DEAR BOB: Following your advice to buy during the current buyer's market, we have decided now is a great time to buy a home. I can't believe how eager, helpful and courteous the real estate agents have become. We were looking for a home to buy about a year ago, but were so turned off by the agent we met we decided not to buy. However, we want to buy at a bargain price, so we are making home purchase offers at least 15 percent below the asking price.

So far we have made two offers. The first involved a difficult divorce situation where our realty agent gave up because the sellers got to fighting about irrelevant matters. But when we wanted to make another offer on a different house, through the same agent, she refused to write up and present our offer because she thought it was too low. We gave up.

Then I happened to meet the seller at a school function and she said the agent never even mentioned our offer, which was pretty close to the price she and her husband would be willing to accept. Is there any law that requires real estate agents to present all offers? -- Olga H.

DEAR OLGA: It is a serious breach of a real estate agent's fiduciary duty to the seller not to present all purchase offers. Even if the agent felt your offer had no chance of acceptance by the seller, the agent should have written up the offer and presented it to the seller.

I am shocked by the agent's irresponsible conduct. Unless the seller has instructed the agent not to accept offers below a specified price, the agent must present all written purchase offers.

In the future, when you want to make a written offer to buy a home, insist the agent prepare and present the offer. If you think the agent will not enthusiastically present your offer, just write in the offer: "This offer to be presented to seller in person only in the presence of the buyer." Then you have the privilege of accompanying the agent to present the offer to the seller.

If the agent gives you any trouble, report the matter to the state real estate commissioner for investigation and possible revocation of the agent's sales license. There is no excuse for agents not acting in the best interests of the home seller by presenting all purchase offers. The worst that can happen is you might receive an acceptable counteroffer from the seller.

DEAR BOB: For several months my husband and I have been looking at a larger home for our growing family. I am surprised at all the nice, but very lazy agents we met. Most just hand us an information sheet and offer to answer any questions.

But about a month ago we met a woman who not only gave us an information sheet about the house, but she had another sheet showing us recent sales prices of similar nearby houses. It was titled "Why this house is a bargain." That got our attention. It seems the seller is retiring and she doesn't need to get top dollar, so she lowered the price for a quick sale. This technique worked. We made an offer and the seller accepted.

My point is the agent used some old-fashioned salesmanship to get us interested in the house. We must have looked at 50 houses before we met the first really enthusiastic salesperson. Then she helped us arrange a mortgage and we closed our purchase last week with just a 10 percent down payment. Only then did this agent tell us this was her first sale. I just thought your many realty agent readers might enjoy our happy experience. P.S. We listed our old home for sale with the same agent. -- Joyce R.

DEAR BOB: Thank you for sharing that inspiring story. I'm afraid many realty agents have become discouraged by the lack of sales volume in the current buyer's market. Fortunately, there are many agents like yours who are doing just fine.

For example, just recently I had lunch with one of my favorite real estate agents. Joe (age 73) and his wife just returned from a month's vacation in Europe. He told me this is the best year he has had in his 15 years selling real estate.

DEAR BOB: Last April we sold our home to a building contractor. He constructs commercial buildings, but knows all about construction. Before he closed the sale, he checked out our home completely. Shortly after he moved in we had a very heavy rain and windstorm that leaked through the roof.

A few of the shingles were blown away. He had a new roof installed and it cost him $2,800. He is now suing us for this amount because, he says, we didn't disclose the roof was defective. Is this legal? -- Rollie P.

DEAR ROLLIE: Anyone can sue anyone. However, it seems to me you have no liability, since the roof was apparently in good condition when you sold the house. If he thoroughly inspected the house before purchase I'm certain he would have spotted a defective roof.

Incidentally, you might want to have your lawyer intimidate the buyer's lawyer by expressing his intent to bring a malicious prosecution lawsuit against the buyer's lawyer for a frivolous lawsuit like this. As an attorney, I am seeing more and more winning defendants suing the plaintiff and their lawyer for malicious prosecution when the lawsuit was frivolous and a waste of the court's time, like the one you describe.

