QDEAR BOB: I recently read your explanation on how to choose a good real estate agent. What is your opinion of for sale by owner real estate transactions? I have almost always sold my own properties with good results. Are there any things I should be cautioned about in today's active real estate market? -- Barbara F.

ADEAR BARBARA: Before you decide to sell your home without a real estate agent, interview at least three successful agents who sell houses in your area. You will learn their opinions of your home's market value based on their comparative market analysis reports, how their evaluation was determined based on recent comparable home sales prices, and all the disclosure paperwork involved in home sales today to avoid lawsuits by buyers.

Most FSBO sellers give up after 30 to 60 days. Chances are you will then list your home for sale with one of the agents you interviewed before attempting to sell your home alone.

If you decide to sell your home without a professional agent, realize you will be cutting yourself off from the most powerful home marketing method: the multiple listing service, as well as having your MLS listing on the Internet at www.realtor.com.

More than 70 percent of home buyers start their quest on the Internet. If your home isn't listed there, you are limiting your potential market.

DEAR BOB: My mom died in May 2003 and my dad, who has Alzheimer's disease, went to an assisted living home in May. Their house is vacant, but it is worth at least $750,000. Their investment broker recommends selling the house and buying annuities. Others have suggested a trust account, while still others suggest waiting until after dad dies. What do you recommend? -- Annie D.

DEAR ANNIE: This is an excellent time to sell dad's home to provide money for his future care. However, I strongly disagree with the suggestion to tie up the sales proceeds and buy annuities. Is he still competent enough to understand what he is doing? If so, I suggest you get him to sign a notarized power of attorney so you have authority to sell the house and make other major decisions involving the home sale.

The primary reason I do not recommend buying annuities with the home sales proceeds is that this major decision makes those assets unavailable for your dad's other possible needs, such as medical care. My suggestion is get the home sold while the market is strong in most communities, but don't rush to buy annuities.

DEAR BOB: When I applied for a home loan, it was more beneficial to apply alone and leave my wife off the mortgage. Should I add her to my title? Does it really matter? If anything happens to me, she would get the house -- Jacob F.

DEAR JACOB: Your situation is not unusual. Because one spouse has good credit and the other spouse has bad credit, it is often easier to take title and get the mortgage in one spouse's name.

The last time I saw that situation, where a couple bought a house from me, the wife's income and credit as a nurse were great, but her husband's credit was bad because of a recent business bankruptcy, so title was taken in the wife's name alone. The husband didn't seem to mind. I presume, if the husband behaved, the wife later signed a quit claim deed for a 50 percent interest in the house to her husband.

If your marriage is strong, there is no reason not to sign and record a quit claim deed to your wife for a 50 percent interest in the house, but there is no reason to notify the lender. Of course, be sure you either have a living trust or individual wills just in case of simultaneous deaths, such as in a plane crash.

DEAR BOB: Can I sell my investment property and avoid capital gain tax with an IRC 1031 tax-deferred exchange by acquiring a rental house that will later become my personal residence? -- Kerry S.

DEAR KERRY: Yes. The only way to avoid capital gain tax on the sale of an investment property is to make an Internal Revenue Code 1031 tax-deferred exchange for another investment or business property of equal or greater cost and equity.

Such a transaction has become quite routine. Most tax advisers suggest renting the acquired house six to 12 months to show rental intent at the time of the transaction.

When you sell your investment property, be sure the sales proceeds are held by a qualified third-party intermediary accommodator, such as a bank trust department. You then have 45 days to designate the replacement property of equal or greater cost and equity, and up to 180 days to complete the purchase with the sales proceeds.

DEAR BOB: Our neighbor is suing us involving a property that belongs to the city where we live. It is not our property. What can I do to reverse that lawsuit? -- Neusi G.

DEAR NEUSI: A quick phone call to the neighbor or to the lawyer who filed that lawsuit should bring a prompt dismissal against you. It is a serious matter, possibly entitling you to monetary damages, to sue the wrong person.

If, for some reason, the plaintiff or his lawyer refuses to drop the lawsuit against you, be sure to answer the complaint promptly. Failure to answer and deny ownership might prove costly later. Consult a lawyer for details.

DEAR BOB: My husband and I made a full-price purchase offer on 58 acres advertised for $551,000. Instead of accepting, the seller counter-offered at $696,000. Is this legal? We think they thought their asking price was too low. There are no other offers. Doesn't the seller have to sell to us? -- Cindy J.

DEAR CINDY: No. A for-sale property's asking price is legally an invitation for purchase offers at that price, but the seller need not accept a full-price purchase offer. If your purchase offer was made shortly after the acreage came on the market for sale, perhaps the seller thought he could get more for the property.

Should you think your offer was at the market value and you don't wish to accept the counteroffer or make a counter-counteroffer, I suggest you politely inform the seller you don't wish to raise your offer price but you will still buy at the price you offered. It would not be unusual for the seller to come back to you in a few weeks and accept your original offer, if you are then still willing to purchase at that price.

