DEAR BOB: I have a second and third mortgage on my house. The interest rates are killing me and I'm trying to get back on my feet financially. My interest rate on the second is 13 percent and it is 21 percent on the third.

I'm having a hard time paying off one mortgage. How can I get my house back to only one payment that I can afford? Is there a lender I can trust who won't make me feel like a criminal?--Gladys A.

DEAR GLADYS: Having obtained many mortgages during more than 30 years of home and investment property ownership, I share your feeling about some mortgage lenders who treat borrowers like criminals. They act as if they are doing borrowers a big favor. Actually, it's the other way around.

If your credit and income aren't too good, you will have a hard time refinancing with one low-interest-rate mortgage to pay off your existing three loans. But today is a great time to shop for mortgage money. Interest rates are up a bit from a few months ago, but loan demand is down, so lenders are eager to make loans. They may even be nice to you.

Start "dialing for dollars" to learn which local lenders offer the best mortgages for your situation. Your bank or credit union is a great place to begin. Then contact a few mortgage brokers and mortgage bankers. To avoid too many credit inquiries, which can hurt your credit report, don't fill out a loan application until the lender shows you in writing the available loan terms that will solve your finance problem.

DEAR BOB: Appalled, angry and now frustrated describe our situation. When we returned from our vacation last week, we found a neighbor had come into our yard, cut down our trees and butchered our shrubbery.

For 15 years I have been establishing a noise barrier from the rental property behind our house. It has noisy tenants, loud parties and barking dogs.

What can we do? We talked to the landlord who unsympathetically apologized. We cannot afford the time or money to sue. Is there any solution?--Mr. C.S.

DEAR MR. C.S.: Other than a lawsuit against your neighbors for the damages--I presume you can prove who cut down your trees--I am not aware of any other practical remedy. Many homeowners construct attractive fences around their property to keep neighbors out. The result is increased privacy, too. I suggest you consult a lawyer who might take your case on a contingency basis.

DEAR BOB: I own an Arizona rental house with other couples in an informal, verbal partnership. We are having a disagreement because they don't want to pay the mortgage that I've been paying on the house.

I want to force the sale of the house, get my money back and keep the house. Since we don't live in Arizona, can a local court here partition the sale of the Arizona house?--Bakh A.

DEAR BAKH: No. Real estate lawsuits must be brought in the community where the property is located, with few exceptions. Only an Arizona court in the community where the house is located is the proper venue with jurisdiction.

A partition lawsuit asks the court to order the property sold, with the proceeds divided among the disagreeing co-owners. If you want to keep the house, you'll have to buy out the partners, minus what they allegedly owe you.

Your situation shows why it is important for real estate co-owners, especially investors, to have written partnership agreements. Sooner or later, trouble usually develops, just as happened in your situation. Consult an Arizona real estate lawyer to discuss your alternatives.

DEAR BOB: My wife and I lived in a rental house, which was owned by my parents. Nine years later, we received title to this house from them. After six months of ownership, we bought another house and moved out.

For the past 18 months, the house has been a rental. We want to sell it. Do we have to pay capital gains tax on our profits since we did not own and live in it for at least two years?--John E.

DEAR JOHN: Yes. Your nine years of occupancy but only six months of principal residence ownership do not qualify you and your wife for the $250,000/$500,000 home-sale tax exemption. As you know, Internal Revenue Code 121 requires at least two years of ownership and occupancy within the five years before the sale.

But I question if you have much taxable profit. Did your parents give you the house as a gift? If so, as the donee you take over your parents' low adjusted cost basis. The difference between that basis and your net adjusted sales price is your taxable capital gain.

However, if you bought the house from your parents, paying close to its market value about two years ago, then your capital gain is only the difference between the price paid and your net adjusted sales price. Consult a tax adviser for details.

DEAR BOB: My husband and I bought our house in January 1998 with a 10 percent down payment. The mortgage lender required us to pay private mortgage insurance (PMI). We have made major improvements, such as a new roof, air conditioning, attic insulation, refaced kitchen cabinets, a remodeled master bathroom and exterior painting.

Home values in our neighborhood have appreciated greatly in the past year. Last week we had an appraisal done, and it confirmed that our house has appreciated almost $50,000 since purchase.

Early in 1999, I contacted our mortgage lender to find out how to cancel our PMI. They said the only two ways are to pay down the mortgage so the loan-to-value is below 80 percent and get a new appraisal showing the current loan balance is below 80 percent of today's market value, which we did.

If by some chance the lender refuses to cancel our PMI, what recourse do we have? Refinancing is not an option since we have a great 6.75 percent interest rate for 30 years.--Sue G.

DEAR SUE: Most lenders will agree to drop PMI when the loan-to-value ratio declines below 80 percent, as shown by a new appraisal.

However, if the lender refuses to cancel your PMI, find out who owns your mortgage today. The lender must tell you. If you learn Fannie Mae or Freddie Mac, the nation's largest secondary mortgage market lenders, owns your loan, their rules require dropping PMI if the loan is below 80 percent of market value.