DEAR BOB: You said it is smart to buy real estate when you are young and when you are old sell it on installment sales and carry back mortgages for retirement income. That is what I did about five years ago. Every month the payments come in like clockwork. A few months ago one of my buyers was going to pay off my loan. I had to talk fast, but I convinced her not to pay me off.

Where else could I earn such high interest? -- Frank L.

DEAR FRANK: I greatly appreciate your sharing that success story. When I sell property I love to carry back a first or second mortgage for the income. Once in a while, if the buyer doesn't make the payments, I have to foreclose and either get paid off at the foreclosure sale or get the property back to sell for a second profit.

I can't understand why more property sellers don't help finance their buyer's purchases. Sorry, I don't know anyplace else you can earn as high interest as you can by financing a real estate sale.

DEAR BOB: Our home has been listed for sale about three months with only one offer. We accepted that offer, but the buyers were unable to qualify for a mortgage. Last week we received a solicitation letter from a company that auctions homes. Their brochure points out advantages of auctioning a home. What do you think of this idea? -- Norma C.

DEAR NORMA: Not much. Auctions may be fine for cattle, art and autos, but not for homes. The big drawback of a home auction is financing problems. Unless the auctioneer can offer ready financing, your big risk is the top bidder won't be able to get a mortgage. Then you will have to start all over again.

Real estate auctions have been successful where a large number of properties are being sold and a lender is standing by to offer easy finance terms. For example, lenders who foreclose on condominium projects can profitably auction individual condos at bargain prices with built-in financing available. But as an individual home seller, your auctioneer doesn't have that ability to offer the buyer a mortgage lender eager to make a loan.

Instead of an auction, I suggest you reevaluate your home. Check its physical condition to be certain it is in tiptop shape. Then check your asking price to be certain it is not out of line with recent neighborhood sales prices. If necessary, hire a professional appraiser to estimate its market value. Also, take a close look at the available financing. Perhaps you can offer a low interest rate second mortgage or a lease-option as a sales inducement.

Finally, evaluate your real estate agent. Ask why your home hasn't sold. Perhaps the problem is the agent. Don't let him or her blame the lack of a sale on a "slow market." The top agents are making sales even in the current buyer's market. If necessary, when your listing expires switch to a more aggressive agent.

DEAR BOB: We recently sold our home after it was listed only about three weeks. A young real estate agent had been "farming" our neighborhood for several months, so we decided to give him the listing. I think it was his only listing, so he really worked hard. He got lots of other agents to tour our home. Every week his company ran nice ads for his Sunday open houses. And he delivered flyers to our neighbors about our home being for sale. It turned out one of the neighbors had a friend who wanted to move to our neighborhood, so we sold our home to her.

The purpose of my letter is to let you know sometimes the new agents work harder than the old-timers. I know you advocate listing with experienced agents who have good references, but don't you think it pays to give the new kid a try? -- Gary C.

DEAR GARY: Of course. Occasionally, I get irate letters from new real estate agents who criticize me for recommending home sellers interview at least three local real estate agents before selecting the best one. Part of that interview process involves phoning each agent's client references to ask, "Were you in any way unhappy with your agent and would you list with the same agent again?" I still think that is the best way to select an agent. But, of course, there are exceptions to every rule.

DEAR BOB: For the last 12 years I have been a union carpenter. My wife and I bought a nice lot where we want to build our new home. We have about $25,000 cash, but we need a construction loan to finance our house until we can get a permanent mortgage. We have contacted at least 20 lenders about construction loans. None will lend to us because (1) I am not a licensed contractor and (2) I want to do all the sub-contracting without hiring a general contractor. Any ideas how I can get a construction loan? -- Ron W.

DEAR RON: Look at your situation from the lender's viewpoint. You may be a great carpenter, but the lender is worried you will run into trouble on the construction project that you can't handle. The possibilities are endless.

As a remodeler of older homes who hires licensed general contractors, I know even the experts with many years of experience often run into unexpected problems. Fortunately, they are always able to solve them (usually with more money). But lenders are reluctant to loan to non-licensed do-it-yourself home builders. I suggest you hire a general contractor to supervise your home building, so you can get a construction loan.