DEAR BOB: I am a real estate broker; my client has owned a rental house for 17 years. She took the usual depreciation deductions on Schedule E of her tax returns. Now she has refinanced the property, her son has moved in, and she has added his name to the title along with her husband. She removed the property from her Schedule E, as it is no longer a rental. The son pays the mortgage and is claiming the tax deduction benefits. Her question to me, and now mine to you, is what happens to all the depreciation she deducted over the last 17 years, since there has not been a sale? -- Joyce H.

DEAR JOYCE: Nothing happens, tax-wise, until there is a sale of the property. All that happened was a change of use from rental to personal use by one of the co-owners.

However, when the property is sold, then your client's depreciation deducted since 1997 will be recaptured and taxed at the special 25 percent federal tax rate. Consult a tax adviser for details.

DEAR BOB: I went to Phoenix to look at new homes for sale. I found a nice development and put a deposit on a lot and house. A separate sign in the lobby read: "No investors or second-home buyers." This is not a condo development, nor is it a gated community, nor does it have a homeowners association. Can a developer limit to whom it will sell its houses? -- Sarah B.

DEAR SARAH: Unless you are in a protected class, such as a minority, the seller can refuse to sell to you. For instance, a seller can refuse to sell to a buyer with inadequate income to afford the home.

You might recall, for example, a few years ago a California builder refused to sell his new houses to lawyers, presumably because lawyers tend to sue home builders, often over minor home defects. The court said he could discriminate against lawyers. If your developer accepts your purchase offer in writing, he can't later refuse to sell to you if he discovers you are an investor or a second-home buyer.

DEAR BOB: I bought my home in June 2001. Recently, a rotted trim board was removed from under a sliding glass door. Carpenter ants poured out and there was severe structural damage. In 2000, the sellers replaced the three sliding glass doors. All three doors now have structural damage. The trim boards had to be removed, thus exposing the ants. The exterminator said in writing that the ants have been here at least five years. The former owners gave me a seller's disclosure form saying they did not have an exterminator nor know of any damage to the house. If I hire a lawyer, what are my chances of winning? -- Elaine K.

DEAR ELAINE: I suggest you forget the matter. Proving there were carpenter ants in non-accessible locations in the house three years ago would be difficult, and the seller knew about the carpenter ants but failed to disclose them would be even more difficult.

If you had discovered the problem a few months after the home purchase, the situation would be different. Chances are when the seller replaced the sliding glass doors in 2000, there were no carpenter ants after the replacement. Few people would replace three sliding glass doors without also repairing any obvious damage from the ants.

Unless you can prove the seller knew about and concealed the carpenter ant damage, I suggest you forget it and move on.

DEAR BOB: I own a single-family rental house, which is in a community with a homeowners association. The association makes the absentee landlords like me pay a $100 extra fee per month. The complex has a small common area, but no other amenities, such as a pool or tennis courts. The association's board recently passed a new rule requiring landlords to pay $1,000 for each new tenancy to "keep the complex looking good, as tenants usually do not care as much about the houses as do homeowners living in the units." We have always been particular about our tenants. We also use a rental agency that screens our tenants. We pay for a weekly gardener to take care of the yard and keep it in showcase condition. The house is only three years old and is in perfect condition. We think the association is out of line with this new rule, which discriminates against landlords. Is this legal? -- Jim W.

DEAR JIM: I hope you got the message that the homeowners association doesn't want renters. The reason is that when there are too many renters in a complex, the quality of maintenance usually declines. Most absentee landlords don't do as good a job managing tenants as you do.

It is perfectly legal for the homeowners association to charge extra monthly fees for rental units if it can show there are extra expenses involved, such as controlling rowdy tenants. Last time I checked, there is no law prohibiting discrimination against owners of rental units. Most towns even require rental-unit licenses or permits.

I suggest you get involved with your homeowners association. Attend the monthly meetings to get acquainted with your fellow owners. Volunteer for committees, such as the building and grounds committee. When the annual election occurs, volunteer to run for election so your voice can be heard.

Another obvious alternative is to sell your rental property and enjoy your profit.

DEAR BOB: We closed the purchase of our home on May 7. The sellers needed to stay in the house until their new home was finished. They paid us daily rent. The sellers paid their rent and turned the keys over to us on July 29. We performed our walk-through inspection with no problems. But when we arrived at the house on July 31, we discovered the seller had the electricity and gas turned off without notifying us. We phoned the utility company and learned they couldn't turn on our utilities until a week later. In that time, there were several days of heavy rain that resulted in a flooded basement, which ruined the finished basement due to the inoperable sump pump. I filed a claim with our insurance company. It was denied. Should I sue the seller in small claims court for failing to notify us he was turning off the utilities? -- Mike C.

DEAR MIKE: That is a difficult question. I suggest you first get several written estimates of costs to repair the damage. Then you have a dollar amount to discuss with both your insurance company and the seller. Also, you will have proof of the damage amount so you can decide if it's worth fighting about.

