DEAR BOB: We have owned our home many years. If we sell it, our profit will be about $200,000, so that "over 55 rule" $125,000 home sale tax exemption won't help much.

Our idea is to somehow sell our home and buy an apartment building where my husband and I will manage the building. He is very handy and can handle the repairs and I will enjoy managing the building by renting the apartments and doing the bookkeeping.

Is there any way we can pull this off without paying tax on our home sale? -- Jenny A. DEAR JENNY: Yes. But first I must explain an Internal Revenue Code 1031 tax-deferred exchange only applies to "like kind" real estate held for investment or use in a trade or business.

That means your personal residence cannot qualify. But you can first move out and rent it to tenants, thus converting it to "like kind" property. Then you can trade it for apartments or any other "like kind" property, such as offices, warehouses, shopping centers or even vacant land.

However, nobody knows the answer to your next question, which is how long must the house be rented before it can be traded for apartments. Most tax advisers suggest renting it at least six to 12 months before exchanging. Consult your tax adviser for further details.

DEAR BOB: To sell our home, we had to carry back a $24,000 10-year second mortgage for our buyer. Because we are moving away from the area, I am concerned the buyer might not make her monthly payments and we might have to foreclose. If that happens, what should we do? -- Bryan W. DEAR BRYAN: Foreclosure is the best thing that can happen to a second mortgage lender. If your buyer defaults, after about 30 days you should contact the realty agent who handled your home sale. The agent can recommend a lawyer or other qualified person to handle the foreclosure for you.

If there are no bidders to pay off your loan at the foreclosure sale, then you get the home back to sell for a second profit. Instead of fearing foreclosure, you should consider it an added benefit of selling your home. But don't get your hopes up because less than 1 percent of home loans go to foreclosure sale.

DEAR BOB: I should have taken your advice to another reader several months ago. You warned her to be very wary of mortgage brokers, who often promise loan terms that later prove to be unavailable.

I stupidly listened to the saleswoman who sold me my condominium. She recommended a local mortgage broker who, she said, was wonderful. But about a week before the scheduled closing the mortgage broker called to tell me the lender refuses to make a loan on the condo complex because it was not "preapproved," whatever that means. She said she was unable to obtain another lender who will make a loan on the condo I wanted to buy.

Fortunately, I had the presence of mind to calmly walk down the street to a nearby savings and loan branch, where the manager said her S&L would be glad to make the loan to me. Although the closing had to be delayed about a week, I got my mortgage and am happily moved in my condo. Keep warning people about mortgage brokers who don't keep their promises. -- Scott R. DEAR SCOTT: Thank you for sharing your experience which, unfortunately, is too typical of some mortgage brokers who promise more than they can deliver. I realize that statement will incur the wrath of mortgage brokers. But I keep hearing over and over from home buyers like you who have been misled by a mortgage broker.

I realize they are middlemen caught between the lender and the borrower. Often the mortgage broker has no control over the lender's decision to change loan terms or refuse to make a loan. But mortgage brokers shouldn't mislead borrowers into thinking their loan is a firm commitment if it isn't.

DEAR BOB: My husband and I are in the process of refinancing our home loan to switch to a fixed-rate loan and take out some tax-free equity cash. Our lender offered us a good loan, but wanted us to pay a $250 appraisal fee, which we stupidly paid. However, the appraisal came in about $15,000 below what a similar home sold for last month just a few blocks from our house.

To make matters worse, the lender wouldn't let us see the appraisal for which we paid. Thankfully, we found a better loan with another lender who didn't even charge us an appraisal fee. I feel we got ripped off for $250, don't you? -- Barbara A. DEAR BARBARA: Yes. Any borrower who is asked to pay an appraisal fee should pay the fee only with the understanding the borrower will be given a copy of the appraisal.

There is no valid reason for a lender not giving the borrower a copy of the appraisal, except to conceal a faulty appraisal. Shame on your old lender. If I were in your situation I would sue the lender for the $250 in small claims court.

DEAR BOB: Our town seems to have an oversupply of homes for sale. My husband and I are looking for a home to buy for our growing family. If we limit our search to homes being sold directly by their owners do you think we can get the seller to reduce the price by the amount of the sales commission that doesn't have to be paid? -- Vivian H. DEAR VIVIAN: No. The value of a home is determined by the marketplace, not by real estate agents. A few home sellers try to sell their homes without a real estate agent because they think they are saving the sales commission.

But the truth is they are working very, very hard to get their homes sold. Do you think they will pass that sales commission savings on to the buyer? Very unlikely.

Realty agents perform valuable services to both buyers and sellers. If they didn't, sellers wouldn't hire them. As a home buyer, it costs you no more to buy a home through a real estate agent than directly from the seller. A realty agent has hundreds of homes to show you, but a do-it-yourself seller has only one.

After you find the right home, the realty agent, who is representing the seller, will help negotiate the sales price and terms. Then the agent will recommend mortgage lenders and help obtain the loan you need. Finally, the agent arranges the 1,001 details of the sale closing.

All this service costs you, the buyer, nothing extra, but it can save you many headaches. Since the marketplace determines a home's value, you might as well work with a realty agent to find and buy the right home for you.

DEAR BOB: My wife has a great job opportunity in London. I am a writer and can work anyplace, so I have agreed to the move, which should last about two years. We have decided to keep our home and rent it while we are gone. How can we determine the fair market rent? -- John F. DEAR JOHN: Local rental market conditions determine the rent you can obtain for your home. The quickest way to determine rents of nearby homes is to read the classified want ads under "homes for rent." Phone a few owners to determine if their homes are truly comparable to yours. You will rapidly determine the fair market rent for your home.

