QDEAR BOB: Some time ago you had a letter from a widow who asked why she shouldn't deed her home to her son in joint tenancy with right of survivorship so she wouldn't need a will or a living trust. That's what I did. It was one of the biggest mistakes I ever made.

My daughter, age 36, had been bugging me to put her on the title to my home since she was living in my house with me after her divorce. Even my lawyer advised me not to do it. I guess I was hoping my daughter would take care of me in my old age if I got sick. (I'm 71 and in quite good health.)

About two years later, my daughter met a man, they married and he moved in. Now it seems I'm not wanted in "their" house. I wanted to sell it to them, but my daughter claims she already owns half of my house, so why should they buy when it will be hers when I die?

At this point, I would like to sell my house, but I can't because my daughter is on the title. My lawyer has filed a partition lawsuit to force a sale of the house. He's hoping the judge will rule all the sale proceeds should be mine. However, my daughter's lawyer is fighting that argument. Any suggestions? -- Amy T.

ADEAR AMY: Your lawyer appears to be doing all he can to protect your legal rights to that house.

Your situation shows why parents should not add children or grandchildren to their property titles just to avoid probate.

The better solution to avoid probate costs and delays would have been to deed your home into your living trust so you could maintain complete control of it during your lifetime, without needing your daughter's approval for such things as a sale or refinancing. Your daughter could have been named beneficiary to receive the house when you die.

DEAR BOB: I have owned two cooperative apartment units for almost nine years and they have doubled in value during this time. The lease on the land beneath the building expires in 2052. I would like to borrow on my equity gained in these units or sell them to buy more investment property.

What happens to a co-op when the land lease expires? I am worried that the co-op shares will be worthless. I am 42 and want to build my mini-empire from the equity that I gained in the last nine years. -- Marvin K.

DEAR MARVIN: My best advice is to get out while the getting is good. Sell those co-ops as fast as you can while the prices are up.

Although 49 years remain on that land lease, unless it contains a renewal provision, when the lease expires the land owner will then own the co-op building. Your co-op shares will become worthless. Of course, by then you'll be 91 years old and probably won't care.

As the land lease expiration date nears, your co-op shares will lose value. Meanwhile, refinancing your co-op shares could be difficult and expensive because there are few co-op lenders.

If your co-op shares have doubled in value, I suggest you sell now and make an IRC 1031(a)(3) Starker exchange for other investment real estate. Consult a tax adviser for details.

DEAR BOB: My wife and I have owned and lived for six months every year in each of our two homes. In September 2002, we closed on the sale of our Michigan home, which was our primary residence. We will take the full $500,000 principal-residence-

sale tax exemption.

Since then, we lived in our condo as our main home. We have just sold it and plan to close its sale by the end of the month. Our capital gain is about $30,000. Can we use the home-sale tax exemption again since the condo is now our primary residence? -- Respino Y.

DEAR RESPINO: The $30,000 condo sale capital gain is taxable. You can use the Internal Revenue Code 121 tax exemption of up to $500,000 for a married couple (up to $250,000 for a single homeowner) on the profits from the sale of a principal residence only once every 24 months. That's presuming you both have owned and lived in the residence an aggregate two out of the last five years before the sale. Ask your tax adviser for full details.

DEAR BOB: My 1997 home loan with my lender was refinanced with that same lender in 2001. Both loans specified that I would pay my own property taxes and insurance with no escrow impound account.

Now, when I went to refinance again, my lender says it will charge me either a higher interest rate or a one-time escrow waiver fee if I insist on paying my own taxes and insurance.

I have a track record of always paying these expenses on time. I even direct-pay my mortgage through checking account automatic deduction. How can the lender get away with charging me for making my own property tax and insurance payments? Is this a garbage fee? -- Michael D.

DEAR MICHAEL: Escrow waiver fees, which are charged by some mortgage lenders, are a relatively new rip-off, and yes, they are garbage or junk fees. But some states, such as California, prohibit lenders from requiring escrow accounts, except for borrowers with VA, FHA and private mortgage insurance (PMI) mortgages.