DEAR BOB: You often advocate home sellers invite at least three realty agents to give their listing presentations. I suggest home sellers select these three agents from recommendations of friends and business associates who have recently sold their homes. Then it doesn't get into a competition among agents who estimate the highest sales price for the home.

In addition, sellers should dismiss any agent who doesn't prepare a written marketing plan for the home, including weekly advertising, open houses, multiple listing service and direct mail to targeted buyers. -- Jerome P.

DEAR JEROME: Thank you for the valuable suggestions. I can't emphasize enough that home sellers talk with at least three local real estate agents before selecting the best.

The most important criteria is the client references of each agent. Before signing a listing with any agent, a home seller should phone their seller references to ask, "Were you in any way unhappy with your agent and would you list your home for sale with the same agent again?" This method will tell you which agent should receive your listing.

DEAR BOB: I sold my home to a nice young couple. They are getting an FHA mortgage and it is taking forever. Since they moved here from out of town and are staying in a motel, they want to move into my house before the mortgage papers are ready. Do you think I should allow them to do so? -- Rhea H.

DEAR RHEA: No. The big problem of allowing home buyers to occupy the residence before the sale is recorded is the buyers will surely discover some little defect that will hold up the closing of the sale. Another difficulty is you must keep up the insurance while the buyer occupies your home. If a loss results, there can be problems. I do not recommend you let your buyer move into the home before the sale is recorded.

DEAR BOB: Following your advice we negotiated a terrific lease-option. The home seller is giving us a 100 percent rent credit toward our down payment. However, he does not want us to record our purchase option. It occurred to me the seller, a rather slippery character, might try to sell our home again. We definitely plan to exercise our purchase option. Do you think we have a big problem? -- Duane W.

DEAR DUANE: No. The buyer of any property takes title subject to the rights of the occupants. Since you have a valid lease-option agreement, you need not be concerned. Consult a local real estate attorney for more details.

DEAR BOB: I am trading my commercial building for an apartment house. However, the Realtor who arranged the three-way trade didn't put any price tags on the property. I know I am trading up, but how does the IRS know this? -- Rege P.

DEAR REGE: Don't worry. Price tags are often left off the properties in an IRC 1031 tax-deferred exchanges. As long as you are trading up for investment or business-trade property of greater value and equity without receiving any "unlike kind" property such as cash or net mortgage relief, you have a tax-deferred exchange. Consult your tax adviser for more details.

DEAR BOB: I have heard options are a great way to acquire real estate. But how do I go about finding options to buy? -- Arno H.

DEAR ARNO: I don't know. Frankly, I have never seen an option advertised for sale. You have to negotiate for them. The only options I have ever acquired involve a lease with option to purchase. I usually pay $1 or nothing for the option to purchase. However, I understand straight options without a lease should cost from 1 percent to 3 percent of the option price, depending on the length of the option.

DEAR BOB: My father is selling his home and will be carrying back the mortgage for the buyers at 10 percent interest, amortized over 40 years, but with a balloon payment due in five years. Based on your recent column about inflation, my father wants to add a paragraph so there will be a built-in inflation factor to the interest rate. Since the sale closing is already scheduled, how can he change the terms of the mortgage? -- Joyce B.

DEAR JOYCE: I am shocked your father would even think of changing the terms of the home sale. He signed a sales contract and he must live up to its terms, which are very good. A balloon payment in five years is far too short for the buyer, but very good for the seller. After five years, if all is going well and the buyers pay on time, your father can extend the loan for another five years.

DEAR BOB: We loaned our son $25,000 to buy a home. He promised to give us a second mortgage on the house when he bought the house four months ago. So far we have received nothing, either in payments or paperwork. I am afraid his wife is taking advantage of him. Just in case of a divorce I think we should have some proof of our loan, don't you? -- Ramon F.

DEAR RAMON: Yes. Especially in family transactions it is important to document everything. Tell your son and daughter-in-law your tax adviser (or attorney) says you need documentation for the loan. That means you need a promissory note and either a recorded mortgage or deed of trust. For further details, consult a real estate attorney.

