DEAR BOB: I recently read your article and several others about the advantages of prepaying a home mortgage. I understand how thousands of dollars can be saved by cutting the life of the mortgage. But I am not sure if I should prepay in my situation.

My mortgage is about $46,000 at 9.5 percent interest. I am 61, a widow, employed with a good office job and I have about $30,000 in bank certificates of deposit that will be coming due soon. I can either roll over those CDs at about 8 percent interest or pay down my mortgage.

It seems to me, since my mortgage is at 9.5 percent interest and I can only earn about 8 percent on my money, I should pay down my mortgage. Do you agree? -- Barbara T.

DEAR BARBARA: No. Paying down your mortgage by $30,000 could be a major mistake. If you might ever need that $30,000 again, don't use it to reduce your mortgage balance now. The problem is you would probably have great difficulty borrowing $30,000, especially if you are ill or unable to work at the time you need the cash.

I recommend making small extra principal payments each month. Many homeowners prepay $50 or $100, sometimes more, each month on their mortgage to cut its term and reduce the total interest that will be paid. That makes financial sense because most people won't miss small extra mortgage payments that can save thousands of dollars of interest by cutting the mortgage term.

DEAR BOB: I recently attended a real estate seminar where the speaker talked about the benefits of buying real estate at tax deed sales. He said these are properties being sold for the unpaid taxes.

How would I go about buying property at such a sale and are they a good deal? -- Thelma R.

DEAR THELMA: Every year millions of dollars of real estate is sold at tax sales because the property taxes weren't paid by the owners.

Occasionally, the owner can't afford to pay the taxes. But more frequently the owner intentionally doesn't pay the taxes. Often the property has become worthless to the owner and he or she can't find a buyer for it, so the owner abandons the property.

Rarely is a highly desirable property sold at a real estate tax sale. More frequently, odd-size parcels are sold for the unpaid taxes to buyers who think they are getting a bargain. But usually these properties are worth just about what is paid for them.

DEAR BOB: My neighbor's tree overhangs my property line. It is constantly causing a mess by dropping leaves and other debris that I have to clean up.

I understand I can trim his tree back to our property line. Can I force the tree owner to pay for the trimming and cleanup? -- Corrie A.

DEAR CORRIE: No. The general rule is a property owner can trim an overhanging tree belonging to a neighbor back to the property line. The same rule applies to underground roots. However, you can't force the neighbor to pay for trimming the tree on your side of the property line. For details, consult a local real estate attorney.

DEAR BOB: For the last 11 years I have rented a house belonging to my aunt, who inherited it about 20 years ago. My aunt has agreed to sell the house to me for a bargain price so she can be admitted to a life-care retirement home. But we are unsure how to go about transferring the title. She has the deed by which she inherited title. Do we take that down to the court house? -- Mary Lou M.

DEAR MARY LOU: To be certain you are receiving marketable title, you should buy an owner's title insurance policy. Depending on local custom, you can either go to a title insurance or escrow firm or have a local real estate attorney handle the title transfer to you.

DEAR BOB: Many years ago I bought about 40 acres of land as an investment. I have been paying the property taxes on it, but haven't visited it for at least 10 years.

Although I had planned to build a retirement home on this land, my plans have changed and I won't be doing any building. I have decided I should sell it. How can I best determine its value and sell it from a distance? -- Rupert H.

DEAR RUPERT: I suggest you phone or write at least three nearby real estate agents. Tell them you are thinking about selling your land, give them a full description, so they can locate and inspect it, and ask for their advice on setting an asking price and the best way to market it. Ask for references from each agent and check them out.

But be careful. Since you are an out-of-towner, a buyer might try to take advantage of your lack of knowledge of the property's value. You also might want to hire a professional appraiser who is familiar with land values in the vicinity. A local banker can usually recommend a qualified appraiser approved by the bank. After you have all this information, then you can list the land for sale.

DEAR BOB: Why don't you warn condominium buyers to be extremely careful before buying? As a widow, I foolishly sold my nice home of 32 years and bought what I thought was a new luxury condo.

