DEAR BOB: We will soon be listing our home for sale and are wondering whether we should list it with a large or small brokerage firm. One of our good friends is an independent broker, but we question whether she can handle our home sale because she works from a small two-person office.

Another agent we are considering sold us our home about six years ago. She works for a large franchised real estate office where there are about 50 agents.

If we list with the large firm I am afraid our listing will get lost among all their listings. What do you advise? -- Juster R.

DEAR JUSTER: The size of the real estate brokerage has nothing to do with which agent should get your listing. Interview both agents, plus a few more. Ask them all your questions about their services, fees, written marketing plan for your home and anything else you want to know.

Because most home sales involve both a listing and selling agent, the size of the brokerage you list with really doesn't matter. However, be sure your listing is placed on the local multiple-listing service, so other local agents who may have prospective buyers for your home will know about it.

Before you list with an agent, be sure to get a list of their recent sales and phone those sellers to inquire if they were in any way unhappy and if they would list a home with the same agent again. Because the real estate agent is the key to your home sale, you can't be too careful in selecting the best agent.

DEAR BOB: Recently I read about a San Diego exchange accommodator who allegedly stole over $10 million of funds that were being held to acquire properties to complete Starker delayed tax-deferred exchanges.

I am thinking about doing a delayed exchange, but am wondering who should hold the sales proceeds and how can I be certain my money will be safe? -- Jules P.

DEAR JULES: As you know, an IRC 1031(a)(3) Starker delayed tax-deferred exchange requires the use of a third-party intermediary accommodator to hold the funds from the sale of your old property until you can acquire a larger property to complete the exchange. You have 45 days to designate the property and 180 days to complete the acquisition.

In the meantime, your sales proceeds should be earning interest. Some accommodators provide their clients with a letter of credit from a reliable bank where the funds are deposited. Another approach is to have the funds deposited with a bank trust department. For further details, consult your real estate attorney.

DEAR BOB: I want to compliment you on the sound advice you gave a widow a few weeks ago not to take the $30,000 from her certificate of deposit account to pay down her mortgage balance.

When my husband died about four years ago I stupidly used his $50,000 life insurance proceeds to pay down the mortgage because I thought it would add to my security. Then about a year later my son was injured and needed special care that was not covered by our health insurance. Since my job doesn't pay very well I could only borrow the necessary money at very high interest rates. If I still had the $50,000 in savings I could have used part of it for my son's medical care.

People who pay down their mortgages in big amounts are not very smart, don't you agree? -- Mary R.

DEAR MARY: I wouldn't go so far as that, but I do not recommend paying down a mortgage unless the borrower has plenty of other cash reserves. It is not a good idea to tie up cash that might be needed someday, as happened to you.

However, I do think it is a good idea to add a little extra principal to each monthly payment, so the loan is paid off sooner, such as in 15 years instead of 30 years. Most homeowners can afford to add $100 or $200 to their monthly mortgage payment and that is all it usually takes to speed the loan payoff, thus saving thousands of interest dollars.

For example, the monthly payment on a $100,000 30-year mortgage at 10 percent interest is $877.57. By increasing the monthly payment by $197.03 to $1,074.60 the loan will be paid off in 15 years, thus saving $122,497.20 interest by paying off the loan 15 years earlier.

DEAR BOB: We recently bought a town house in a new development. It is not our dream house, but just a starter house that we hope to profitably sell in about five years, so we can buy a larger home more to our liking. Any suggestions on how we can maximize the resale value of our town house in the next few years? -- Niles T.

DEAR NILES: Increasing the value of your new town house won't be easy because there probably isn't much that can be improved. Buying a new residence offers minimal opportunities to raise market value by improvements such as adding a bathroom or remodeling the kitchen.

One way to enhance the probability of future value increases is to make certain the town house complex is well-managed and maintained. Get involved in the homeowner's association board of directors so you can do your part to increase property values in your development. This is important because the resale prices of similar town houses in your complex will determine the market value of your town house when you are ready to sell in five years.

