DEAR BOB: Several weeks ago, you ran a question from a seller who interviewed three real estate agents before listing. He asked if it would be smart to intentionally underprice his house, hoping to get purchase offers higher than his asking price. You recommended setting the asking price "just slightly below the price you are willing to accept."

As an agent with many years of home sales experience, I disagree. Underpricing houses for sale often results in sales considerably higher than market value. In many areas, underpricing has become widespread within the real estate community. However, I won't argue with your comment that you think it is "dishonest" to set an asking price lower than what the seller is willing to accept.

While underpricing may be against your morals, it clearly is not contrary to the ethics of brokers toiling in the trenches to find the best way to take care of our sellers. P.S. Is it likewise dishonest to set an asking price higher than what the seller will accept?--Lee B., Real Estate Broker

DEAR LEE: I appreciate your viewpoints. Intentional underpricing of houses has become widespread, especially during "hot markets," such as the ones earlier this year before mortgage interest rates went up a little. As we enter a more "normal" sales period in late 1999 and early 2000, it will be interesting to see if intentional underpricing continues.

Home buyers soon realize an asking price is not always the price the seller is willing to accept. This can become discouraging to buyers who make purchase offers at the asking price only to receive the seller's counteroffer above the asking price. Worse yet, such buyers are often outbid by savvy buyers who offer more than the asking price.

You said "Underpricing houses for sale often results in sales considerably higher than market value." Technically, I think you meant "presumed" market value. After all, market value is defined as the price at which the property changes ownership when neither buyer nor seller is under pressure to buy or sell.

I think deliberate underpricing of houses for less than the sellers will accept, while legal, is dishonest and unethical. This procedure makes asking prices, in many cities, a mere starting point for negotiations. This method can backfire if nobody offers to buy an underpriced house, knowing the seller probably won't sell at that price. Treat buyers as you would wish to be treated.

DEAR BOB: I live in a house that I leased seven years ago from an out-of-state owner. We had a verbal understanding that I would have an option to buy it when he decided to sell. So I performed all maintenance for the seven years.

In early 1999, the owner told me he wanted to sell and that he would give me first option to buy. His attorney wrote me a letter with the price and terms. We finally came to agreement and he asked that I arrange for the sale closing, which I did. But two days before the scheduled closing, after I had signed all my documents and paid the down payment with a cashier's check, the owner's attorney faxed a letter stating the seller was canceling.

Apparently, the seller got a better offer, even though I performed all maintenance and was never late with my rent for seven years. I filed a specific performance lawsuit, asking the court to compel the owner to comply with our agreement. But his attorney contends there was no written agreement signed by both of us, so the statute of frauds prevents specific performance. What should I do to enforce the sales agreement? --Mr. R.M.

DEAR MR. R.M.: I hope you hired an experienced real estate attorney who recorded a "lis pendens" against the home's title to effectively prevent the seller from selling or refinancing.

To comply with the statute of frauds, there must be a written agreement to sell signed by the party being sued--the seller. If you don't have that, your argument in court should probably be that your partial performance of maintaining the house for seven years in reliance on the oral option takes the case out of the statute of frauds' written requirement.

I'm sure your attorney has researched and found the precedent cases so holding. Next time, get everything in writing.

DEAR BOB: I want to refinance my commercial property mortgage. But it has a stiff prepayment penalty of one year's interest, which I find to be outrageous. What can I do to get the lender to waive or reduce it since the lender has been earning 9.75 percent interest on my mortgage for almost nine years?--Clyde C.

DEAR CLYDE: Although you didn't mention which state the property is located in, I'll presume the state does not have a statute barring or limiting prepayment penalties on commercial properties. Many states have such limits on prepayment penalties on owner-occupied residences.

Last year I encountered a situation similar to yours when I was selling a rental house. My prepayment penalty was one year's interest, no matter how old the mortgage was. However, I politely asked the lender to reduce it to six months' interest.

After I started using the word "unconscionable" and warned the lender I would pay the penalty "under protest" and then sue for a refund, the lender backed down. Perhaps you or your attorney will be equally successful with your lender.

