notices. Larger counties often have privately published daily or weekly newsletters listing default property. After the foreclosure auction, if there were no bidders, I immediately contact the foreclosing lender to inquire about buying the property. Most lenders are uncooperative at first, so you must be persistent. But eventually you can buy the REO properties at bargain prices from the lenders. Persistence pays, so don't get discouraged. DEAR BOB: During the last few months I have been negotiating to buy 4.9 acres that have been on the market quite a while. The asking price is $45,000. I offered $35,000, but my offer was refused by the sellers. About a week later the salesman phoned to see if I would make a better offer. He said the sellers would accept $37,000. The next day I went to his office, signed a $37,000 purchase offer contract, and left my $500 binder check. I heard nothing further for more than a week when the salesman phoned on Sunday afternoon to say the owners changed their minds because they had received two better offers of about $40,000. I asked when the new offers had been received, and he said they had been made on Saturday. The following Monday I went to the realty office and asked the lady who holds the salesman's license about the new offers. She told me they had been received the previous week. My offer had not been presented to the sellers until seven days after I signed it. I don't fault the owners for rejecting my offer, but my question is, should the real estate agent have promptly presented my offer? Waiting seven days seems unusual. Do I have a case against this agent and her salesman or not? -- Edward M. DEAR EDWARD: Unless the sellerwere unavailable, there is no excuse for holding a purchase offer seven days before presenting it to the sellers. It appears your offer was being "shopped," as it is called in the real estate sales business, to obtain higher offers from other buyers.

You could have prevented this unethical action by putting a one- or two-day time limit in your purchase offer. Then the salesperson would have presented it to the sellers promptly.

As you probably know, the listing agent works for the seller. Legally, nobody represents the buyer unless a "buyer's broker" contract is signed with an agent. However, real estate agents owe buyers a fiduciary duty of honesty and truthfulness. It sounds like that salesman breached this duty to you and to his sellers if he did not promptly deliver your offer.

But I doubt that it would be worthwhile for you to pursue the matter further. Unless you can prove damages becaue of the agent's failure to immediately deliver your offer to the sellers, I think you would be wasting your time and money. Consult your attorney for further details. DEAR BOB: Recently there was a fire in our condo complex. The condominium association's insurance company rebuilt the structure and hallways but refused to finish the interior of the damaged apartments. I can understand why the insurance company wouldn't replace the furnishings, but shouldn't it pay for rebuilding the interior walls of the condos? My best friend lives in one of the damaged condos, and she doesn't have any money to rebuild her apartment. She didn't buy fire insurance because she was told the condo owner's association carried the necessary insurance. Is there anything she can do to get the insurance company to rebuild the walls of her condo? -- Brewster C. DEAR BREWSTER: The fire insurance carried by the condo owner's association will pay to rebuild the structure but not the interior walls and surfaces of each condo apartment. Technically, your friend owns the inside walls of her condo, but the structure is part of the common area owned by all the condo owners.

Your friend's situation is a classic example of why condo owners should carry condominium owner's insurance. These policies insure for damage to the interior of a condominium from fire and water damage. In addition, they pay for losses to furnishings due to fire, water and theft. These policies also include liability coverage if someone other than the owner is injured inside the condo, as well as loss-of-use living expenses. As your friend discovered, not having a condo owner's insurance policy can be a foolish and costly mistake. DEAR BOB: My husband and I are getting a divorce. We plan to sell our house for about $150,000. Our profit will be approximately $60,000, with $30,000 to him and $30,000 to me. The problem is we refinanced the house last year for $110,000 so, after paying the realty agent's fee and other sales costs, we'll be lucky to each walk away with $15,000 cash. I heard we can avoid taxes by buying another house, but with so little cash available I can't buy a $150,000 house for just $15,000 down. Is there any way I can avoid paying taxes on my $30,000 half of the profit? -- Rosa L. DEAR ROSA: Yes. If you and your ex-husband have been living in the house as your principal residence, each of you can qualify for the "rollover residence replacement rule" of IRC 1034. This tax law permits tax deferral on the home sale profit if a replacement principal residence of equal or greater cost is bought within two years before or after the sale.

In divorce situations, this tax break applies separately to each ex-spouse on his or her share of the sales price. If your home sells for $150,000 and your share is $75,000, you can defer the tax on your profit share by purchasing a principal residence, perhaps a condo, costing at least $75,000. Your ex-husband can do likewise.

But the best news is you need not reinvest all the cash received from the sale into the replacement residence. The extreme situation would occur if you sell your old home for cash and buy a qualifying home for nothing down with the help of a new VA mortgage. No tax would be owed and you can spend the tax-deferred cash as you please. Ask your tax adviser to explain further. DEAR BOB: You should warn home sellers that computer printouts are not the same as competitive market analysis forms that real estate agents should prepare when making a listing presentation. "Garbage in, garbage out," as the saying goes. Why can't realty agents do their jobs right? -- Mary C. DEAR MARY: Thank-you for sharing that important information. If a real estate agent is too lazy to prepare a competitive market analysis form and instead uses a computerized multiple listing service printout of recently sold neighborhood homes, which may not be comparable, that agent doesn't deserve the listing.

Computerized multiple listing services are wonderful time savers, but a computer printout of home sales information is no substitute for an agent's evaluation of each home sold to see if it is truly comparable to the home under consideration. Home valuation is an art, not a science. Each agent should interpret computer-supplied information to make it useful.

Readers with questions should write Bruss directly at P.O. Box 6710, San Francisco, Calif. 94101.