A few mortgage lenders refuse to cancel PMI even when the loan-to-value ratio is below 80 percent. However, some states, such as California, have laws specifying when PMI must be canceled. Unfortunately, the new federal law on this issue won't have much effect for about two years.

DEAR BOB: Some time ago you wrote about buying a house with seller financing. You said that method is good for "cash challenged" buyers with less-than-perfect credit. That's us! We had a Chapter 7 bankruptcy about three years ago (due to debts that my business couldn't pay), but that's behind us. Now we pay our rent and other bills on time.

Last summer we found a house for sale, and the sellers liked our purchase offer of a 10 percent down payment and seller financing at 8 percent interest. But, before it was accepted, another buyer offered more and an all-cash sale, so the sellers accepted that offer.

Since then we haven't been able to find another house to buy with seller financing. How can we find one in a decent neighborhood?

--Darren G.

DEAR DARREN: More than 50 percent of U.S. houses are owned free and clear. When those owners decide to sell, they are superb candidates for seller financing.

Keep making purchase offers on free-and-clear houses. Look for motivated sellers, especially out-of-town landlords whose tenants have abused the houses or caused rent collection trouble.

A seller-financing variation is to take over the existing mortgage while the seller carries back a second mortgage. If the existing mortgage has a due-on-sale clause, most lenders allow assumptions with a low assumption fee or at no cost.

Not every house can be bought with seller financing, but all you need is one. Keep making purchase offers. Don't give up until you buy a house like the one that got away from you last summer.

DEAR BOB: My son will soon be in the market to buy a house. He and his wife both work. They have about $13,000 in savings after about 30 months of marriage.

My wife and I are retired and own our house free and clear. We are willing to put up some money to help with their down payment. Should we be joint tenants in their home purchase? I still have my letter of VA mortgage eligibility. Can I use that with my son?--Mr. A.P.

DEAR MR. A.P.: I do not like the idea of your becoming joint tenant co-owners with your son and his wife on their house. I don't think they will like it either because of many potential complications, such as divorce or death. Instead, either lend or give them the rest of the down payment money they need to buy the house.

For example, Fannie Mae's "Flex 97" home loan offers loans up to $240,000 with only a 3 percent cash down payment. Even that 3 percent can be borrowed. However, the borrowers need excellent credit and good income. Mortgage brokers and most other lenders offer these loans at reasonable interest rates.

As for using your old VA mortgage eligibility, it is probably still available. Since you are retired, however, you may not have enough income to qualify. VA mortgages require owner-occupancy, so if you get a VA mortgage, it will have to be on your personal residence, not your son's home. Check with a VA lender about your eligibility.

DEAR BOB: When I recently visited a rental house I own, I discovered my neighbor built a fence on my side of the property line. My tenant likes it because of the added privacy, but I don't like losing a two-foot strip of my land. What should I do?

--Todd W.

DEAR TODD: Consult a local real estate lawyer. To avoid having your neighbor acquire a permanent prescriptive easement for that two-foot strip of your property, you should take action now. One solution is to have a lawyer prepare and record a permission to use document. Both you and your neighbor should sign it, with notarized signatures, and then record it against both parcels so there is no future prescriptive easement.

DEAR BOB: We just started renting out our personal residence, which we occupied for more than 10 years. How long must we rent it before we can make a tax-deferred IRS 1031 exchange? A real estate attorney told us it is a "gray area" but that it is best to rent it through two income tax years. Then I read someplace it must be rented a minimum of three years. Which is it?--Helga A.

DEAR HELGA: Nobody, not even the IRS, knows for sure. I've had accountants tell me six to 12 months is sufficient to show rental intent. Of course, two or three years will be safer from IRS challenge. As far as I can determine, there are no IRS regulations or rulings and no tax court decisions on this issue.

If you find someone who knows the answer for sure, let us all know.

DEAR BOB: I let the agent who listed my house for sale set the asking price and sales commission. I made the recommended improvements and made my home accessible to the agents with a lockbox. But the agent rewarded me with contempt, lies and general lack of motivation regarding my sale.

I documented these to the brokerage firm, but they are backing the agent with the same bad attitude. Are there any organizations or agencies to which I should forward my issues to protect future buyers and sellers? Or should I just get on with my life?--Robert B.

DEAR ROBERT: Although you did mention lies, the other two things you mentioned--contempt and lack of motivation--generally aren't actionable. If the agent lied to you about a serious matter, such as your home's value, if it was deceit or misrepresentation, that could be a breach of the agent's fiduciary duty to you. In serious cases, the agent's sales license can be revoked.

How did you select this agent? Did you follow my constant advice to interview at least three successful local realty agents and to check their prior seller references?

If you checked out several agents, I doubt you would have chosen him. Perhaps you were too trusting since you let him set the asking price. You should have at least reviewed all the comparative market analysis reports presented by the other agents interviewed.

Unless the agent violated a real estate statute or code of ethics, notifying the state real estate commissioner and the local Association of Realtors will be a waste of your time, although you may feel better. Fortunately, the few unmotivated agents such as you describe rarely survive long in real estate sales.

Readers with questions should write Robert J. Bruss at P.O. Box 280038, San Francisco, Calif. 94128. {copy} 1999, Tribune Media Services Inc.