However, if you don't have an insurance and property tax escrow account, most lenders charge an upfront "tax service fee" of about $75 when the loan is originated to hire a firm to check up on your property tax payments every year.

Especially since you are a longtime customer with a superb payment record, there is no valid reason your lender should rip you off with an escrow waiver fee. Unfortunately, such garbage fees are legal, except in the few states prohibiting them.

DEAR BOB: Can a real estate broker take a for-sale-by-owner home sale after we signed a written contract and I paid my deposit? The real estate lawyer hired by the seller has a son who is a real estate agent. The lawyer-and-agent duo convinced the seller to break my contract because they promised the seller they can get her $50,000 more for her house. I want the house at the price the seller agreed to in writing. What should I do? -- Barbara B.

DEAR BARBARA: Consult with a real estate lawyer. You should file a specific performance lawsuit against the seller to enforce your sales contract, presuming it was valid and had no loopholes. Your lawyer will probably also record a "lis pendens," a notice of pending litigation involving the title, against the home's title to effectively stop the seller from selling or refinancing the house.

DEAR BOB: I am refinancing my home loan with the same lender that held my old mortgage, which was obtained in 1993. If my lender gets a new title insurance policy, do I need a new owner's title insurance policy too? -- Lucy W.

DEAR LUCY: No. Your lender needs a new lender's title insurance policy because liens and encumbrances might have affected your title since you bought the house. Maybe you incurred a judgment lien, an IRS tax lien or perhaps a mechanic's lien. Depending on state law, be sure to ask if a discount is available for the lender's title policy. You pay the title fee.

However, you don't need a new owner's title insurance policy at the time of refinancing. Your original owner's title insurance policy still protects against insured title risks as long as you or your heirs own the property.

DEAR BOB: My son's loan servicer failed to pay the property tax from his escrow account on time. Now my son has received a bill with late charges from the county tax collector. What should he do? He wants to promptly pay the taxes and then seek reimbursement from the loan servicer. Do you agree? -- Brenda J.

DEAR BRENDA: No. The loan servicer breached its fiduciary duty to your son by not properly managing his escrow account. Your son should write a polite letter to the loan servicer insisting the property taxes be paid immediately with an apology letter to your son. He should be certain the late charges and penalty are not withdrawn from his escrow account. The reason for writing the letter is to begin a paper trail.

Then your son should follow up with phone calls several times a week until he receives written confirmation that the property taxes were paid and his escrow account was not debited for the late charges and penalty. This is important because the credit bureaus often report late property tax payments, and he may need to prove to them that the late payment was not his fault.

Your son should ask the loan servicer two things: 1. who owns his mortgage, such as Fannie Mae or Freddie Mac; and 2. which state or federal government agency regulates the loan servicer.

After the loan servicer pays the property taxes, your son should write the owner of his mortgage and the government regulating agency to report the loan servicer's breach of fiduciary duty and ask for an investigation to learn if the loan servicer failed to pay taxes for other borrowers, too. Maybe it was just an error. Or maybe it is embezzlement.

DEAR BOB: We are looking into refinancing. Several months ago you wrote that certain days of the month are better for closing than others. What were those dates and reasons again?

Also, you often write about all the junk fees that lenders try to incorporate into their closing costs. You weren't kidding. I've shopped around, and the favorite lender junk fee seems to be a processing fee of anywhere between $200 and $500. Is there any way to avoid fees such as this? -- Becky H.

DEAR BECKY: The best day to close a home purchase or a refinanced mortgage is the last business day of the month, unless it is on a Monday or the day after a holiday. Then you should close on the prior business day so you won't pay interest for days when you don't have use of the money.

At closing, borrowers usually have to pay the mortgage interest to the end of the current month. Most borrowers want to make this interest payment as low as possible, so closing late in the month is advantageous.

For example, if you close on Friday, Feb. 28, you'll only have one day of interest to pay at the closing. Because mortgage interest is paid in arrears, your first monthly mortgage payment will be due on April 1, plus usually a 10- or 15-day grace period.

