QDEAR BOB: I sold my home last month. Do I have to reinvest my profits in a new home within a year or two? Will I owe taxes on my profits if I don't buy another home? -- Alan S.

ADEAR ALAN: There is no need to reinvest your home sales proceeds in another home. Internal Revenue Code 121, enacted by Congress in 1997, repealed the old rules on the sale of a principal residence. If you owned and occupied your principal residence an aggregate two of the last five years before its sale, up to $250,000 of your capital gain is tax-free ($500,000 for a married couple).

DEAR BOB: My oldest brother died in 1987 and left me all his assets except his house. My inheritance was worth about $160,000. My mother was extremely distressed; she believed she should inherit everything. In 1988, when Mom moved to live near me, I gave her $160,000 to buy a condo. She recently moved into a nursing home, and I sold the condo. My youngest brother says I should reclaim my $160,000. What do you think? -- Paula G.

DEAR PAULA: You have no legal right to reclaim that $160,000 from the sale proceeds of your mother's condo, which are probably needed to pay for her nursing home care.

DEAR BOB: There was a driveway easement across our property for the rear neighbors to reach their house. But about 10 years ago, the county built a new road and the neighbors gained easy front driveway access. The easement over our land hasn't been used since. Now we want to get rid of it and build a guest house. The neighbor is cooperative. How do we get rid of the easement? -- Earl H.

DEAR EARL: You will need a real estate lawyer to prepare a quitclaim deed for the neighbor to sign and record, abolishing his right to the easement over your lot.

Although it isn't necessary in this case because your neighbor is being cooperative, there are legal methods to eliminate easements by hostile methods.

DEAR BOB: About 15 years ago, I bought a house with a woman I planned to marry. I made the $30,000 down payment, and we both moved into it. My job was transferred, I moved out of the area, she refused to move, and we never got married. She has lived in the house ever since. She got married about 12 years ago, and she and her husband pay all the expenses. The house has greatly appreciated in market value. I've repeatedly asked them to buy out my equity and repay my $30,000. They refuse or stall. Is there anything I can do? -- Jonathan R.

DEAR JONATHAN: Yes. You can bring a partition lawsuit against your co-owner to force the sale of the house. The sales proceeds will be divided equally, but the court might appoint a referee to consider whether the co-owner's payments decreased your share of the equity. For details, consult a real estate lawyer in the area where the house is located.

DEAR BOB: I disagree with you on timeshares. About four years ago, my wife and I bought a Florida timeshare near Orlando. We use it every winter for two weeks. The costs are comparable to what we would pay in a decent hotel. When we tire of Orlando, we can trade for weeks at other resorts. Timeshares are a good deal. -- Julio R.

DEAR JULIO: I'm glad you enjoy your timeshare, but if you add up the costs, you could probably enjoy several weeks each year at an upscale Orlando hotel for much less than your timeshare costs. I hope you bought the timeshare with money you will never need, because it is almost impossible to resell timeshares for anywhere close to the purchase price. The only person who usually profits from timeshares is the developer.

DEAR BOB: My husband of 43 years died in March. We paid about $45,000 for our house, and now it is worth at least $450,000. A friend told me if I want to sell the house and claim that $500,000 principal-residence tax break, I must sell by Dec. 31. Is that correct?

-- Agnes R.

DEAR AGNES: Yes, but don't worry. If you inherited your husband's share of the house, you received a new full or partial stepped-up basis for it, depending on how title was held.

For 2004, you can still file a joint income tax return, so if you sell the house this year, you can claim an Internal Revenue Code 121 principal-residence-sale exemption up to $500,000. That assumes that both of you owned and occupied the home as your primary residence an aggregate two of the five years before its sale.

If you wait to sell, you will only get a $250,000 tax exemption, but your new stepped-up basis will probably eliminate most or all of the capital gain tax. For details, consult a tax adviser.

DEAR BOB: What preparations do I need to make before my elderly mother's death so I will be able to sell her house? I am her only child. She can still help with the paperwork. I plan to visit her soon and would like to handle the details efficiently. -- Judith S.

DEAR JUDITH: If your mother holds title to her home in her living trust, and if you are the named successor trustee, you should have no problem selling it without probate costs or delays after your mother passes on.

However, if your mother does not hold title in a living trust and title passes according to the terms of her will, probate court proceedings might be necessary. That will mean hiring a probate lawyer.

Determine whether she has a living trust and whether she has transferred title to her house and other major assets into it. A probate lawyer in the state where your mother lives can help you set up a living trust. If she has a trust but title hasn't been transferred, the trust is worthless for avoiding probate costs and delays.

DEAR BOB: We are closing in a few weeks on our retirement home. We are getting the mortgage through the builder's lender because of a $2,500 incentive toward closing costs, but we must pay 1/8-percentage-point extra mortgage interest because we do not want an escrow account for the property taxes and insurance. When we questioned this extra cost, the lender said it is legal and everyone does it. Is that true?

-- John L.

DEAR JOHN: Many mortgage lenders do not require escrow accounts for payment of property taxes and insurance. However, some borrowers give their lenders "free money" each month as they pay one-twelfth of their estimated taxes and insurance into an escrow account along with their mortgage principal and interest.

In the last year or two, mortgage lenders have discovered they can legally charge escrow waiver fees, typically $200 to $1,000, for allowing borrowers the privilege of paying their tax and insurance bills directly. Even in states where escrows can't be required except for FHA, VA and private mortgage insurance (PMI) mortgages, lenders can still charge escrow waiver fees.

But your lender is using a far more profitable scheme. By adding to your interest rate, the lender raised the yield and marketability of your mortgage in the secondary mortgage market.