DEAR BOB: We plan to list our home for sale soon. Most local realty agents charge the same commission rate. We found two discount brokers who charge less, but they offer less service, too. For example, we would be expected to hold our own weekend open houses. When a buyer expresses interest then we are supposed to phone the discount broker. Also, these firms charge extra if we elect to use the multiple listing service.

Do you think we should sign up with one of these lower-priced agents? -- Diane W.

DEAR DIANE: I do not recommend real estate sales commission shopping. The big drawback of most discount or cut-rate real estate brokers is their fee is so low that other local realty agents can't afford to cooperate on a sale with them. That could cut you off from prospective buyers represented by other agents.

Also, most discount brokers do not submit their listings to the local multiple-listing service (MLS) because that involves an extra fee which you would have to pay if another agent finds a buyer for your home. If your listing is not among the MLS data, you will be eliminating a large number of cooperating agents and their buyers.

In summary, it usually does not pay to cut the sales commission because you also could be cutting yourself off from large numbers of prospective buyers.

DEAR BOB: About six years ago I bought an investment property that was leased to a local chain of drive-in restaurants. I checked the chain and they were doing well, so I figured my investment was secure. But two years ago the original owners sold out to new owners who milked these restaurants.

Business declined and recently the chain declared bankruptcy. They elected to cancel my favorable 10-year lease. Now I am stuck with a vacant building that is desirable only for a restaurant. I listed it for sale or rent about four months ago with a commercial property brokerage, but they have not produced any buyers or tenants for me. Any ideas? -- Connie P.

DEAR CONNIE: Now you know why it can be dangerous to invest in single-use investment property that is not easily convertible to other uses. If your property is well located, there should be little problem leasing or selling it to another fast-food type of restaurant operation.

You may want to ask your broker which firms your restaurant has been presented to. If you are not satisfied with your agent's pursuit of prospective buyers and tenants, when the listing expires you might want to switch to a more aggressive commercial property broker.

DEAR BOB: Our home had been listed for sale almost three months before we finally received a purchase offer from a buyer. I suppose we were so happy to get an offer we didn't pay attention to the details. The real estate agent was pretty excited too because her listing was to expire the next week.

The problem is the offer says, "Offer contingent upon buyer obtaining the maximum mortgage available at the current market interest rate and best available terms." The buyer applied with three lenders and was unable to qualify for a fixed-rate mortgage. He can get an adjustable-rate mortgage, but says he wants only a fixed-rate mortgage. Since he can't get a fixed-rate home loan, he refuses to go through with the sale and he wants his $2,000 earnest money deposit refunded. He has wasted over 30 days trying to get a new mortgage.

Do you think we should let him out of the contract? -- Jess W.

DEAR JESS: Your situation is a classic example of how inexact home purchase offer terms can create misunderstandings and cause uncertainty for buyer and seller. The buyer was apparently referring to a fixed-rate mortgage, but you were thinking of any mortgage.

From a legalistic approach, because the contract didn't specify any type of mortgage, it appears there was a mutual mistake that would allow the buyer to rescind the contract for lack of mutual agreement.

To have a valid real estate purchase contract the details must be clear and exact. The mortgage contingency clause in your home sale contract was so poorly written if either party went to court to enforce the contract the judge might say the contract was unenforceable, since the terms are not certain. If I were in your situation I would refund the $2,000 and put your home back on the market for sale. For details, consult a local real estate attorney.

DEAR BOB: My wife found a wonderful old house for us to buy and renovate. It has five bedrooms and even a large upstairs playroom for the children on the third floor. The problem is we have no idea what the remodeling work will cost. An estate is selling the house, which has been on the market at least six months. Should we get the remodeling bids before we buy the house or should we buy the house first? -- Nick R.

DEAR NICK: To be certain you can buy the house at a price you think is reasonable, make your purchase offer first. However, that purchase offer should contain a construction contingency clause such as: "This offer contingent upon buyer obtaining satisfactory renovation construction cost bids within 20 days from acceptance of this offer." Your attorney can give you further information.

DEAR BOB: When we bought our home, the property tax bill wasn't divided between the seller and buyer. Since we were first-time home buyers we didn't know about splitting the property taxes and the young man handling the closing never mentioned taxes.