However, because month-end closings became too burdensome for lenders, some now don't require borrowers to pay the full current month's interest at the closing. But the first monthly mortgage payment, due on the first day of the next month, will include interest for the month of the loan closing.

As for mortgage junk or garbage fees, when you inquire about a mortgage, ask for a no- or low-cost mortgage with no junk or garbage fees. If you specify that upfront to the lender, it probably won't charge them. But you might pay a slightly higher interest rate, typically one-eighth percent higher.

DEAR BOB: Does a landlord have to pay the tenant, upon move-out, interest on his or her security deposit? If so, must interest be paid if the security deposit is not refunded because of damage to the premises? -- Barbara P.

DEAR BARBARA: The answer depends on where the rental property is and if there is any state, city or county law requiring landlords to pay interest on tenant security deposits.

If such interest payment is required, the interest rate is another issue. Some cities and counties require higher interest rate payments on security deposits than the 1 or 2 percent currently paid by most banks.

DEAR BOB: A friend and I plan to buy a condo together. But only his name will be on the mortgage. If I pay half the mortgage payment each month, can I deduct my half of the interest on my income tax returns? -- Mr. A.P.

DEAR MR. A.P.: Yes. If your name is on the title, you are legally obligated to make the mortgage payments, even if the mortgage is not in your name. Presuming you pay half the mortgage interest and property taxes, you can then claim those payments as itemized deductions on your income tax returns. Consult a tax adviser for details.

DEAR BOB: I bought a second home in Florida where my son and family are living (rent-free) while attending school. I paid less than 20 percent down payment and knew I would have to pay private mortgage insurance (PMI) premiums. I was told PMI could be removed when the loan-to-value ratio reached 80 percent.

According to my lender, my loan-to-value ratio is now 83.9 percent. I disagree -- the property has gone up in value, and I am pretty sure the ratio is below 80 percent. I asked to be sent information on what I need to do to prove PMI is no longer needed. To my dismay, I am now being told because this is a second home, the loan-to-value ratio must be 65 percent.

Have you ever heard of this? Do I have any recourse? I feel foolish for trusting my lender. -- Donna S.

DEAR DONNA: Your situation shows why it is so important to get the PMI removal rules in writing at the time of borrowing. I learned long ago it usually doesn't pay to fight your mortgage lender.

If your lender refuses to treat you right, stop doing business there. There are many other lenders that will gladly refinance your mortgage without PMI.

DEAR BOB: We are selling our home. The buyer wants a nine-month closing. Can we reduce the sales price of the house by the lease-back amount, thereby reducing our capital gain obligation? -- George A.

DEAR GEORGE: If the home is your principal residence and you qualify for the $250,000 (up to $500,000 if you're married and filing jointly) principal-residence-sale tax exemption, you might not have any taxable capital gain. To qualify, you (and/or your wife) must have owned and occupied your principal residence an aggregate two of the last five years before its sale.

A nine-month closing is unusual. Unless the home sale market in your area is extremely depressed, I wouldn't even consider it. During the nine months, the buyer might decide not to go ahead with the deal, and you could be stuck with an unsold house. Be sure to get all the buyer's money now if you decide to wait the nine months to close.

Even if the sale doesn't close for nine months (and you're presumably still living in the house), I don't see how that would reduce the home's sales price. A lease-back occurs when a home sale is closed but the seller remains in the house, thus leasing it back for several months. In a lease-back, the holdover seller pays rent to the buyer, usually from the sales proceeds, which would otherwise go to the seller.

Consult a tax adviser for details.

DEAR BOB: My wife and I bought a 2.1-acre lot from a builder in a small subdivision. Home construction is nearly done. We expect to close our purchase by the end of the month.

I have been visiting the lot each weekend since August 2002 to watch the magic of our home construction. I recently observed the lot lines going from a rectangular shape to that of a triangle, with stakes and pink tape clearly delineating the area.

I wish to relieve my uneasiness by hiring a surveyor. But the property is not mine until after the closing. Without tipping my hand yet to the builder, do I have the right to hire a surveyor to verify the size and shape of my lot before I complete the purchase?