If I were in your situation, I would agree to a mortgage escrow in return for reducing the interest rate by 1/8-percentage point. But keep a very close eye on your lender to avoid overpayments and to be sure the taxes and insurance are paid on time.

DEAR BOB: You recently encouraged a new condo owner to attend the homeowner association meetings and get involved. We have owned our condo since 1989, and I served on the board for about 10 years, but our board refuses to let association members attend their meetings. We are self-managed. I am bewildered as to what is happening at the meetings. The minutes aren't even published. Is this legal? -- Char S.

DEAR CHAR: The laws in most states require that homeowner association meetings be open to the members and that the minutes of the meetings be available for inspection by members. If your association is not publishing and distributing copies of the minutes, and is not allowing members to attend, you've got a big problem. I suggest you consult a lawyer who is familiar with your state's condo laws.

DEAR BOB: Almost 10 years ago, I made the down payment so my daughter could buy a condo. She recently sold it at a net profit of about $375,000. Half is hers; half is mine. Her capital gain is tax-free under that $250,000 exemption, but what about my share? Do I get stuck paying tax? -- Helen R.

DEAR HELEN: Yes. Because the condo was not your principal residence for at least two of the past five years, you do not qualify for the tax exemption under Internal Revenue Code 121. For details, consult a tax adviser.

DEAR BOB: What percentage of my monthly income can I afford for my mortgage payment? I am buying my first home. My only debt is a car payment with a balance of about $2,500. -- Doc R.

DEAR DOC: The answer depends on your mortgage lender. Some lenders say a home buyer's mortgage payment should not exceed 28 percent to 33 percent of gross family income, and that total debt payments should not exceed 36 percent of household income.

But many other lenders allow mortgage payments of up to 40 percent, or even 50 percent, of household income if there isn't much other debt, as in your situation.

FHA and VA mortgages usually offer quite liberal qualifications. I suggest you discuss your situation with at least a half-dozen local mortgage lenders to get preapproved in writing. Then you will know for sure the maximum mortgage available.

DEAR BOB: I foolishly applied to refinance my mortgage with a major Internet lender whose name is widely advertised. The whole procedure was a scam. The quoted interest rate was never available, although I promptly filled out the paperwork and cooperated 100 percent. It took more than six weeks just to get approval "subject to appraisal." The final interest rate was a half-percentage-point above the original quoted rate. I told the lender to get lost. Now the lender threatens to sue me for the $375 appraisal fee, even though it was just a drive-by windshield appraisal. Do you think I should pay? -- Norman W.

DEAR NORMAN: No. You should be suing that lender for fraud, misrepresentation and breach of contract. Be sure to report the events to the lender's state or federal regulator. Dishonest lenders like that give the honest ones a bad image.

DEAR BOB: My 32-year-old daughter recently became a widow and cannot afford to keep her home. The church next door wants to buy it but won't pay the balance on her mortgage. They say the house is worth less than that. What can she do to avoid foreclosure? -- Nancy S.

DEAR NANCY: When a property is worth less than the mortgage balance, it's called a short sale. You or your daughter should call the mortgage lender, ask to speak with a supervisor and explain the situation. Or write a letter to the lender, explain the circumstances and enclose a copy of the church's purchase offer.

The lender will probably have the house appraised. If the appraiser agrees the house is worth less than the mortgage balance, the lender might agree to a short sale to the adjoining church. Smart lenders realize a short sale loss is usually better than letting the property go to foreclosure and taking a bigger loss.

DEAR BOB: I married about a year ago. My husband, then 61, owned his house, where we lived. He told me several times that the title was in his living trust and if anything happened to him, I would receive the house. He died in February, and his son told me the trust left everything to his two children and I had 60 days to move out. I consulted a lawyer, who said there is nothing I can do. Is this correct? -- Paulina L.

DEAR PAULINA: The lawyer is probably correct. In your situation, where you had no title interest in the house, state law determines whether you have any widow's allowance rights. You might want to consult another lawyer in the state where the house is located, but don't get your hopes up. Your situation shows why spouses should consult their own lawyer to be sure of their right to receive property upon the death of their partner.

DEAR BOB: When I bought my condo about eight years ago, the complex was very nice and well maintained. A faction that prefers to minimize maintenance (and keep our monthly fees low) has gained control of the board. Meanwhile, the market value of our condos is thousands of dollars lower than in similar nearby complexes. As I anticipate selling my condo in a year or so, is there anything my neighbors and I can do to force common-area repairs? -- Gerry G.

DEAR GERRY: Suing your condo owners association is really a lawsuit against yourself and is usually not productive. Except as a last resort, legal action is not recommended.

A better approach is for you and like-minded neighbors to become active in the association. Attend the board meetings and volunteer for committees, especially the grounds and maintenance committee.

When the annual meeting approaches, make it known you and your friends want to run for election to the board. That's the best way to change the direction of your board.

DEAR BOB: I am in the midst of a divorce. We will be selling our house, and my attorney says the conveyance will be by quitclaim deed. A friend wants to buy the house, and we have agreed on the price. My soon-to-be ex-husband is glad we won't have to pay a sales commission, but my friend, the buyer, is concerned she won't be able to get title insurance on a quitclaim deed. Is that correct? -- Georgeann R.

DEAR GEORGEANN: No. Title insurance companies insure quitclaim deeds every day. These deeds are often used in divorce situations in which neither spouse wants to make any warranties or representations.

The title insurance company will research the title carefully to be certain there are no recorded judgments or other obligations of either co-owner signing the deed. Your buyer should have no trouble obtaining an owner's title policy, and the mortgage company will be issued a lender's title policy.

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

{copy} 2004, Inman News Service