QDEAR BOB: We are two single women who have owned our home together and are thinking of selling. Each of us meets the two out of last five years ownership and occupancy tests of Internal Revenue Code 121, which you often discuss. When we sell our home, can we each claim up to $250,000 tax-free profits (up to $500,000 total), or do we only get one $250,000 tax exemption? -- Amy S.

ADEAR AMY: The federal government gives each qualified single co-owner up to $250,000 tax-free principal residence sale profits. If there were three or four co-owners, for example, who each met the ownership and occupancy tests, up to $1 million total principal residence sale profits could be tax-free.

You each qualify because you are both on the title, unlike a married couple filing a joint tax return where only one spouse need hold title, and you each meet the two out of last five years ownership and occupancy tests.

DEAR BOB: My wife and I enjoy your items about reverse mortgages for senior citizens. I am 68 and my wife is 59. I retired a few years ago, thinking we were well set for retirement, then we both began incurring medical bills, mostly prescriptions not covered by insurance. You say "the older the better" for reverse mortgages, but we're dipping into our principal about $475 per month. That can't go on forever. However, it looks to me like we must wait three more years until my wife becomes 62 before we are eligible for a reverse mortgage on our free-and-clear home. Any other alternatives for us?

-- Ronald H.

DEAR RONALD: You are correct that both spouses must be at least 62 to qualify for a reverse mortgage. That is because reverse mortgage eligibility is based both on the residence's market value and on the age of the youngest spouse. If your wife is willing to quit claim her interest in the residence to you, that could allow you to qualify for a reverse mortgage, which would pay you monthly income to help pay those heavy prescription costs.

To find local reverse mortgage representatives, go to www.reversemortgage.org to compare the three major plans.

DEAR BOB: In 1990, my husband bought five acres of unimproved land without the benefit of a survey. He had a well drilled shortly thereafter, based on the property boundary information supplied by the real estate agent. The well is almost 20 feet away from an existing fence, but when we recently went to sell this property and the buyer requested a survey, we discovered our well is four feet on the neighbor's side of the boundary. The neighbor won't agree to a variance. The well cost $7,000 in 1990 and we can't afford to drill another one now. Any suggestions? -- Marina Y.

DEAR MARINA: Your situation shows why it is important to always obtain a survey when buying rural acreage.

Although the neighbor is uncooperative, you might be able to obtain legal rights for you and your buyer to continue using that well drilled on the adjoining lot. The situation you describe might qualify for a prescriptive easement, depending on the state where the acreage is located. The legal requirements for a prescriptive easement are open, notorious, continuous and hostile use of a neighbor's property without permission.

A court quiet title action will be required to perfect your prescriptive easement for the well. Consult a lawyer for details.

DEAR BOB: Last July, I received an approval letter from a mortgage company, so I went out and found the house I wanted to buy. When it came time to get my home loan, the mortgage company said I was not approved because of my credit history. I paid $500 for a house inspection, plus I gave my 30-day notice at the apartment I was renting. Now I have to rent month-to-month at $50 extra per month. What legal rights do I have? -- Tony G.

DEAR TONY: I suspect you didn't really have a mortgage pre-approval letter or certificate. Before an actual mortgage lender, not a mortgage broker, issues a mortgage pre-approval letter or certificate, the borrower must fill out a loan application. Then the borrower's credit report and the Fair Isaac Corp. (FICO) credit score are checked, as are the borrower's employment and cash down payment.

Unless you have done something to mess up your credit since July, I suspect you went to a mortgage broker who issued you a pre-qualification letter that means: "We think you can get a mortgage, based on the information you supplied, but we haven't verified it."

Mortgage brokers can obtain pre-approval letters or certificates from actual lenders. But no responsible lender would give you a pre-approval letter without checking your credit. If you have a mortgage approval letter from an actual lender who breached that contract, I suggest you take that lender to the local small claims court for breach of contract damages.