The builder wears lots of hats, as he owns all the lots, he holds the exclusive rights to build each home, he is president of the homeowners association, and he is chairman of the architectural review committee. -- Jim A.

DEAR JIM: Of course you have the right to have a survey made of your lot lines. But before you hire a surveyor, pay a visit to your county recorder's office where the subdivision maps are recorded. Check the recorded lot map for your new home.

Get a copy of the map. The title insurance company that will handle your sale can also obtain this lot map for you so you will know its boundaries. Then, even before a survey is made, you'll know if the builder has changed the lot size of your future property.

DEAR BOB: My husband and I have been renting a modest house for two years. We asked the seller about buying it. Our problem is we have poor credit. As you suggested, we checked our FICO credit scores at www.myfico.com. Mine is 613, and my husband's is 589.

Our landlord suggests selling to us on a land contract. He says we would make the monthly payments to him, and he would keep paying on the existing mortgage. As we're not familiar with this method, are there any possible pitfalls for us?

-- Suzanna H.

DEAR SUZANNA: Yes. There are a lot of potential land contract problems for buyers. Land contract sellers can also have problems if their buyers default.

As the land contract buyers, you will be the "equitable owners" entitled to deduct the interest and property taxes you pay. The seller remains the "legal owner," holding the title until you make all or an agreed number of payments, which entitle you to receive the ownership title.

Many land contract buyers who faithfully made their payments every month have discovered, to their dismay, that their sellers are unable to deliver marketable title. Sometimes the sellers disappear or die, and the buyers can't find anyone to transfer ownership.

Land contract sellers sometimes discover that evicting a nonpaying buyer can be difficult. Court action is often required.

Before entering into a land contract sale, consult an experienced local real estate lawyer for advice. Land contract sales, also known as installment land sales, contracts for deed, contracts of sale, agreements for sale, and a zillion other names, usually work out well. But you might be better off obtaining the title now even if you have to pay an above-market mortgage interest rate.

DEAR BOB: Suppose you are signing the final mortgage papers and you discover the lender has imposed unexpected junk fees. What should you do? Is it too late at this time to question these fees? -- John D.

DEAR JOHN: No. The proper time to question any unexpected junk or garbage fees that the lender tries to sneak by the borrower is before the borrower signs the loan papers.

Lenders know borrowers are extremely vulnerable when signing the loan documents; many borrowers don't even question junk fees because they're so anxious to get the money.

If you're buying a home, you'll be all excited and probably won't question the lender's junk fees -- which aren't for any services and so are pure profit to the lender -- such as processing fee, administration fee, escrow waiver fee, documentation fee, and even miscellaneous fee.

If you're refinancing, however, it's much easier to walk away if the lender refuses to reduce or cancel the junk or garbage fees. But when the borrower protests, lenders will often cancel or reduce these fees.

DEAR BOB: I am an experienced real estate investor. My partner and I have 17 mortgaged properties. But we are running into problems obtaining investment property mortgages.

The lenders are saying the guidelines have recently changed, and they won't approve investment property or second-home mortgages for borrowers who own more than 10 mortgaged properties.

Any suggestions, other than getting mortgages from expensive private lenders? Do you know if Fannie Mae is going to change its guidelines? -- Steve P.

DEAR STEVE: Just a few days ago I had lunch with two "tycoon" real estate investors who own many more properties than you do. They were discussing several mortgage alternatives they were considering for refinancing.

Not a word was said about any difficulty finding mortgages today for their rental properties. Instead, it seems like there is too much mortgage money available for too few sound investment opportunities.

I suggest you work with an experienced mortgage broker who specializes in investment properties such as yours. Forget about Fannie Mae. You don't need that lender.

Ask fellow investors in your community for lender recommendations. Another excellent source is community banks, which, in recent years, have discovered that mortgages on rental properties make superb investments.

Readers with questions should write Robert J. Bruss at P.O. Box 280038, San Francisco, Calif. 94128, or contact him via e-mail at robertjbruss@aol.com.

{copy} 2003, Tribune Media Services Inc.