When we received our property tax bill we realized the seller should have paid part of the bill, but she has moved out of state and we can't locate her. We paid the entire bill, but are now told by our tax adviser we can deduct on our income tax returns only our pro-rated share.

This means we will lose a deduction for about $600 which we had to pay for the seller's part of the tax bill. Please clarify. -- Randy R.

DEAR RANDY: Your tax adviser is correct. You can deduct as an itemized income tax deduction only your pro-rated share of the property tax bill, regardless whether you or the seller paid the tax bill. However, you might have a claim against the person who handled the closing settlement and failed to correctly pro-rate the taxes between buyer and seller. Your attorney can give you further details.

DEAR BOB: As a Realtor for the last 14 years I respectfully disagree with your recent disparaging remarks about small income properties such as duplexes, triplexes and four-family homes. I find many of my clients have profited handsomely from these buildings.

Just because you didn't like living in a triplex where your tenants were nearby doesn't mean all small residential properties are not good investments. -- John H.

DEAR JOHN: I think you misunderstood the question. It asked whether single-family homes are better investments than small income properties. I replied that houses usually appreciate better. Then I explained the primary disadvantages of two-through-four-family buildings. The conclusion was stronger demand for houses usually makes them the better investment.

DEAR BOB: I am a dentist. Several years ago a group of doctors and dentists built a condominium office building in our town. They each took one office. But problems soon developed. The construction quality was shoddy and medical offices must be sparkling clean. But many physical problems soon made the building look run-down. Several doctors moved out and quit making payments on their mortgages.

The building is now about half empty. Most of the structural problems have been solved. I can buy several offices very cheap from the lender who foreclosed. Do you think I should do so? -- Jim R.

DEAR JIM: No. Condo office buildings have not been successful. Most business owners prefer to invest in their business rather than buy condo office space. They also want the flexibility to move to larger or smaller space as the need arises.

If you want to own medical office space, you would do better buying a small medical building rather than space in a condo medical building where you lack control over what happens if the other owners don't agree how the building should be run.

As you know, medical office buildings require a higher than normal standard of maintenance. If half the space in a medical condo building is empty, it might be hard to collect the monthly assessment fees from the foreclosing lender who now owns that space.

DEAR BOB: The listing on our home is about to expire and, much as we like our real estate agent, we think it is time for a change. She has had our listing almost six months, but we have received absolutely no purchase offers. We are selling due to a job transfer, but are reluctant to buy a new home until we sell our old one.

Two other homes have sold in our neighborhood for slightly less than our listing price during the six months our home has been for sale. What are we doing wrong? -- Jules S.

DEAR JULES: Even though we are in a buyer's market in most cities, if you have had no offers for your home in six months something is seriously wrong. Chances are that it is overpriced, but there could be other causes. If you can help finance the sale, such as by carrying a first or second mortgage, that will make your home more attractive to buyers.

I agree it is time to switch real estate agents, since your current agent hasn't produced any offers. Interview at least three active local realty agents. In addition to their "comparative market analysis" form that each agent should give you showing recent sales prices of nearby homes and listing prices of similar neighborhood homes (your competition), ask each agent for a list of homes they have sold in the last six months.

It may seem cruel, but don't even consider listing with an agent who hasn't sold at least a few homes in the last six months. You need a successful agent, not one who will gain experience at your expense. One way to choose agents to interview is to phone several nearby brokerage offices and ask for the names of their top salespeople for last month.

Each agent should give you a written marketing plan, including planned advertising, open houses and other promotions. Then phone each agent's recent sellers to ask if they were in any way unhappy with the agent and if they would list their home with the same agent again. You will soon know which agent should get your listing.

Incidentally, it will be a good idea to take your home off the market for a few weeks. It is now a "tired listing" that needs a rest. During this time, implement any suggestions the agents you interviewed made to make your home more attractive to a buyer. Perhaps it needs painting, cleaning, repairing, recarpeting or new landscaping. Get it into tiptop "model home" condition at a fair asking price based on recent neighborhood sales prices.

When your new agent brings your home back on the market with enthusiasm in a few weeks, if it is priced correctly, even in a slow buyer's market you should be ready to get offers.

