QDEAR BOB: We recently refinanced our mortgage to lower the interest rate and take out cash to pay off credit card debt. But at the last minute before we were expected to sign the loan papers, the mortgage broker gave us documents showing large fees we had never heard of before. Because we were refinancing, we told the broker we didn't want to pay any loan fee points, which, as you have explained many times, can only be deducted over the life of the refinanced mortgage. In addition to the appraisal fee and lender's title insurance fee, which we expected, there were extras that weren't listed on the "good-faith estimate," which the mortgage broker gave us after we applied for the refinance. We were charged an administration fee, underwriting fee, documentation fee, inspection fee, preparation fee, wire fee, courier fee and even a miscellaneous fee. The total was about $3,800. When we protested, our mortgage broker said it was the lender, not the broker, that imposed these fees. However, I saw there was also a notation about a "yield spread premium," which wasn't charged to us. Were we ripped off by mortgage lender junk fees?{ndash}Gregg W.

ADEAR GREGG: Yes. A mortgage junk, or garbage, fee is a fee paid by the borrower that does not go to a third party for a legitimate service. Your appraisal fee and lender's title insurance fee were legitimate fees paid to third parties for services. The wire and courier fees may also have been legitimate.

Because you wisely told the mortgage broker you didn't want to pay any loan fee on your refinance, the broker probably arranged a loan at an interest rate slightly above the market rate. To illustrate, if 6 percent is the "market rate" for home loans, your mortgage might be at 61/8 percent with no loan fee.

The result is that the actual lender gave your mortgage broker a fee for producing a higher-than-market-rate mortgage. It is called a "yield spread premium." But it's perfectly legal so don't argue about it.

However, those other fees are 100 percent junk or garbage fees. Whether they went to the actual lender or the mortgage broker is difficult to determine.

Unfortunately, there is no penalty when a mortgage broker provides borrowers with a good-faith estimate of closing costs that is more fiction than truth.

If you feel strongly, you could demand a refund from your mortgage broker of junk fees. You probably won't receive a reply. But then you can decide if you want to take the mortgage broker to local small-claims court to let the judge decide if you are entitled to a refund.

DEAR BOB: My husband and I are divorcing after 18 years. But after he moved out, he stopped paying the mortgage, which is now four months behind. The mortgage company started foreclosure. He earns more than $200,000 per year and can afford the mortgage payments. What can I do to stop the foreclosure?

{ndash}Agnes C.

DEAR AGNES: Please consult your divorce attorney. A pending divorce won't stop the mortgage lender from foreclosing for nonpayment.

For the sake of the children, you and your husband should try to reach an accommodation to save the house from foreclosure loss. As a last resort, you could file for bankruptcy so the bankruptcy "automatic stay" will temporarily delay a foreclosure sale.

DEAR BOB: We recently bought an "as is" home in a hot market where there were more buyers than good homes for sale. Our buyer's agent told us we had to make our purchase offer with no contingencies if we wanted a chance of acceptance by the seller. So we waived a customary professional inspection. The seller supplied an inspection report, which showed nothing seriously wrong with the house. But shortly after moving in, we hired our own inspector, who said the furnace had a cracked firebox, a serious hazard needing replacement; the roof has been leaking into the attic, which had absorbent felt laid on the rafters to prevent leaking into the living areas; and the fireplace chimney is badly cracked, needing replacement. The seller's disclosure statement said: "See attached inspector's report." Is the seller liable for repair costs?{ndash}Kitty H.

DEAR KITTY: You asked an extremely tough question. Because the seller's so-called professional inspector was hired by the home seller, he or she has no liability to you.

However, if you can prove the seller knew of the defects you discovered after moving in, the seller might be liable to you for fraud. But proving what the seller knew can be very difficult.

Your best sources are nosy neighbors. If they knew about the defects and are willing to testify, you just won your case against the seller. For full details, please consult a real estate lawyer.

DEAR BOB: I inherited my late father's house but had no desire to keep it. Following your suggestion, I interviewed three agents in the small town where the house is located. The first agent was high pressure but estimated what I later found out was a low sales price (probably to get a quick, easy sale). The second agent estimated a higher sales price based on similar sales within the past few months. But the third agent picked a "pie in the sky" estimated sales price without any justification. After checking references, I listed for 90 days with the second agent. I'm glad I did. She did a superb job, even advising me not to accept the first offer because the buyer was not preapproved for a mortgage. The second buyer offered about $4,000 more (just $1,500 under the asking price) and the sale closed successfully. Thanks for the great advice to interview three agents.{ndash}Herbert H.

DEAR HERBERT: A few real estate agents get mad when I suggest home sellers interview at least three agents before listing with the best one. Your situation shows why this advice is sound.

DEAR BOB: I own a property that I rent to college students. They seem to have heard about "black mold." I need to educate myself on this issue to see if my rental has it. Where can I get information?{ndash}Harriet G.

DEAR HARRIET: Mold requires moisture, such as a leaking pipe or rainwater leaking into a house. Virtually every property has a little bit of mold. For example, recently I stayed in a luxury hotel where I observed a bit of mold around the bathtub.

