DEAR BOB: My husband will be retiring in early 2000. We want to move to a better climate then, but our dilemma is whether to sell our old home before buying a new one. For the last few winters, we have visited Arizona and like it very much, but we aren't certain we want to live there year-round. What would you do in our situation?

--Glenda R.

DEAR GLENDA: The general rule is sell your old home before buying a replacement home, because then you won't be under pressure to sell fast and you will know exactly how much cash you have available from the sale for your home purchase.

Your situation, however, is more complicated. Before selling your old home, try living in Arizona year-round. Rent a house or apartment in the town where you think you want to retire. If you haven't enjoyed Arizona from May through October, you don't know what hot is. Yes, I know it's a "dry heat," but it's still extremely hot.

I have friends who retired to live in Arizona year-round and they love it. However, many other retirees flee Arizona during the hot summer months.

DEAR BOB: We are supposed to close the purchase of our home on Jan. 28, but now we are having second thoughts about buying that house. We're not so sure about the neighborhood, since it is rather new and not very well established. Almost every weekend, we drive buy our new house--actually, it's about a year old--and aren't so thrilled about the long commute it will involve. If we cancel the purchase, can we get our $10,000 deposit refunded?--Alan Y.

DEAR ALAN: Reread your purchase contract. Most specify the consequences if the home buyer defaults. To illustrate, if it contains a liquidated damages clause, and both parties signed it, the seller's damages are limited to the amount specified.

However, if your purchase contract says nothing about what happens if the buyer defaults, then your $10,000 deposit won't be refunded unless the seller agrees. The seller might even sue you for additional damages if, for example, he can't sell the home for the amount you agreed to pay or he incurs additional carrying expenses. Before defaulting, consult a local real estate attorney to discuss the financial consequences.

DEAR BOB: Recently a friend of ours got a loan from a local bank to buy a new house. His income goes up and down radically from year to year, but he always pays his bills--sometimes a bit late--and is a solid citizen. It's either feast or famine with his family.

We were surprised when we learned he got a big mortgage, since we had such a hassle when we applied for a mortgage last summer and had just one late payment on our credit report because of defective merchandise bought. I know his credit report is much worse than ours. What are we doing wrong?--Doug C.

DEAR DOUG: You probably aren't doing anything wrong. However, you should get that late payment removed from your credit reports if you had a valid reason for not paying until the problem was corrected.

Your friend who got a big home mortgage from a local bank probably borrowed from a "portfolio lender." Such lenders can be very flexible because they keep their loans "in portfolio."

I love doing business with a local lender like that, rather than a big, impersonal chain bank. Portfolio lenders don't sell most of their home loans, like other lenders do, to tough secondary mortgage market buyers such as Fannie Mae and Freddie Mac.

Another possibility is that your friend got an adjustable-rate mortgage. Most originating banks and S&Ls retain their ARMs in portfolio, because they automatically adjust the interest rate if the index--such as the cost of funds or certificate of deposit interest rate--goes up or down. Thus, ARMs are very safe for lenders.

DEAR BOB: We are in the process of looking for a house to buy. Last Sunday we visited a real estate agent's open house. When we expressed interest in buying the house, the agent told us she represents the seller and could not be our "buyer's agent" for that house. After we mentioned a few objections, she said she could show us other houses her brokerage has listed as a "subagent." We are thoroughly confused. What we want is a buyer's agent, such as you often mention, not a "subagent," whatever that is. Is a subagent the same as a buyer's agent?--Torrie C.

DEAR TORRIE: No. You are smart to clear up who represents whom in your important home purchase transaction. There is a huge difference between a buyer's agent and a subagent. Most states now require realty agents to disclose the agency relationship in writing to prevent misunderstandings.

A buyer's agent represents only you, the home buyer, in the transaction, looking out for your best interests. Your buyer's agent is obligated not to reveal confidential information to the seller or the listing agent, such as the highest price you say you will pay. If the house you buy is listed for sale with a listing agent, the listing agent and your buyer's agent will usually split the sales commission. If you buy a "for sale by owner" house with no listing agent and your buyer's agent represents you, the seller usually will agree to pay your buyer's agent 50 percent of a customary sales commission.

However, a subagent works for the seller. In other words, a subagent is working under the direction of the home's listing agent. Because of legal problems, many local Realtors' associations have eliminated subagency. If you deal with a subagent, or a "dual agent" representing both seller and buyer, don't reveal any confidential information, such as the highest price you will pay, because that agent has a duty to report it to the seller when your initial purchase offer is presented.

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