DEAR BOB: I recently bought a two-family duplex house. The real estate agent told us both families would be moving out. The reason we bought a two-family house is that my in-laws will be living in half of the house and my wife and I will live in the other half. The problem is the tenant in the other half of the duplex showed me her lease, which has nine months remaining. How can I get her out, so my in-laws can move in? -- Jeffrey H.

DEAR JEFFREY: Sorry, but a new property owner must honor the rights of an existing tenant. The seller and the real estate agent should have informed you the tenant has a lease, which must be respected. If there was any misrepresentation, I suggest you consult a real estate attorney.

DEAR BOB: My only realty investment, other than my home, is a rental house that I inherited from my mother about five years ago. It has gone up in market value nicely, but I can't sell it because my tenant is my sister and her family.

In the current real estate market, do you think today is a good time to buy more property or should I wait until interest rates come down? Since the realty prices in our town are rather stagnant, is there any way to make profits today in real estate? -- Nel W.

DEAR NEL: It's always a good time to buy sound, well-located real estate. In most cities this is the best buyer's market we have had for at least five years. Excellent seller financing is available and you can negotiate hard on the price and terms.

First you need to decide whether you are a speculator or an investor. A speculator buys for a quick resale profit. The properties he buys are called "flippers." But an investor purchases for long-term investment, letting the tenant rents buy the building for the owner. These properties are called "keepers."

Personally, I like to keep my alternatives open. So I buy fixer-upper properties at well below market prices to compensate for the cost of needed work. After the fix-up work is completed, I decide whether to keep or resell. Lately, I have been renting the houses on lease-options, so I get some of the longer-term investment benefits along with the shorter-term resale profits.

DEAR BOB: Last year my mother gave me the building where my business is located. My late father formerly ran the business, which I took over when he died a few years ago. I realize my cost basis for the building is my mother's basis, which is far less than the building's market value. Each year my banker asks me to fill out a new financial statement, but I am unsure how to value the building. Should I use the basis at which I carry the building on my books or the much higher market value? -- Nancy R.

DEAR NANCY: You should use the building's current market value when preparing your financial statement for the bank, which is interested in your equity, which is the difference between the market value and the mortgage balance.

Of course, if you should sell the building your taxable profit will be the difference between the net (adjusted) sales price and your depreciated book value. Since donees take over their donor's basis for the property, your depreciated book value will be your mother's basis for the building at the time of the gift, minus any depreciation you deduct, plus the cost of any capital improvements you add during ownership. Consult your tax adviser for further details.

DEAR BOB: Last year my ex-wife and I sold our home. We split the sale price equally. Our tax preparer calculated our taxable profit as the difference between our estimated $155,000 net sales price and our $85,000 purchase price, including some improvements we made. However, our mortgage balance was $123,455, but he said that doesn't matter. In other words, we were each taxed on half of $38,455 ($123,455 minus $85,000), but we didn't receive that cash in the sale. Can this be correct? -- Jonathan B.

DEAR JONATHAN: Yes, your tax preparer is correct. You were victims of the "excess mortgage trap." Sometime during ownership, you and your wife apparently refinanced the mortgage for more than your $85,000 adjusted cost basis.

You paid no tax on that cash you received. But when you sold the home for more than your adjusted cost basis, then the cash which you received from the mortgage refinancing became taxable as an excess mortgage.

However, you can avoid paying tax on your half of the sale profit by buying a replacement principal residence within 24 months before or after the sale costing at least as much as your half ($77,500) of the $155,000 adjusted (net) sales price. Consult your tax adviser for details.

DEAR BOB: We live in a small town where homes are not selling very well. Our real estate agent suggests we let her advertise our home for sale with 10 percent down payment, buyer to assume our VA first mortgage, and we will carry a second mortgage for the balance. Does this sound dangerous to you? -- Corrine H.

DEAR CORRINE: No. However, instead of carrying back a second mortgage, I would carry back a wraparound mortgage because it has many advantages for you. However, wraparound mortgages should only be used if the existing first mortgage does not have a due-on-sale clause.

