DEAR BOB: As you know the market for home sales is slow in most cities, including my town where I have been a real estate agent about 11 years. Having been through the ups and downs of real estate cycles, I realize the current slow cycle is nothing extraordinary. However, I must question your idea of using lease-options to "sell" homes.

I have six listings and every one of my sellers needs all their equity out of their homes so they can buy another home. The big drawback of lease-options, as I see it, is there isn't enough cash for the home seller nor is there enough cash to pay the real estate agent's sales commission. When are you going to stop giving false hope to home sellers that lease-options will solve their problems? -- Joanne P.

DEAR JOANNE: Lighten up. These are the purposes of a lease with option to purchase:

Get a tenant-buyer living in the home producing rent income for the owner.

Give the tenant-buyer a chance to try the home before buying it. Practically assure the tenant-buyer will purchase the home if a large enough rent credit is given toward the down payment.

Make a quick easy "sale" for top dollar.

If a home will sell in the "regular way" there is no need for a lease-option. Lease-options can solve many problems for home sellers, but not all. For example, if your sellers need every dollar of their equity to buy another home, the lease-option is not appropriate. However, if your sellers can add second mortgages to their houses to provide cash down payments for their replacement homes, then they can lease-option the old homes.

Frankly, the biggest obstacles to lease-options are real estate agents. They rarely suggest a lease-option to a buyer or seller. Why? Because the agent won't get most of their sales commission until the buyer exercises the option to buy.

To illustrate, when I bought my home on a lease-option I paid the seller $10,000 nonrefundable consideration for the option. Incidentally, I moved in three days after acceptance because there is no long closing period necessary with lease-options. The two agents could have taken part of their commission up front from this money, but they elected to wait until I exercised the purchase option. But most agents would have insisted on a partial commission. Mine was the first lease-option my agent had ever done. I had to show her how.

DEAR BOB: My husband is a commissioned salesman. Business is either feast or famine for him. Thankfully, 1990 was excellent and he earned $240,000. But he says 1991 looks dismal for his business.

We live in a very nice home in which we have about $100,000 equity. My husband says we should borrow $50,000 on a home-equity loan, but I think we should try to pay off our mortgage so we can own our home free and clear. We filed for bankruptcy protection about 10 years ago, so we know what hard times are. Do you think we should borrow on our home equity now? -- Cheryl L.

DEAR CHERYL: Yes. Smart people are aware the time to borrow money is when you don't need it. If times should get tough for your husband's business in 1991 and his income decreases substantially, it may become difficult or impossible to borrow on your equity. You may need that $50,000 to live on. In a cyclical business like your husband's it is not wise to be property rich and cash poor. Take the money while it is available.

DEAR BOB: Several months ago you wrote that home private mortgage insurance can usually be canceled when the loan-to-value ratio drops below 80 percent. I clipped that article and sent a copy to my mortgage lender along with my monthly payment. The lender sent back a printed reply that FHA mortgage insurance can never be canceled. Is this correct? Were you wrong? -- Henry H.

DEAR HENRY: Yes. No. You have mixed up apples with oranges.

A PMI premium is an extra amount added to the monthly mortgage payments of home loan borrowers who obtained a conventional 90 or 95 percent mortgage. If the home loan has been sold in the secondary mortgage market to Fannie Mae or Freddie Mac, they generally allow dropping the private mortgage insurance premium when the loan-to-value ratio drops below 80 percent. However, other lenders do not have to follow this rule unless state law applies. For example, California has a new law requiring lenders to drop PMI when the loan-to-value ratio on any home loan drops below 75 percent.

But FHA home loans do not have PMI coverage. Instead, they have MMI (mutual mortgage insurance), which generally costs one-half of 1 percent of the loan's balance at the beginning of each year. Over the years I have received several angry letters from FHA officials who tell me MMI can be canceled at the lender's discretion. However, I have yet to hear of any FHA-insured lender allowing a borrower to drop the MMI. But when you make the final payment on your FHA mortgage, you then become entitled to a partial refund of your MMI premiums.

DEAR BOB: I recently attended a free real estate seminar on how to buy a home and invest in real estate. The speaker said smart home buyers don't make any earnest money deposits. He explained all that is necessary is for the buyer and seller to agree on the price and terms in writing to form a binding contract. I always thought the buyer had to put up an earnest money deposit to create a legal contract. Who is right? -- Luke P.

DEAR LUKE: Both you and the speaker are correct. Legally, a binding contract is formed when the real estate buyer and seller sign the sales contract. But in the real world very few home sellers will accept a purchase offer without the buyer making a substantial earnest money deposit.

If you were selling your home to me, no matter how good my purchase offer bid might be -- unless you are a desperate seller -- I doubt you will accept my offer without seeing some deposit money. Although I have bought properties with only a $1 deposit accompanying my purchase offer, those were special situations such as rundown properties and highly motivated sellers.

Incidentally, if you want to convince the seller you are a serious buyer, even when making a low-ball purchase offer, a large earnest money deposit usually works wonders. However, be sure the deposit is not given to the seller until the sale closes because the seller might lose his sales motivation. I recommend having the deposit held wherever the sale will be closed, such as in the office of a title or escrow company, bank or attorney.

DEAR BOB: Having lived in my home for several years, I am considering moving and renting to tenants. Will this cause the mortgage company to call my loan? -- Margaret F.