Your next step is to begin interviewing prospective tenants. One way is to phone a local real estate agent who specializes in rentals and list your home for rent. However, you may prefer to rent the house yourself by advertising it in the newspaper.

I have been very fortunate using both methods. But I do enjoy the special service the best rental agents give, such as screening applicants, eliminating the unqualified prospects, checking their credit and income, and making the rental task easy. Of course, rental agents do this in return for a fee, often one month's rent.

DEAR BOB: We own a small home in a nice neighborhood. But it is only two bedrooms and we need four. My husband thinks we should remodel and add two bedrooms to our home. He obtained estimates and we can swing the cost with the help of an equity credit line loan. But we realize it will involve about six months of mess.

Our other alternative is to buy a larger home. However, the only ones we can afford are way out in the boondocks and the schools there are not the best. What do you advise? -- Kirsten L. DEAR KIRSTEN: At the risk of offending my home builder friends, I recommend you remodel your current home. This is usually the least expensive and most profitable choice. Since you like your current neighborhood, that is a major advantage compared with moving to an untried area. Perhaps you have noticed the remodeling boom. This shows other people have faced the same choice you did and they elected to stay and remodel.

DEAR BOB: My parents, in their early seventies and retired, live in a small town. Last week my mother sent me a clipping from the local newspaper that said homes prices there have only gone up 3.5 percent in the last year. They are debating whether to sell and move to a warmer climate or stay where they are. The town is neither growing nor declining. It is a very nice place and I enjoyed growing up there. I would hate to see my parents move away from their friends, but they are concerned about their home value because it is their major asset. What do you advise? -- Jerry G. DEAR JERRY: When I started investing in real estate in the the 1960s, I recall a real estate agent told me that homes in the area where I bought my first property appreciated 3 percent annually. We thought that was terrific. There is nothing wrong with a modest appreciation rate. Of course, a higher rate would be better.

I suggest you and your parents watch the economic climate in their small town very carefully. If it starts to decline, that is the time to sell. Since they are happy there, I suggest they stay unless some unfavorable factor indicates they should sell.

DEAR BOB: My husband and I are house hunting. Last weekend we found one we wanted to buy. However, the realty agent was more of an obstacle than a help. She thought our offer price was too low, but we pointed out several neighborhood sales at about that price, so she finally agreed to our price. We also insisted on a termite inspection and a professional inspection to which she reluctantly agreed.

Then we insisted our offer be contingent on our obtaining a fixed-rate mortgage on specific terms. We have prequalified and showed her our certificate, but she said we didn't need a finance contingency clause. When I insisted on it, she got real mad. Finally, my husband lost his cool and we both walked out. However, we still want to buy that house. What should we do? -- Sharon T. DEAR SHARON: There are many real estate agents who would love to write up your purchase offer. You were absolutely correct to insist on your offer price, the inspections and the specific mortgage finance contingency clause. Knowing how emotional a home purchase can be, I admire your courage to walk out on that obnoxious real estate agent.

A few bad apples like that agent give all the other excellent real estate agents a tarnished image. You are absolutely correct, she was an obstacle to the home sale rather than a help. Unfortunately, the home seller probably doesn't know that agent is an important reason the home hasn't sold.

I suggest you find another agent to prepare your purchase offer. If necessary, go to the manager of the listing agent's office. He or she will solve your problem. Realty agents are supposed to promote property sales, not prevent them.

DEAR BOB: We offered to buy a 12-unit apartment building. With our purchase bid we made a $5,000 earnest money deposit. However, we learned more about the building and decided not to buy, as we decided apartments are not the right investment for us. The seller and real estate agent refuse to refund our $5,000 because we breached the contract. We understand that. But can we deduct our $5,000 loss on our income tax returns? -- Ramon H. DEAR RAMON: Yes. Since this was to be a business or investment property, your lost earnest money deposit qualifies as a deductible business expense. However, if you had lost the deposit on the purchase of a personal residence, then it would not be deductible. Consult your tax adviser for further details.

DEAR BOB: My wife insists we buy a new home rather than a resale house. We have looked at about a dozen new houses so far and the sales agents refuse to negotiate on price. But I have heard the sales of new homes are very slow. How can we negotiate on the price of new homes? -- Jon B. DEAR JON: Home builders are extremely reluctant to cut the prices of their new homes. The reason is the lower sales prices will cut the appraised values of future home sales in that builder's development.

However, builders will negotiate on what is to be included in the sales price. Rather than reduce the price, home builders will include extras such as landscaping, appliances and upgrades such as carpets, mirrors and decorating. It won't hurt to ask.

DEAR BOB: We offered to buy a home. The agent wrote on the bid that our offer was to be good for seven days. I didn't read that part very carefully. After a few days I called the agent and she said the seller was considering our offer.

When a week had gone by I called the Realtor, since she had not called us. She reported there was another, slightly better offer coming in from another buyer and she wondered if we could raise our bid by $4,500. I was so angry I told her to forget it. Now I realize our agent was trying to get us to offer more for the house. Next time, what should we do differently? -- Julia S. DEAR JULIA: Don't make your purchase offer valid for such a long time. Unless the seller is out of town, an offer bid valid for one day is usually sufficient. A short time for purchase offer acceptance puts pressure on the seller to either accept or counteroffer your bid. The one-week acceptance time in your purchase offer was an invitation for "offer shopping," which is what the seller did.

Readers with questions should write Bruss directly at P.O. Box 280038, San Francisco, Calif. 94101.