I soon discovered the soundproofing between units is nonexistent (I can hear my neighbors cough), my outdoor patio furniture has been stolen twice due to lack of security, the recreation area is a disaster due to poor construction quality, there are serious plumbing problems and the crooked builder-developer folded his corporation shortly after selling the last condo, so now we have nobody to sue for all the problems.

If I move out, the mortgage company will come after me for their loss because nobody will buy a condo here now. What can I do? -- Marge W.

DEAR MARGE: I am sorry to hear about your condo problems, which, unfortunately, are not unusual. Although there are many excellent condo complexes, such as the one where my mother has lived for about 12 years, there also are many quick-buck developers who have built shoddy condos like yours.

I have written about the typical problems with condos many times.

As the first buyer of a new condo, you had a more difficult situation evaluating a new building than do buyers of older condos. The defects didn't become apparent until after it was too late to change your mind and you had nobody to consult before you purchased.

Since the problems sound serious, I suggest you pressure the owner's association board of directors to hire an attorney to sue the developer. It shouldn't be too hard to "pierce the corporate veil" and go after him as an individual for the things he has done to defraud the condo buyers.

DEAR BOB: As a tenant, am I better off with a one-year lease rather than a month-to-month rental? -- Keith J.

DEAR KEITH: Tenants usually prefer a one-year lease because they know the landlord cannot raise the rent for at least 12 months. However, the drawback is if you want to move out, then you are stuck for the full 12 months.

Of course, unless you live in a rent control area, with a month-to-month rental agreement the landlord can raise the rent by giving a 30-day advance notice. But you also can move out by giving a 30-day notice.

DEAR BOB: I know you advocate buying fixer-upper houses to make profits. My problem is I found such a house in a choice area. It is, by far, the worst house on the block. The asking price is firm, but it is a bargain. The problem is the house is being sold by an estate "as is" and the executor refuses to make any repairs. Do you think I should skip this "as is" house? -- Joanna L.

DEAR JOANNA: It is very common for probate properties to be sold "as is." That means the seller makes no warranties or representations and refuses to pay for any repairs. This is quite logical for an estate since the executor probably is not familiar with the house.

An "as is" property can be an excellent bargain. However, as a contingency in your purchase offer you should insist on a complete professional inspection. If you don't have the property inspected it could turn out to be a nightmare if you discover unexpected problems.

DEAR BOB: My husband and I are selling our home. During our 14 years of ownership we have made many changes to the house. I am trying to figure out what our total cost basis is for the house, including improvements. Is there any easy criteria for determining if an expense is a repair or a capital improvement? -- Kris M.

DEAR KRIS: The IRS says a capital improvement extends the useful life or enhances the market value of the property, whereas a repair maintains it in its present condition. But sometimes the difference is hard to distinguish.

For example, if you replace a 30-gallon water heater with a 30-gallon water heater, that is a repair because it maintains the property in its present condition. However, if you replace a 30-gallon water heater with a 50-gallon water heater, that is a capital improvement, so the cost should be added to your home's adjusted cost basis.

Another example would be if you patch a leak in the roof, the cost is obviously a repair. But if you replace the entire roof, that is a capital improvement because the new roof extends the useful life of the home and enhances its market value. For further details, consult your tax adviser.

DEAR BOB: Congratulations for using that letter a few weeks ago from the home buyer who declared bankruptcy over just $3,500 of debts and now she is having trouble getting a home loan.

As a loan officer for a major S&L, I wish every prospective home buyer could read that letter. We constantly receive home loan applications from people who have taken either Chapter 7 straight bankruptcy or Chapters 11 or 13 bankruptcy reorganization.

Whenever we see a Chapter 7 bankruptcy we want to know the circumstances. Sometimes the debtor had no alternative, such as unemployment due to illness. But when we see no good reason for bankruptcy and big losses for creditors, we know that applicants didn't t take their obligations seriously and we want nothing to do with them.