DEAR MARGARET: No. Changing your home from owner-occupancy to rental status will not allow the mortgage lender to cause your loan to become due. Consult a local real estate attorney for further details.

DEAR BOB: I own a commercial property. The city plans to widen the intersection by condemning a 25-foot strip of land on one side of my corner lot. This will take away several parking spaces and landscaping, making my remaining property less useful and attractive. Is there any way I can obtain payment from the city for the harm they are doing to the portion of my land that is not condemned? -- Galvin W.

DEAR GALVIN: Yes. The situation you describe creates severence damages for the diminished value of your remaining land. Recognized appraisal methods permit condemnation payment for both the condemned land and the decreased value of the noncondemned property. I recommend you retain an attorney who is familiar with condemnation law.

DEAR BOB: I heard you on a radio talk show recently and you said you used to own apartment buildings, but you switched to rental houses in 1975. You didn't say why.

I am a college junior and I own a four-unit apartment building in a college town that I rent to fellow students. My net income after paying the mortgage, taxes, insurance and expenses is about $400 per month. My dad co-signed on the mortgage and that was a big help because I don't have a job. Based on my limited experience, apartments seem a good deal to me. Why did you get out of apartments? -- Lyman H.

DEAR LYMAN: Management. Since you live in your four-unit apartment building you can easily manage it. But I didn't live in my apartment buildings, so I had to have resident managers to handle the rentals and day-to-day management details. Managers don't work for free, as you do.

Although mine were good "bread and butter" working-class apartments, something was always going wrong with either the tenants or the building. Of course, these problems never occurred at 9 a.m. on Monday. They usually happened late at night. I just got tired of all the management headaches.

Another problem is the value of apartments depends on their net income. However, the value of single-family houses depends on recent sales prices of similar nearby houses, not on the net rental income.

DEAR BOB: Our home loan is in arrears. My husband is ill and unable to work. I have a job, but my salary goes to pay for food and clothes for our three children. The result is our mortgage hasn't been paid for five months.

Last week the loan company sent a loan collector who wasn't very nice. He posted a notice on our house that says our loan is in default and if we don't pay our home will be auctioned in a few months. Do you think we should file for bankruptcy protection? I hate to lose our $40,000 equity. -- Ann H.

DEAR ANN: If your husband will not be able to go back to work soon, perhaps you should sell your home to salvage most of your $40,000 equity. It would be a shame to lose that equity at a foreclosure sale.

However, if your husband will soon be able to earn an income again, immediately contact the lender to work out a new payment plan. Be sure to talk with a supervisor or officer, not just a loan clerk. Either way, don't bury your head in the sand. If you do nothing you will lose your home.

As for filing for bankruptcy protection, it will delay foreclosure, but it won't save your home. Your failure to pay the mortgage has already been reported to the credit bureaus and is explainable, but filing bankruptcy will ruin your credit and remain on your credit report at least seven years. Consult your attorney, but file bankruptcy only as a last resort.

DEAR BOB: I want to buy a home with a 10 percent cash down payment and a 90 percent seller-financed mortgage at 9 percent fixed interest for 10 years. I found a nice home owned free and clear by an elderly seller. I offered her a fair price for the house, but she rejected my seller financing offer. The house has been for sale at least three months and I know the seller doesn't need much cash. How can I get her to accept? -- Art M.

DEAR ART: Try again, but offer to prepay the first year's loan payments to the seller in advance and be present when the realty agent presents your purchase offer to the seller. I now write in most of my purchase offers: "This offer to be presented to the seller only in the presence of the buyer." That gives me the privilege of explaining my offer to the seller, so there is no misunderstanding.

But don't be afraid to walk away. You can't buy every house with seller financing. Some sellers just refuse to carry back a mortgage. That is their privilege. However, if you make enough offers with seller financing one eventually will be accepted.

DEAR BOB: Our large house has been listed for sale almost six months. It is a difficult home to sell because it has six bedrooms and the price is not cheap.

Last week we received an unusual purchase offer from a young doctor and his wife. They want to trade us their three-bedroom tract home as their down payment. Their net equity is about $85,000.

The real estate agent wants us to accept. However, she knows she will get the listing to sell the smaller home, so she will earn two sales commissions. What do you think of this unusual trade offer? Should we accept? -- Quentin A.

DEAR QUENTIN: That offer is not so unusual. I have heard of many similar trade offers that anxious sellers have accepted because they figure the smaller home will be easier to sell than the larger home. And such a trade offer could be ideal for a home seller who wants to move down to a less expensive home.

Before you accept that offer, consult your tax adviser. You could be getting yourself into a taxing situation without receiving enough cash to pay the tax on your sale profit.

DEAR BOB: I own a lot in a Florida development that I purchased about 12 years ago. My late husband and I planned to build our retirement home there, but he died about six years ago.

I have received several solicitation letters from real estate brokers who will list my home for a fee of $100, which includes advertising in a booklet of lots for sale. What do you think of this idea? -- Linda W.

DEAR LINDA: Don't waste your $100. Most advance fee schemes are rip-offs that produce no results except cash in the agent's pocket. Now you know why I do not recommend buying land you can't use immediately. Readers with questions should contact Bruss directly at P.O. Box 280038, San Francisco, Calif. 94128.