DEAR BOB: In a recent column you wrote, "The general rule is that retired people are better off owning a house or condo than they are renting." Why? My wife and I have owned our home for eight years and plan to sell it to move to Madison, Wis. We are considering renting a house there. Would we be better off owning instead of renting? -- Anthony W.

DEAR ANTHONY: There are a few times in life when it is better to rent than own your home. Obviously one of those times was when you couldn't afford to buy because you were young, just out of school and getting started in your job. Another time to consider renting is when you move to a new city where you are not familiar with the neighborhoods.

Rather than make the costly mistake of buying a home in an area that turns out to be undesirable, it's better to rent for a year or two. Instead of immediately buying a home in Madison, renting for a year would give you the opportunity to check out the neighborhoods and consider whether you want to buy a new or used house.

Better yet, lease a home with an option to buy. If possible, negotiate a rent credit so all or part of your rent applies toward the down payment if you exercise the purchase option. Be sure the purchase price is locked in when you sign the lease-option.

DEAR BOB: After living in the same house for more than 50 years, my aunt suffered a stroke and has been in a nursing home the last 2 1/2 years. Now her house needs to be sold to meet increasing health care costs and to eliminate house upkeep costs. The house has not been rented, but she will be unable to return to it. Her affairs are being handled by a relative with a power of attorney. The house should sell for about $90,000 and has a cost basis of about $30,000. Since my aunt does not meet the three out of five-year occupancy test of the "over 55 rule" $125,000 home sale tax exemption, is there any way the profit on the house sale can be excluded from her gross income? It seems most unfair that she would be unable to use this tax exclusion due to her stroke. -- William J.

DEAR WILLIAM: I regret to report there are no exceptions to the strict time limits in the "over 55 rule" of Internal Revenue Code section 121. Since your aunt did not own and occupy her principal residence at least three of the five years before the sale, all her $30,000 sale profit will be taxable. She will probably be in a 28 percent tax bracket, costing her about $16,800 in federal income tax. It is a shame her relative didn't sell the home sooner to meet the two-year deadline. Consult a tax adviser for details.

DEAR BOB: Before long my house will be taken by the highway department for a new expressway. What is the best way to deal with these people? The home is in excellent condition. -- Marilyn P.

DEAR MARILYN: The state or local governmental agency must pay you fair market value for your home. However, reasonable people can differ as to what is the fair market value. Naturally, the highway people want to acquire the property at the lowest possible price.

To be sure you receive full fair market value, I suggest you retain a professional appraiser to give you a written appraisal. The cost will be about $225. Better yet, get two professional appraisals so you will know if the highway department's offer to you is fair. When you hire these appraisers be sure they have professional credentials, such as MAI, RM, SRA or SREA, and that they will be willing to testify, if necessary, at a court condemnation hearing. If you can't reach a fair settlement with the highway people, don't hesitate to hire a lawyer with experience in condemnation.

DEAR BOB: Several months ago you ran a letter from a reader in Enid, Okla., whose mortgage lender refused to cooperate with the borrower who had moved away and couldn't sell or rent his old house. We had a similar situation with our condominium, which turned out to be a very bad investment because we couldn't sell it for the amount of the mortgage. The lender refused to accept a deed in lieu of foreclosure without our also furnishing an appraisal (at a cost of $225), a title insurance report (an expensive $450), copies of the condo financial statements (not available), and other unnecessary paperwork. Our lawyer advised us to execute and record a quit claim deed to the lender. We did that about two months ago and haven't heard from the lender. Do you think the lender will try to sue us for any loss? Will this put a black mark on our credit report? -- Lynea W.

DEAR LYNEA: You should know why the mortgage lender doesn't want a deed in lieu of foreclosure. If the lender accepts such a deed, the lender takes title subject to any liens and encumbrances such as a second or junior mortgage, unpaid property tax liens, unpaid condo association fees, income tax liens, judgment liens, mechanics liens and other obligations that became a lien against the condo after the mortgage was recorded. Many lenders prefer to foreclose, thereby wiping out most junior liens except property taxes.

However, many lenders will accept a deed in lieu of foreclosure if the junior liens are not too extensive. It is usually cheaper for a lender to accept such a deed than to go through foreclosure, especially if there is a redemption period after the auction. I agree with you that lenders make it too tough for borrowers to deed the property to the lender.

Your lawyer gave you the same advice I would have given. After giving up on trying to sell the property, record a deed to the lender. If the lender doesn't want the property the lender can deed the property back to you.

One advantage for you of deeding the property to the lender without foreclosure is that in most states you avoid the possibility of a deficiency judgment if the lender suffers a loss. However, if you were in default on your mortgage, a nasty lender might put black marks on your credit report for not making your payments on time. Considering the circumstances of an uncooperative lender, your lawyer appears to have given you sound advice.

