DEAR BOB: Recently you said property buyers who expect to sell within a few years can save on title insurance by paying 110 percent of the normal title premium for a ''binder policy.'' I did that in California a few years ago and got back all except 10 percent of my premium when I sold the home about 18 months after purchasing. But I recently moved to Florida and have been unable to find a Florida title insurance company that offers binder policies. Which Florida companies offer these title insurance savings? -- Barry S.
DEAR BARRY: Binder title insurance policy savings are not available in all states. I recently received a letter from Jill Chamberlin and W.M. Senter of the Florida Department of Insurance stating that title insurance binder refunds are not available in Florida.
DEAR BOB: Recently we received a letter from our mortgage company offering us a home equity credit line. But the interest rate is 2 percent above the bank prime rate and there is no maximum interest rate. A loan officer phoned us offering a $25,000 credit line with no fees if we would sign up by the end of the month. This seems like a dangerous loan to me. Your opinion please. -- Henry T.
DEAR HENRY: We must have the same mortgage lender because I received a similar offer and a phone call from a loan officer. In my opinion home equity loans tied to the bank prime rate with no maximum are dangerous. But home equity loans based on the Federal Home Loan Bank's cost of funds index are very safe if there is a maximum ''cap'' interest rate. Legislation is pending in Congress to make home equity loans safer for borrowers, so don't rush to sign up for a home equity credit line because they will get better, I think.
DEAR BOB: I have been studying your articles and books for several years, as well as attending several real estate investment seminars. Everyone seems to recommend that the ''little guy'' like me should invest in single-family houses. But I am unsure if I should buy the real cheap houses or if the more expensive houses will appreciate more in market value and appeal to a better quality of tenant. -- Wilma C.
DEAR WILMA: I agree that single-family houses make the best investments for most people. My preference is to buy ''bread and butter'' working-class houses in decent neighborhoods. The reason is these lower-priced homes usually appreciate in value, percentagewise, more than expensive homes.
Recently a friend told me he was buying a $260,000 house as a rental investment. In my opinion, the only way he can make any profit on that house is to fix it up and resell it immediately for a higher price. However, that can be very risky unless he can make modest cost improvements that will greatly increase market value. Holding this house for long-term rental investment probably won't be profitable because rents on expensive homes are usually less than the 1 percent per month of market value that is usually needed to financially carry the house.
I recommend buying working-class "fixer-upper" houses that can be bought at below-market prices and then immediately upgraded for either quick resale profit or held for long-term investment.
DEAR BOB: We are very upset at the real estate agent who had our listing. She brought us a purchase offer at close to our asking price. When we asked her about the buyer's financial qualifications to obtain a mortgage, she gave us a glowing report of good income from an excellent local company. So we accepted the offer. But the agent neglected to tell us, and the agent knew, that the buyer is going through a divorce and the soon-to-be ex-wife refuses to sign anything. Naturally, no lender will approve a mortgage until the divorce is final and that is months away. We lost four weeks while our agent misled us. Fortunately, the listing expired and we got a quick sale through another agent. But we lost about $4,000 because we had to take a lower offer and waste about two months until the second sale closed. Should we sue the first agent? -- Lucy C.
DEAR LUCY: Consult your attorney. Shame on your first agent for not telling you the full story about the first buyer. That is breach of fiduciary duty to you and, in most states, is grounds for revoking the agent's sales license. You should report the matter to the state real estate commissioner for investigation and possible license revocation. As for collecting damages from the agent, if just $4,000 damages are involved, few attorneys will find your case worthwhile.
DEAR BOB: I understand that all notices of mortgage defaults are published in a local newspaper. Please tell me where to look for these notices. -- Lawrence F.
DEAR LAWRENCE: In your state, notices of mortgage default are not required to be published. But they are recorded with the county recorder of deeds. However, notices of the foreclosure sale usually must be published. In larger counties, both defaults and foreclosure sales are often privately published in newsletters that list these distress properties.
By going to the county office where the defaults and foreclosure sales are recorded, you can usually learn the best way to obtain information about distress properties. Also ask real estate attorneys, realty brokers and agents and title insurance officers for the best local source of information on defaults and foreclosure auctions.
DEAR BOB: I am well aware of the $125,000 home sale tax exemption ''over 55 rule'' for the elderly. But I am wondering if there is any way my 68-year-old uncle can avoid paying tax on his farm sale. His tax adviser says the $125,000 exemption only applies to the sale of his residence and, as he has a profit of about $550,000 on the farm land, this will be taxed at the new 28 percent tax rate. -- Keith A.
DEAR KEITH: Sorry, other than the $125,000 ''over 55 rule'' home sale tax break, there are no special real estate tax breaks for elderly property sellers. Your uncle's tax adviser is correct.
DEAR BOB: I am an attorney with a savings and loan. I usually enjoy reading your columns because you provide your readers with valuable information. Occasionally, however, I take exception to your advice. For example, I disagree with the advice you recently gave involving deeds in lieu of foreclosure where a reader complained that a lender was reluctant to accept a deed in lieu of foreclosure. The reader's attorney advised executing and recording a quit claim deed to the lender. But the lender wanted an appraisal, title insurance and statements about the condo association's financial condition. You agreed with the attorney and concluded that if the lender did not want the property it could be deeded back to the borrower.
This advice leads your readers to believe that executing a quit claim deed to the lender will relieve them of their obligation to repay money borrowed. One of the main purposes of a deed in lieu of foreclosure should be to relieve the borrower of any obligation to repay the loan. The consideration, as you stated, is the lender receiving the property back sooner than if foreclosure is necessary. The second misleading part of your advice is that executing and recording a quit claim deed is not a valid conveyance without the element of delivery and acceptance by the lender. Our S&L won't accept such deeds if there are any junior liens on the property because it is usually more cost-effective to foreclose and extinguish the junior liens. I think you should explain these consequences to your readers. -- Mary F.