However, toxic mold often develops in walls or underneath a house in a crawl space. Some individuals become extremely ill when exposed to toxic mold, whereas others aren't affected.

One book to read is "What Every Home Owner Needs to Know About Mold and What to Do About It," by Vicki Lankarge. It is available in stock or by special order at local bookstores, public libraries and online.

DEAR BOB: About two years ago my wife and I moved to Florida, where we rent a condo. Meanwhile, we rented our house to tenants. Now our tenants are pressuring us to sell them the house or they will move out. We hate to lose them as they pay on time, take care of minor repairs and don't complain. We own the house free and clear, so they offered us a modest $15,000 down payment if we will carry back the mortgage. It would provide greater monthly income to us than we now receive in rent. But our big problem is, if we sell, our capital gain will be about $325,000. Although we rented the house for almost two years, can we still qualify for that $500,000 tax break you often discuss?{ndash}Morgan Y.

DEAR MORGAN: Yes. If you and your wife occupied your principal residence an aggregate two of the five years before its sale, you qualify for the Internal Revenue Code 121 tax exemption of $250,000 each.

Carrying back the mortgage for your buyers, who have proven themselves to be reliable, can create retirement investment income at an interest rate you probably can't earn elsewhere with safety. Although the capital gain will be tax-free, your interest income may be taxable, depending on your tax situation. For more details, please consult a tax adviser.

DEAR BOB: I live in a condo complex where I recently received a $265 bill to pay for the fire insurance on the building. I have my own condo owner's insurance for my furnishings. But it seems the condo homeowners association should pay for the building fire insurance premium out of our monthly association dues. Am I right or wrong?{ndash}Arlene C.

DEAR ARLENE: You are right. The association is wrong to bill condo owners for their share of the fire insurance premium.

The homeowners association is responsible for maintaining and insuring the condo building. That includes carrying adequate fire and liability insurance. The premiums should be paid from monthly assessments that owners pay to the association.

Unless your homeowners association is encountering financial hardship, perhaps as a result of an unexpected major expense, it should not be billing you for a proportionate share of the fire insurance cost.

I suggest you and your neighbors attend all the condo homeowners association monthly meetings to find out why your association can't pay the fire insurance premium from its operating budget as it should.

To make individual special assessments to pay the insurance bill for a condo association is unusual. However, don't become a complainer. Attend the meetings to learn and make polite constructive suggestions.

DEAR BOB: I own a house in a working-class neighborhood. Nothing fancy. Good location. Low crime. Good schools. Highly desirable. A few weeks ago on a Sunday, I was out front working on my rosebushes. A couple stopped by to ask if I knew of any houses for sale in the neighborhood. I didn't. They asked if I might like to sell my home for cash. As my three-bedroom house is too big for me alone after my husband died last year, I said I might be interested in selling if the price was right. After we chatted awhile, they offered me a price that I thought was very high. I jokingly said, "Sure." To my surprise, the husband whipped out his checkbook and wrote me a $10,000 deposit check. (The next day, I called his bank, and the manager said the check is "very good.") I told the couple I would think about selling. Four days later I received a phone call from their lawyer asking if he could stop by so I could sign the papers. I explained I didn't cash the check and am still thinking about the pros and cons of selling. Can he force me to sell?{ndash}Millie P.

DEAR MILLIE: No. The Statute of Frauds requires real estate sales contracts to be in writing to be enforceable. Even if the buyer wrote the sales terms on the check -- unless you cashed it to indicate acceptance -- that is not a binding contract.

However, if it is an acceptable cash purchase offer and if you might like to sell with no real estate sales commission, perhaps you should seriously consider that offer.

DEAR BOB: I know you often tell readers to never buy a vacation time share, except with money they will never need to see again. But my elderly parents own a Las Vegas time share, which they are no longer able to use. They offered to transfer it to my wife and me. However, my parents have complained about the drastically rising annual fee. Is there any risk if my wife and I accept this gift?{ndash}Maury W.

DEAR MAURY: Your risk is that after the time share is transferred to your name you become obligated to pay the increasing annual fee. If I were in your situation, I would leave the time share in your parents' names but pay their annual payments without assuming the legal obligation to do so.

Then you and your wife can enjoy the time share benefits without the legal obligation to make the payments. If the costs become too burdensome, after your parents pass away, you could just stop making the annual time share payments without any personal obligation or harm to your credit.

DEAR BOB: My wife and I owned three rental houses on the same street. We listed them for sale with a local agent who found us a buyer who wanted all three. But when we figured out our capital gain would be more than $300,000 and the tax would be huge, we got cold feet. Then the agent told us about Internal Revenue Code 1031 tax-deferred exchanges. That sounded good, especially because my sister wanted to sell her commercial building so we could trade for it. So we went ahead and sold the three rental houses. But after the closing, we learned from reading your column that we needed a third-party intermediary, such as a bank trust department, to hold our sales proceeds to use to buy the commercial building. Our agent never told us about that. What should we do?{ndash}Russ W.