DEAR BOB: I just signed a contract and paid a $19,000 deposit to buy a house. I am also selling my old residence, with both transactions to close on the same day. My problem is that I was just offered an attractive out-of-town job that means moving to another state. I know the seller of the home I am buying is anxious to close, so I doubt he will let me out of the purchase contract or even allow me to find another buyer if it means delaying the closing. I believe my only way out without losing the deposit is if the bank refuses me a mortgage. But I have no reason to suspect they will unless they don't like my job switch. Should I go ahead and buy the house, then put it on the market for sale right after the closing? I'd rather get out now before paying closing costs. My prospective employers have a decent relocation policy but I'm not sure they would take this house off my hands. Any suggestions? -- Gil B.

DEAR GIL: It is unfortunate you tied up such a large earnest money deposit. If it had been a smaller amount, you could have let the seller keep it as liquidated (agreed) damages and walked away from the sale.

If your purchase offer contains a contingency clause for obtaining a mortgage to buy the house, no lender is going to approve your loan if your employer can't verify continued employment. Then you would be entitled to full refund of your deposit if the offer is contingent on obtaining a mortgage. If it isn't, shame on the real estate agent for not including such a clause.

But if worse comes to worst, and your offer didn't contain a finance contingency clause, to avoid litigation your best bet would be to offer the seller a payment to be released from the sales contract. A total of $1,000 to $5,000 might be reasonable. Consult your lawyer for details.

DEAR BOB: My husband and I have a net worth of more than $2 million. We own several income properties. But I am very concerned as we carry only $300,000 liability insurance. How much liability coverage should we carry? -- Vera W.

DEAR VERA: In my opinion you should carry liability coverage at least equal to your net worth. My insurance consultant advises that it is cheaper to carry a "commercial umbrella policy" on all properties than to insure each property for the amount of your net worth. Talk to several insurance agents to get their opinions and price quotations.

DEAR BOB: I refinanced my home and a rental condominium. How do I deduct the loan fee points paid at closing? Must I prorate them over the 30-year period or by the amount the loan balance is reduced each year? Also, can I amortize refinance closing costs, such as title insurance? -- Steve G.

DEAR STEVE: If the loan was to buy or improve your personal residence, the loan fee points are fully deductible as interest in the year paid. Otherwise, loan fees must be deducted as interest equally over the life of the loan.

For example, if you paid a $1,000 loan fee you can deduct $33.33 each year for the next 30 years. Other refinance costs must be capitalized and added to your property's cost basis. Ask your tax adviser to explain.

DEAR BOB: My home was listed for sale with a real estate agent for six months, but wasn't sold. Upon the expiration of the listing contract, I put out my own for-sale sign. But I've had an agent show my home since then, although I have no written contract with this agent. If the home should sell because this agent showed it to a prospective buyer, am I obligated to pay a full sales commission although I have signed no listing? -- Joseph B.

DEAR JOSEPH: If a real estate agent brings you a purchase offer for your home that you accept, in the fine print you will probably find a clause in which you promise to pay the agent a sales commission. I have yet to see a real estate sales contract without such a commission agreement, which, if necessary, is enforceable by the agent in court.

However, the agent is taking a chance. Working without a written listing agreement is called an "open listing." As experienced agents know, an open listing is really no listing because the property owner can avoid a commission payment by withdrawing the property from the market, selling to a buyer obtained by another agent, or finding a buyer without any agent's help.

Just in case you are an unscrupulous person, a sharp agent should ask you to sign a 24-hour exclusive listing before presenting you with a purchase offer from a buyer. Without such a listing, to avoid owing a sales commission you could write down the buyer's name and address, reject the offer obtained by the agent, and later make a direct sale to the buyer without the agent's assistance. The agent, however, might sue you for a commission based on a legal theory of implied contract or detrimental reliance.

If the agent has a listing contract, even a 24-hour listing, you still owe the commission even if you go behind the agent's back to make a deal with the buyer. The reason is most listings contain a "safety clause" that protects the agent's commission if a sale is made within 90 days to a buyer obtained by the agent. Ask a real estate lawyer to explain.

DEAR BOB: I am contemplating purchasing a time sharing (interval ownership) condo in Freeport, Bahamas. I am a U.S. citizen. May I have your observations please? Are there any pitfalls to avoid? -- Leo M.

DEAR LEO: I would not buy any real estate in a foreign country unless I could afford to lose my full investment. Timeshares are not real estate investments; they are vacation purchases. So many things can go wrong I won't even start to list the potential problems. If you add the further complication of foreign laws and the difficulty of enforcing your legal rights, I hope you get the picture. Invest only money you can afford to lose.

DEAR BOB: Rental property I own is nearing the end of its 20-year depreciable life. How can I start a new series of depreciation without selling the property? -- Azad K.

DEAR AZAD: You can't. When a property has been fully depreciated on your income tax returns, you can't start depreciating the same property again.

However, you can make a tax-deferred exchange of your current property for a larger property on which you can depreciate the increased basis. Greater depreciation deduction, without paying tax on your sale profit, is a major motivation for making a tax-deferred exchange. Consult your tax adviser for details.

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