DEAR MARY: Thank you for clearly stating the viewpoint of most mortgage lenders. If I were in your situation, I would feel the same way.
But the reader who wrote had moved away from the area, was not able to sell or rent her condo and had an unreasonable lender who demanded unnecessary and costly paper work. Her lawyer advised giving the lender a quit claim deed and that's what she did. I doubt the lender refused to accept it.
You are correct that a quit claim deed to the lender does not relieve the mortgage borrower of loan obligations if the lender suffers a loss. A deed in lieu of foreclosure is usually far better for the borrower because the lender then usually agrees to cancel the debt.
However, some lenders foolishly refuse to negotiate with borrowers who can't pay their loans. A cooperative lender attitude cuts losses for both parties whereas uncooperative lenders get losses they deserve. Instead of playing hardball with borrowers, lenders should work out a fair solution to benefit everyone. Only as a last resort should a borrower consider deeding the property to a lender who refuses to cooperate.
DEAR BOB: Enclosed is a copy of your article of Sept. 3, 1983, in which you said one way to get around a mortgage-due-on-sale clause is for a home seller to put the property title into an inter vivos (living) trust with the seller being the beneficiary. The lender is sent a copy of the trust. Then after the sale closes, the new owner becomes the living trust beneficiary. Since the trust beneficiary change is not recorded, the lender does not learn of the sale. The buyer makes his monthly payments to the seller, who continues making payments to the mortgage lender. Is this still true? -- Ken K.
DEAR KEN: Yes, the living trust method is still being used to thwart mortgage lenders who want to enforce due-on-sale clauses. The infamous Garn-St. Germain law created the specific exception for transferring a property into trust that will not trigger a due-on-sale clause.
However, the due-on-sale clause issue is no longer very important and most mortgage lenders don't care if a property is put into a living trust, which is a very common estate planning technique for avoiding probate expenses. Most mortgage lenders don't check up to make certain the trust beneficiary has not been changed. Consult a real estate attorney for full details.
DEAR BOB: Recently you said in reply to a reader that ''Although no guarantee of competence, an appraiser with the professional designation MAI (member, appraisal institute) has the best credentials.'' Why do you think the MAI designation is better than certified appraisers, SRA, MSA, etc? -- Mr. H. McD., Realtor-Appraiser.
DEAR MR. H.M.: The requirements for the MAI professional appraisal designation seem more demanding than those of the other appraisal societies. The question involved a commercial property and, in my opinion, MAI appraisers are usually best qualified by experience to appraise such buildings.
As you are probably aware, the appraisal industry is being investigated by Congress and there will probably be legislation requiring uniform national appraisal standards. I think this is a very good idea because some of the so-called professional appraisal societies are a joke. For example, a few months ago I received a letter from one inviting me to become a ''certified member,'' even though I have no appraisal qualifications other than a real estate broker's license.
DEAR BOB: Last summer you wrote about how lease options as a great way to get into a home with little cash. My husband and I took your suggestions and started looking at homes with the idea of acquiring one on a lease with option to purchase. We have excellent credit and income but have only about $7,000 for a down payment. I spent hours reading the newspaper want ads of homes for sale and homes for rent. I found several we loved but the owners wouldn't do lease options.
Then we found a rare real estate agent who is enthusiastic about lease options. She found us a four-bedroom home that can be leased optioned for three years. But the owner wants $5,000 nonrefundable consideration money and will only credit us one-half the rent toward the purchase price. The option price is today's market value so if the house doesn't go up in value we don't make any profit. Since the option money is high and the rent credit is low, do you think this is a good deal? -- Janice R.
DEAR JANICE: Sorry, I can't advise if a specific transaction is a ''good deal.'' But if the home is in a good neighborhood where market values are likely to appreciate in the next few years, by locking in the purchase price at today's level you should have a profitable investment. During the next three years you can enjoy living in the home while saving for a down payment. Incidentally, a 50 percent rent credit toward the purchase price is excellent.
About six months before the lease option expires, you should decide if you want to exercise the purchase option. If not, perhaps you can sell the purchase option to recover your $5,000 and the rent credit you will have built up. In case you elect to sell the lease-option, be sure it is assignable. Or you can walk away and buy another home with the cash you'll save in the next three years.
But lease options are not one-sided in favor of home buyers. The benefits for property owners include immediate tax-deferred option money, a top quality tenant who will treat the property like an owner and on-time rental income because late payments cancel the option.
DEAR BOB: I bought three condos at a lender's foreclosure auction. The prices were below market value. But I had to pay cash since the lender didn't offer financing. Now I am trying to refinance them. However, I am encountering lender refusals because (1) I will not be living in the condos and (2) a large percentage of the condo complex is occupied by renters. Why are condos so difficult to finance? -- Orlando S.
DEAR ORLANDO: Mortgages on nonowner-occupied condominiums have an extremely high default rate. As I've said here many times, I have yet to hear of any investor who has made substantial profits on condos. If anyone has figured out how to profitably invest in condos, I would like to know how.
Because of the high loan losses on condos, mortgage lenders don't want to make condo loans. Especially if the complex is primarily occupied by renters, rather than owners, the mortgages are likely to go into default and the maintenance quality is likely to be poor.
However, a few lenders will make loans on nonowner-occupied condos. But the interest rate is high, the loan fees are substantial and the loan-to-value ratio is lower than for owner-occupied residences. Instead of obtaining new loans, since you bought at bargain prices, perhaps a better alternative might be to sell the condos and take your profits now.
Readers with questions should write Bruss directly at P.O. Box 6710, San Francisco, Calif. 94101