DEAR BOB: My father died without a will, owning property in several states. Most are small properties that are worth little. He had been trying to sell them for several years, without success. How can I get rid of these properties without spending a fortune on legal fees so there will be something left for the heirs?--Ruth G.

DEAR RUTH: Since there was no will, probate proceedings are required in each state to convey title to those properties. However, some states have exceptions for small estates below specified minimums.

If you do nothing, title to those lots will eventually be taken by the state or county for unpaid property taxes. If the heirs don't want any of the parcels, you might contact the adjoining owners and offer to sell them those lots cheaply if they will pay probate costs.

DEAR BOB: I inherited my father's residence after he died last spring. It is a unique house in a neighborhood of $150,000 to $200,000 houses. I have not lived in the town for many years. Three real estate agents have given me value estimates $40,000 apart. While I've been fixing up the house, several people have contacted me about buying. My attorney was noncommittal about taking bids from them and selling without an agent. What do you advise?

--Mr. C.A.

DEAR MR. C.A.: Hire a professional appraiser to give you a market value appraisal. Be sure the appraiser is experienced appraising houses in that neighborhood.

You could list the house for sale with one of the agents but exclude the buyers you already know are interested so you won't owe a sales commission if one of them buys. Chances are they weren't serious, but you never know. If one of them buys, the attorney for the estate should be able to arrange the title transfer details so you can save the sales commission.

DEAR BOB: My mother died recently, and her will left her house to my son (her grandson), age 16. She stated in her will how she appreciated his taking care of her house, such as mowing the lawn and tending her garden, so she wanted him to have it.

I don't mind her not leaving the house to me, an only child, because I am quite well off financially. But I'm wondering if a minor child can inherit property. I recall your saying something about not putting minors on real estate titles.--Ted K.

DEAR TED: Minors, who are younger than 18, can receive title to real estate, so your son can inherit the house and hold title to it; however, he can't convey that title until he is 18.

If it should become necessary to sell the house before then, a court-appointed guardian must represent his interests. I hope he wants to become a young landlord in order to have rent coming in to pay the property taxes and other expenses. It will be a great experience.

Sometimes parents think it's smart to add little Suzie or Johnny to their home's title as joint tenants with right of survivorship. The parents reason that if anything should happen to them, their minor children will own the house.

However, that is poor reasoning, especially if the parents decide to sell the house before the children turn 18 and are able to convey title without a court-appointed guardian. Further problems can develop with older children if the parents want to sell and the adult children don't. Then a partition lawsuit may be needed to force a sale.

DEAR BOB: Two years ago I bought a 1985 double-wide mobile home with a loan at 12.6 percent interest. I would like to refinance to lower my interest rate. But I can't find any lender with a lower interest rate who will refinance a 1985 model in good condition. Any ideas?

--Daisy H.

DEAR DAISY: Most mortgage lenders will not finance older mobile homes because they usually depreciate in value, the way automobiles do. However, local banks will sometimes finance mobile homes for good customers. Also, check with local mobile home dealers for their recommendations. But I doubt you will find a lower interest rate.

DEAR BOB: We own a lot on which we want to build a custom house. What is the best source for a construction loan? One problem is that we already have a mortgage on our current house, which we won't sell until our new home is completed.--James N.

DEAR JAMES: Local banks usually make construction loans because they are profitable and generally have a short life, typically less than two years. Some lenders offer combination construction and permanent loans so you don't have to shop around for mortgage money when the house is completed.

Since construction loans do not require monthly payments, if you have good credit and already own the lot, obtaining a construction loan shouldn't be a problem.

Even though you already have a home mortgage, you should be able to get a construction loan because your custom-built home gradually increases in value as it is being built and as the lender makes periodic progress payments to the builder.

DEAR BOB: I own an out-of-state rental house that was formerly my residence. It has greatly appreciated in market value, and I don't want to sell because I may return to it someday. Meanwhile, I'm stuck with a jumbo mortgage of about $360,000, which has private mortgage insurance.

My lender refuses to cancel the PMI of about $76 per month even though the loan-to-value ratio is now about 70 percent. The lender says the policy is not to cancel PMI until the mortgage balance drops to 75 percent of the original amount. I figure that will be in about nine more years. What can I do to get rid of PMI?--David G.