DEAR RUSS: From your explanation, it appears you blew the tax-deferred exchange by receiving the cash proceeds from the sale of your three rental houses. Please consult a tax adviser.

To qualify for an IRC 1031(a)(3) Starker tax-deferred delayed exchange, the sales proceeds should have been held by a qualified third-party intermediary beyond your "constructive receipt." Your situation shows why property sellers should consult a tax adviser before, not after, completion of a transaction.

DEAR BOB: I listed my home for sale with an excellent agent. Within a few weeks she obtained a purchase price offer that was within $2,000 of my target price, so I accepted it. However, before the sale closed, I was diagnosed with breast cancer. As a result, I don't want to move until this serious problem is overcome. But the buyers aren't very sympathetic. They insist the sale close within 60 days, as specified on the sales contract. Doesn't my unexpected illness make the sale impossible?{ndash}Bernice G.

DEAR BERNICE: No. Unfortunately, your unexpected medical condition is not an adequate legal reason to cancel the sale of your home. I don't mean to sound cruel, but even if you die, the sales contract is enforceable against your estate and heirs.

If you refuse to convey title to your home as agreed, the buyers might sue you and win in a specific performance lawsuit to force you to deliver the deed. For more details, please consult a local real estate lawyer.

DEAR BOB: For the past 14 years I have kept the vacant lot next to my house clean of debris. I periodically mow the grass to keep it looking nice. The owner promised to sell it to me, but he died last year. I have contacted his latest wife, and she informed me she would sell to me. I need that lot to build an addition to my house. Somebody told me there is a "squatter's rights" law, which would entitle me to receive that lot title without having to buy it. Is that true?{ndash}Denise S.

DEAR DENISE: Close, but not quite accurate. So-called squatter's rights are legally known as adverse possession.

To qualify for obtaining title to real estate by adverse possession, you must possess that property openly, notoriously and hostilely (without the owner's permission) for the required number of years (every state has a different time period). In addition, you must have paid the property taxes.

It appears you do not qualify for obtaining title by adverse possession because you occupied the property with the late owner's permission and you didn't pay the property taxes. For more details, see a local real estate lawyer.

DEAR BOB: My late mother and I were joint tenants with right of survivorship for her house. It was her house, but her lawyer advised holding title in joint tenancy to avoid probate costs when she died. After title was transferred into my name, I decided to sell the house. But it required considerable fix-up work. I spent about $8,500 getting it ready for sale. The house really sparkled when it was listed it for sale. To my surprise, it sold for almost $7,000 above the asking price. My question is: Can I deduct the approximate $8,500 I spent on fix-up costs?

{ndash}Andie H.

DEAR ANDIE: No. But you can add those capital improvement costs to your adjusted cost basis for the house. Consult a tax adviser to determine your stepped-up basis for the house you inherited. To that amount, you can add the $8,500 capital improvements you made.

Normally, if you had just spent a few hundred dollars on fix-up costs, there would be no tax consequence. But it sounds like you make major capital improvements to spend $8,500 on that house before selling it. The tax result is you should owe minimal capital gain tax on that inherited house sale.

DEAR BOB: I own an older house that shares a concrete driveway with the adjoining house to reach our garages, which are in our back yards. For more than 20 years I lived in my home and enjoyed cordial relations with the neighbor, until she sold her house about a year ago. The new neighbor then built a new garage on the other side of his house so he no longer needed to use the shared driveway between our houses. He then constructed a chain-link fence down the middle of the concrete driveway, making it impossible for me to drive my car to my garage. When I came home one day to find this new fence, he said he was tired of my waking him up at 7:30 a.m. when I drove on the shared driveway to work. What can I do?{ndash}Jerry T.

DEAR JERRY: Run, don't walk, to the office of the best real estate lawyer in town. You need legal help to obtain an injunction to force your neighbor to remove that fence, which blocks access to the shared concrete driveway.

Your attorney will check the title to your property and your neighbor's property. Both lots are probably subject to a mutual easement. If not, you probably have rights to a prescriptive easement to use the half of the driveway that is on your neighbor's lot.

DEAR BOB: What do you think about the new interest-only home loans? Are they good or bad? -- Aaron T.

DEAR AARON: I've received several questions on this topic recently. Personally, I like and recommend interest-only mortgages for homeowners who plan to stay in their houses or condos less than 10 years.

The reason is the monthly payment is the minimum at the interest-only level. But the big drawback is that an interest-only mortgage borrower never builds any equity in the property from paying down the mortgage balance.

That's fine for short-time homeowners or real estate investors who look for their profit from market-value appreciation of the property. However, if you plan to stay in your home "forever," then you probably would be better off with an amortized 30- or 15-year mortgage, which will be eventually paid off.

Readers with questions should write Robert J. Bruss at 251 Park Rd., Burlingame, Calif. 94010, or contact him via his Web page, www.bobbruss.com.

{copy} 2004, Inman News Service