However, in Chapters 11 or 13 we admire a person who paid off their debts as agreed and we are only too happy to make home loans to these people. But we won't lend to Chapter 11 and 13 debtors who didn't meet their obligations as agreed in the bankruptcy reorganization plan.

I thought you should know most lenders don't automatically reject a loan applicant who has been through bankruptcy. -- James N.

DEAR JAMES: The policy of each mortgage lender differs as to applicants who have filed for bankruptcy, but your letter should help discourage people from unnecessary filings. As an attorney, I find it shocking how some of my fellow lawyers encourage people to file for bankruptcy. I wouldn't be able to sleep at night if I had been the bankruptcy attorney for that woman who filed for bankruptcy just because she couldn't pay $3,500 of bills. As she said in her letter, that mistake ruined her credit. I hope her letter and yours will be important lessons for prospective home buyers to avoid filing for bankruptcy if at all possible.

DEAR BOB: I think I am being swindled by my tax adviser. In 1989, I sold a small apartment building in a bad part of town for about $2,000 less than I paid for it two years earlier. I have had nothing but trouble with the building, mostly due to drug dealer tenants, so when I found a buyer I agreed to sell to him for nothing down if he would take over my mortgage and give me a second mortgage for the balance. So far he has paid me right on time every month.

But on my 1989 income tax returns my tax man said I owed tax on my profit of about $17,450. That was the amount of depreciation I had deducted on my 1987 and 1988 income tax returns. This doesn't seem right to me. Who is right? -- Dennis R.

DEAR DENNIS: Your tax adviser is right. I realize it is hard to understand how you can have a taxable profit when selling an investment property for less than you paid.

To illustrate, suppose you paid $500,000 for the building and deducted $17,450 of depreciation during your two years of ownership. That brings your adjusted cost basis or depreciated book value down to $482,550. When you sold the building for $498,000 in this example, the difference of $15,450 is your taxable profit.

In other words, while you owned the building you deducted depreciation that saved you income taxes. But when you sold the building for more than your depreciated book value, the excess difference was your taxable profit.

DEAR BOB: Some time ago you said it is possible to use the "rollover residence replacement rule" home sale tax deferral of IRC 1034 more often than once every 24 months. That is my situation. My wife and I sold our old home about a year ago and bought a fixer-upper house that we have now completely renovated. We can sell it to a relative at a considerable profit. Our problem is we have only lived here about 14 months. Four months ago I became self-employed. Does that qualify us to roll over our profit again? -- Marc D.

DEAR MARC: As you know, the rollover residence replacement rule of IRC 1034 can be used to defer your home sale profit tax if you buy a replacement home of equal or greater cost within 24 months before or after the sale. However, this tax deferral can be used only once every 24 months.

But there is an exception allowing more frequent use if the sale involves a job site change that qualifies for the moving expense deduction. To qualify, your new job location must be at least 35 miles farther away from your home than was your old job site.

For example, if you drove five miles to your old job, but you now drive at least 40 miles, then you qualify for the moving expense deduction and you can use IRC 1034 sooner than once every 24 months. Consult your tax adviser for details.

DEAR BOB: Almost two months ago we made an offer to buy a house. Before we made our bid, we discussed with the realty agent our desire to add a family room on the back of the house. She said there wouldn't be any problem. So we went ahead and the sellers accepted our offer. However, it was not contingent on being able to construct the family room.

A few weeks later my husband went to city hall to check on the feasibility of adding a family room. The building official checked the property and said the family room would be too close to the boundary and there is a utility line easement where we want to build.

When we went back to the realty agent and the sellers, they refused to refund our $5,000 deposit. Without such an addition, the house will be too small for our family. How can we get out of this deal and get our $5,000 back? -- Sarah H.

DEAR SARAH: The real estate agent should not have said that there would be no problem adding the family room. Instead, she should have said, "Let's go to the building department at city hall to see if that is feasible."

If the agent represents the seller, both the seller and the agent may be liable for damages to you.