DEAR DAVID: Since your jumbo loan is not owned by "good guy" lenders Fannie Mae or Freddie Mac (they only buy mortgages up to $240,000), you can't cite their rules, which require PMI cancellation on their loans when the loan-to-value ratio drops below 80 percent of current market value.

Have you checked for a statute in the state where the house is located to see if there is a law requiring PMI cancellation? For example, California has a statute requiring the lender to cancel PMI when the loan-to-value ratio drops to 75 percent.

I presume you've already written to the lender's president to politely ask that PMI be canceled because it is no longer needed and is a 100 percent waste of money for you. If that didn't work, then your best alternative is to refinance with a new mortgage that doesn't require PMI. Many lenders are now eager to refinance, even rental houses, because the mortgage market has slowed remarkably in the past few months.

DEAR BOB: I own a nice condominium on the second floor of a two-story building, but the roof leaks around the skylight in my kitchen. I have asked the directors of our homeowners association to repair the leak, which is causing damage to the wood and a mess on my kitchen floor during heavy rains.

They can't seem to find anyone to fix the flashing around the skylight. I obtained a bid from a roofer, but they say it is too high. This has been going on for about nine months. What should I do?--Joseph P.

DEAR JOSEPH: The condo homeowners association is responsible for maintaining the common areas, including the roof and windows. Please consult a lawyer, who will probably write the association's directors, giving a reasonable time, such as 30 days, to fix the leak.

If the association still neglects its duties after proper notice, as a last resort you may have to make the repairs and then seek reimbursement for your expenses from the association.

DEAR BOB: In my 35 years of selling and building houses, I became aware of situations in which the seller (usually a home builder), the buyer and the lender all agreed to an inflated sales price with falsified documents to get the mortgage approved. Who is at fault? Who would complain? Who would prosecute?--Thomas J.

DEAR THOMAS: If the lender's loan officers are aware of improper loan documentation, such as an inflated appraisal, the lender might have a cause of action against its employees and independent fee appraisers.

When the buyer and seller are aware of the fraud on the lender, they become liable to the lender for any losses. If the lender is federally insured, such fraud violates federal law and would be prosecuted by the federal government.

DEAR BOB: Many years ago, I had a living trust prepared by a lawyer. The only major item I own that was not included is my condominium. What is the reason for that?--Richard O.

DEAR RICHARD: I don't know, but now is the time to find out before you become incompetent or die. If the lawyer is still around, ask him. Perhaps it was an oversight or a mistake.

Some lawyers think the owner's residence should not be deeded into the living trust because it will forfeit state homestead or property-tax benefits. This usually is not correct. If that's what you are told by your attorney, get a second opinion.

For example, when my mother died a few years ago, her only major asset that had to go through probate court was her condominium. Her Minnesota lawyer had incorrectly advised that she would forfeit her homestead property-tax rights by deeding her condo into her living trust. The results of that bad advice were unnecessary probate costs and delays.

DEAR BOB: During a recent storm, a cascade of water descended down my property from the uphill house and property above. Thankfully, my house was not damaged. But next year I plan to build an extension of my house in the direction of that surprising cascade.

What responsibility does an uphill owner have to the owner of a downhill property? The water appears to have run from their front yard onto their side patio and then onto my property, running the depth of my property down to my street. What should I do?--Helen S.

DEAR HELEN: The general rule is a downhill property owner must accept the natural flow of water from an uphill property. However, if the uphill owner channels or directs the water artificially, then the uphill owner becomes liable to the downhill owner for damages.

But any owner can repel flood waters, such as by building a dike, even if the result is that the flood waters damage adjoining property.

Before building your house's addition, hire an engineer or architect to make provision for heavy water flows from your uphill neighbor. If that water is artificially directed toward your property, you should work with your neighbor to correct the problem before damage occurs. Perhaps a culvert can be constructed to divert the water to the street so it doesn't damage your property.

As you can see, the laws involving surface waters can get complicated. A real estate lawyer can assist with the legal aspects, especially if the uphill neighbor is not cooperative.

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