Just because your insurance company denied your claim doesn't mean the insurance adjustor is correct. If the basement water damage had occurred because the power went out in a rainstorm so the sump pump couldn't operate, that water damage would be covered by your homeowner's policy unless there is a specific exclusion.

You might emphasize to the insurance company that mold could develop unless repairs are made immediately and that could increase the insurer's "bad faith" liability exposure for consequential damages. You might want to contact the state insurance commissioner's office to see if they can help get the money from the insurer.

If you can't get the insurance company to pay, depending on the amount of your loss, you might want to sue both the insurance company and the seller in local small claims court to let the judge decide if one owes you. I suggest suing them separately rather than jointly.

DEAR BOB: I made an offer to buy a house for $205,000 with a $4,000 deposit paid to the real estate company. I asked, "If the home fails inspection, do I get my money back?" The agent assured me I would get my money back. The house was inspected and it failed miserably. My agent sent an addendum to the purchase agreement to the seller's agent stating I wanted to withdraw my offer and sent along a copy of the inspector's report. The damages are excessive and would be cost-prohibitive to me. The seller's agent replied $1,500 would fix all, but we disagree. Now I find the other agent has to sign a "letter of release," which she refuses to do. The seller says I will be sued for "specific performance" to force me to buy the house. But now I do not want that house. I talked to a lawyer who wants $500 just to read the contract and another $500 if he has to send a letter. How can I get my money refunded? -- Jan L.

DEAR JAN: Don't worry about a specific performance lawsuit to force you to buy. Specific performance is a buyer's legal remedy, not a seller's remedy. The reason is monetary damages are usually adequate to satisfy the seller's damages, if any.

Your most effective remedy in a small $4,000 dispute takes two steps: First, send a polite written demand letter to the parties involved, the real estate agents and the home seller, demanding refund of your $4,000 within 10 days. But don't threaten or disclose what you will do if you don't receive the $4,000 within 10 days.

You probably won't receive the $4,000 refund check. So, after 10 days, your easiest legal remedy is to file a small claims court lawsuit (presuming your local small claims court allows actions for $4,000) for breach of contract against the seller and the realty agents.

DEAR BOB: I am a widow, 73, and I own my home. It is worth $180,000 to $225,000. My mortgage balance is about $86,000. I work part time to pay my bills. I would like to make some repairs around my home. My children say I should get a reverse mortgage rather than getting a new interest-only mortgage. But I don't think a reverse mortgage is wise because my house still has a mortgage. What do you advise? -- Louise B.

DEAR LOUISE: I suggest you at least investigate a reverse mortgage so you can stop making those payments. Interview representatives of at least three reverse mortgage lenders to compare their terms for FHA, Fannie Mae and Financial Freedom Plan reverse mortgages. Only after you have all the facts can you decide if an interest-only mortgage (if you have enough income to qualify) or a reverse mortgage with no monthly payments is best for you.

DEAR BOB: We are interested in leasing a home with an option to buy. Our preference is to buy within a specific school district. Our children are already enrolled and have adapted well. How can we find a lease-option within this school district? -- Rochelle S.

DEAR ROCHELLE: You probably won't find any lease-options advertised for houses within the school district you want. That's why you must create your own.

I suggest you look in the newspaper "houses for rent" and "houses for sale" columns, then inspect those houses in the area you want. When you find one you want, ask the owner if he or she will lease with an option to buy.

Most rental house landlords have never considered a lease-option. That means you must explain the benefits, emphasizing the many advantages for the owner.

Be sure to offer the landlord a slightly higher rent than was requested. Also, offer a substantial non-refundable option consideration, such as $5,000, instead of a security deposit.

Lastly, negotiate as large a rent credit as possible toward the purchase price when you exercise your purchase option. I suggest asking for a 50 percent rent credit, but be willing to compromise on a 33 percent or a 25 percent credit.

Try to get as long a lease-option term as possible. The best lease-option I ever negotiated was for 15 years, but the owner negotiated me down to a 17 percent rent credit.

However, the option purchase price was locked in for 15 years. I was betting that home just might appreciate in market value during those 15 years.

DEAR BOB: We bought our primary residence in April. It is in a golf resort community. Because of the high demand for rentals in the summer, we are thinking of renting our house out on weekends and staying at a relative's home during the rental days. How do we calculate "aggregate use time" before we can sell our house and qualify under that two out of the last five years ownership and occupancy test for the $250,000 tax exemption? -- Russ R.

DEAR RUS: Internal Revenue Code 121 provides no guidance for your unusual situation. There is no reference in the statute to days of owner-occupancy and days of rental for the two out of last five year occupancy test.

If I understand you correctly, you just bought the home in April. Why not enjoy it and forget about the rentals? I find it difficult to understand why you are already planning its resale, unless you bought at a bargain price and will have the opportunity to make a huge, obscene profit. Perhaps a tax adviser can be of more assistance.

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

(c) 2004, Inman News Service