DEAR BOB: We bought our home six years ago with a 10 percent down payment. Since then the home has appreciated well and our current loan-to-value ratio is about 70 percent. However, we waste $42 every month for private-mortgage insurance (PMI) that the lender refuses to let us drop.

I tried not paying the $42 one month, but the lender refused to accept my payment and tried to impose a late charge. The lender says we can only drop the PMI when our loan-to-value ratio drops below 80 percent of the original appraised value. That will be in about 10 years.

How can we get out of wasting money on PMI? -- Dalton Y.

DEAR DALTON: Ask your loan servicer who owns your mortgage. You are in luck if it has been sold in the secondary mortgage market to Fannie Mae or Freddie Mac. Both have similar rules that when the loan-to-value ratio drops to less than 80 percent, as shown by a new appraisal, the borrower can drop the PMI.

However, if you are unfortunate to have your loan owned by an uncooperative lender, there isn't much you can do to force the lender to drop the PMI. However, one technique I heard about that worked was for the borrower to pay the PMI fee and sue the lender in small claims court for a refund.

She won the refund, but the lender still refused to drop the PMI until she had done this for several months when the small claims judge imposed $100 punitive damages on the lender, who then dropped the PMI.

DEAR BOB: Why are you so rough on mortgage brokers? After having read your columns for many months, when we recently bought our home we applied for a mortgage at the S&L where we have had our checking and savings accounts for years.

The S&L, however, treated us like dirt. It made no difference that we had been depositors over 12 years. They said we didn't qualify for a loan since we had recently changed jobs and didn't have six months reserves in our savings account.

Then the real estate agent took us to a mortgage broker's office. She checked our excellent credit and within two days had our loan approved by a major bank. Although the payments will take about 40 percent of our gross income, we want the home badly and I'm sure we can make the payments.

Why don't you say more nice things about mortgage brokers? -- Lynn R.

DEAR LYNN: I didn't mean to give the wrong impression. Some of my best friends are mortgage brokers and I have no hostility toward them. You are absolutely correct that mortgage brokers often perform finance miracles because they can refer a loan to dozens of lenders.

However, a few mortgage brokers give the industry a bad name by promising borrowers loan terms that they can't deliver. A few days before the scheduled closing date, the borrower is informed of the best available mortgage terms, take it or leave it. But most mortgage brokers don't use deceptive tricks like that and do an excellent job for their clients.

DEAR BOB: I have about $100,000 to invest, but don't have much time to manage apartments or rental houses. Is there any way I can invest in real estate to earn a high return on my money, but without the management headaches? -- Ryan W.

DEAR RYAN: Yes. I recommend investing in discounted mortgages. That means you buy existing mortgages, usually from individuals, for less than the balance due. Depending on how shrewd a negotiator you are, yields of 15 percent to 20 percent or higher are typical for investors in discounted mortgages.

DEAR BOB: Perhaps your readers can benefit from our costly mistake. We sold our home and moved out. As the buyers were moving from out of town and their mortgage would take several weeks to close, they talked us into letting them move into the house before the title was transferred.

When the time for closing finally arrived, the buyers were about $5,000 short, so we had to make them a second mortgage loan. In addition, they found numerous little defects in the house that were trivial, but they got us to credit $2,000 for repairs.

Our advice? Never let buyers move into a home before the sale is recorded. -- Ginger L.

DEAR GINGER: Thank you for that valuable advice. I fully agree.

DEAR BOB: In the school district where we want to buy a home, there is an oversupply of new and resale homes available. The ads of several realty agents and builders say "lease option." One agent advertises "rent to own, all rent applies toward purchase price." It sounds too good to be true. What is the catch? -- Leon L.

DEAR LEON: As I have said here many times, a lease with option to purchase can be a very good deal for both home buyer and seller. But the buyer should watch out for an inflated option price which is above the fair market value for the home. Be sure to check comparable sales prices to be certain the option price is not too high.

Although you will not receive any income tax deductions until you purchase the home, the 100 percent rent credit toward the purchase price is a major benefit which more than offsets the lack of tax deductions. For further details, consult your tax adviser or attorney.

Readers with questions should write Bruss directly at P.O. Box 280038, San Francisco, Calif. 94128.