Since you have apparently tried to cancel the contract and get your $5,000 back, you appear to have no alternative but to retain a real estate attorney. Situations like this are so easily preventable it is a shame the seller and agent won't be reasonable and cancel the sale due to misrepresentation.

DEAR BOB: In early 1989 I bought a duplex where I live in one-half of the house. The other half is rented to a tenant. I reported the rent income on my income tax return and deducted half of the fire insurance, property taxes, mortgage interest and repairs affecting the rental unit.

I did not deduct depreciation because I had been told by a friend that I cannot depreciate my residence. But several weeks ago you told another reader she can depreciate a rental apartment when the owner lives in the same building. Would that apply to my situation too? -- Herbert S.

DEAR HERBERT: Yes. You not only can, but you must, depreciate the rental portion of the duplex. It should be easy to amend your 1989 income tax return by filing IRS form 1040X and claiming a tax refund thanks to your depreciation deduction. Consult your tax adviser for details.

DEAR BOB: My late husband and I owned some commercial property where his business was located. I inherited his half of the property, which received a new basis stepped up to market value. But my half of the property retains its old low basis, according to my tax adviser.

As I am 72, I thought there is some tax break when the elderly sell property, but my tax man says there is none. Is this correct? -- Myrna W.

DEAR MYRNA: Your tax adviser is correct. There is no special tax exemption when elderly owners sell real estate other than their principal residences. Perhaps you were thinking of the "over 55 rule" $125,000 home sale tax exemption. Unfortunately, it does not apply to sales of other types of property.

DEAR BOB: About a year ago a woman bought the house next to ours, where we have lived for 32 years. She says she had a survey made that shows our fence is about three feet on her side of the property line. Now her lawyer demands we pay to have this fence removed. It is overgrown with ivy and we have roses planted on our side of the fence. This all sounds crazy to me. All the lots on our street have 50-foot frontages and I measured ours, which is exactly 50 feet.

I hate to get into a fight with the new neighbor, but I want to do the right thing. What should I do? -- Ralph Y.

DEAR RALPH: Consult a real estate attorney. He or she will probably advise you to obtain a survey of your property. Even if the survey shows your neighbor is correct about the property line location, it sounds like you are entitled to a prescriptive easement, since you have had open, notorious, continuous and hostile possession of another's property for well over the number of years required by state law.

DEAR BOB: We just bought a home last year, so if we sell it we will lose money after paying the selling costs, such as the sales commission. My wife and I are considering renting our home while we are away on a two-year overseas job assignment. What do you think of this idea? -- Joel L.

DEAR JOEL: Renting your house instead of selling it is an excellent idea if you have someone who can manage it for you while you are out of the country. Another benefit is that all of your rental income should be tax-free, sheltered by the mortgage interest, property tax, operating expense and depreciation deductions. Your tax adviser can give you further details.

DEAR BOB: I rent an apartment from a cheapskate landlord. He won't spend a dime unless absolutely necessary. My wall-to-wall carpet is threadbare and he refuses to replace it. But I love my apartment, the rent is cheap and I do not want to move. If I spend about $2,000 recarpeting my apartment is there any way I can take an income tax deduction for improving my landlord's building? -- James R.

DEAR JAMES: No. There is no income tax deduction for apartment dwellers who make capital improvements to their apartments. For further information, consult your tax adviser.

DEAR BOB: I work for a manufacturing corporation where some of my duties involve real estate management in addition to being the corporate treasurer. The company owns about 30 properties and we buy or sell several properties each year.

Frankly, I love the real estate work even though I don't know what I am doing. I tried taking community college real estate classes, but my travel schedule required me to drop out. Can you suggest any basic real estate book where I can quickly learn the real estate fundamentals? -- Len H.

DEAR LEN: I highly recommend the new book "Supercourse for Real Estate Licensing" by Julie Garton-Good, published by ARCO Books, New York, available for $24.95 in stock or by special order at local bookstores.

Although it is designed for license preparation, it also is an extremely well-written, 606-page basic real estate textbook. You will really impress your boss after you learn the real estate fundamentals from this excellent book.

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