To illustrate, suppose your home sells for $100,000 and the VA mortgage balance is $60,000. The buyer pays $10,000 down payment. That leaves a $30,000 finance gap. But instead of carrying back a $30,000 second mortgage, carry back a $90,000 wraparound mortgage. The buyer will make one monthly payment to you and you will use part of that money to pay the first mortgage lender.

The biggest advantage for you is you always know the payments are made on the first mortgage. If the buyer doesn't pay you each month, after 30 days you should begin foreclosure on your wraparound mortgage. Another advantage is you earn an interest rate override on the differential between the rate the buyer pays you and what you have to pay on the first mortgage.

For example, if the buyer pays you 10 percent interest, but the first mortgage has an 8 percent interest rate, you get to keep the 2 percent differential.

DEAR BOB: Some time ago you wrote it is smart to make an extra mortgage principal payment each month and "jump ahead" on the loan amortization schedule. Does it matter if the lender is a private party or a lending institution? Does the "jump ahead" plan work in all states? If the borrower is unable to keep making extra payments each month, what effect would this have on the program? -- Robert W.

DEAR ROBERT: Whenever I write about the "jump ahead" mortgage prepayment program borrowers get all excited about paying off their 30-year mortgages in just 15 years and saving thousands of dollars in interest. The program is so simple and inexpensive it's a wonder everyone doesn't use it to save thousands of dollars of interest.

But you would be amazed at the follow-up questions I receive, such as: "If I jump ahead on my loan amortization schedule and prepay next month's principal payment does that mean I don't have to make a mortgage payment next month?"

Before answering your questions, let me explain how the jump-ahead loan prepayment plan works. The first step is to get a copy of your home loan's amortization schedule from the lender for the life of the mortgage, usually 30 years. The second step is to remember you always must pay at least your regular monthly mortgage payment every month. The third step is to add to that minimum payment the next month's principal payment from the amortization schedule.

For example, suppose your regular monthly mortgage payment is $1,000. To keep things very simple let's pretend, this month's loan payment will be allocated $990 to interest and $10 to reduce the loan's principal balance. Looking at the loan amortization schedule, we see next month's payment will be allocated $989 to interest and $11 to principal. Using the jump ahead plan, you write a check to the lender this month for $1,011, which is your regular $1,000 payment plus next month's $11 principal payment. Be sure to tell the lender the extra $11 is for principal.

When your loan payment comes due next month, which is to be allocated $988 for interest and $12 for principal, send the lender an extra $13 for the following month's principal payment so you can jump ahead again on your amortization schedule.

What have you accomplished in just two months by making an $11 and a $13 extra principal payment in our simple example? You have jumped ahead two months on your loan amortization schedule, thereby saving $989 interest for next month and $987 interest for the following month.

I'm sure you get the idea. Now to answer your questions: This plan works with all lenders on amortized loans. However, if your loan interest is calculated daily on a simple interest basis, it doesn't work. Yes, the plan works in all states. If you can't make your gradually increasing extra principal payment each month, you can always revert back to your minimum required monthly payment. But then you stop jumping ahead and saving interest every month by cutting the term of your mortgage.

DEAR BOB: Because of financial problems in my husband's business, we must sell our home to raise cash to pay business debts. Fortunately, we have about $150,000 equity in our home. However, we don't want to pay profit tax, as we hope to buy a replacement home within two years.

If we are fortunate enough to get a cash sale by offering the house below market value do we have to pay tax on the $150,000, even if we don't buy a replacement home for a year or two? -- Betsy Ann C.

DEAR BETSY ANN: No. If you handle the transaction correctly, you can sell your home for cash, use that tax-free money as you wish and defer the tax on your sale profit by buying a qualifying replacement home within 24 months.

Internal Revenue Code 1034 says tax can be deferred on the profitable sale of your principal residence if, within 24 months before or after the sale, you buy a replacement principal residence of equal or greater cost.

But there are no restrictions on how you use the cash from the sale or on how much cash you invest in the replacement principal residence. For example, you can sell your old home for cash and buy the replacement home for nothing down, such as with a VA home loan that requires no down payment.

For further details, consult your tax adviser.

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