DEAR BOB: I own a townhouse condo in a complex of 86 units. When I bought it about six years ago, the grounds were well managed. Then new directors and officers were elected and they fired the excellent professional management company and took over management themselves. Now the monthly director's meetings are closed to attendance by the homeowners. We are only allowed to attend the annual meeting at which these board members nominate themselves for re-election. Their sole goal is to keep the monthly assessments low. The place is getting run down. What can we do? -- Ramon R.

DEAR RAMON: It sounds as if your homeowners association is out of control. Most states have statutes requiring meetings of homeowners associations be open to attendance by the members. You and other condo owners who think as you do should first politely try to attend the monthly meetings. If you are refused, then hiring a lawyer familiar with condominium law should be your next step.

I understand your situation because I own a second-home condo that had a similar situation. The newly elected association president decided to hold the monthly director's meetings in her condo without announcing the day or time. The rebellion among the members was so strong she was forced to re-open the monthly meetings and hold them in our party room. Needless to say, she was not re-elected.

DEAR BOB: About 20 years ago, I borrowed $25,000 from my partner's pension and profit sharing plan as a second mortgage on my rental condo. After several years, the $25,000 was paid in full. I have the checks to prove it. Several years later, my investment partner expired. His pension and profit sharing plan was rolled over into his wife's IRA. Now I want to sell that condo, but I discovered the $25,000 mortgage is still recorded against the title. I contacted my partner's widow, who now lives in Maryland, to sign a deed of reconveyance. She refuses. What can I do to clear the title? -- Joseph O.

DEAR JOSEPH: Your situation shows why it is important for borrowers to be certain a paid-off mortgage or deed of trust is promptly cleared from the property title. I suggest you contact a local title insurance company that will insure title for your condo sale. Most title insurers can "insure around" a situation like yours, especially when you have proof the old mortgage was paid off 15 years ago. If necessary, you might have to bring a quiet title lawsuit.

DEAR BOB: On March 4, 2004, we placed a $5,000 deposit with a signed contract to buy a lot in a new manufactured home development. We had up to one year to decide what type of house to build. Four days after signing the contract, we felt we made a hasty mistake and asked the sales manager if we could get our money back. He said, "Once the ink is dry, it's a done deal," because we had a signed contract. We were also told to hold on to our lot, because when the final phase is completed, it will be easier to sell to a potential buyer because it is close to the clubhouse. Two weeks ago, we took a ride to see how the final phase was progressing. To our surprise, a house was built on "our lot." When I approached the sales manager about the situation, he said I told him I didn't want the lot and then it's gone! He has nothing in writing to show we cancelled our purchase, especially since we had up to a year to decide what type of home to build. Does the developer have a right to build a house on our lot? -- Bill V.

DEAR BILL: Consult a local real estate lawyer to review your paperwork. You could be entitled to complete your purchase of that "lost lot," including the house now located on it. Depending on what your purchase contract says, you might have valid legal actions against the developer, the second buyer of your lot, and the title insurance company.

Your situation is an example why everyone should remember oral statements are not enforceable when real estate is involved. The fact you told the sales manager you wanted to cancel your purchase is not binding unless it was put in writing and signed by both parties. If a lawsuit is required, be sure your lawyer takes the case on a contingency basis so he or she has maximum incentive and you don't have anything to lose.

DEAR BOB: A few weeks ago you had a letter from a homeowner who wanted to get a home equity loan to pay off a car loan and some other non-deductible interest loans. You suggested it would be smart to do so because the home equity loan interest is tax deductible. Doesn't a home equity loan have to be used for home improvements to make the interest tax deductible? -- Harold B.

DEAR HAROLD: No. I received several letters regarding that item. A home equity loan up to $100,000 qualifies for personal itemized interest tax deductions on Schedule A of the homeowner's income tax returns. The loan proceeds can be used for any purpose. For this reason, many homeowners use their home equity credit lines up to $100,000 to pay for cars, boats, and even trips around the world. The result is tax deductible interest. Consult a tax adviser for details.

DEAR BOB: Last year, my dad died at age 88. His will left all his assets, worth about $1 million, to my sister and me. He left $1,000 in his will to our brother. The will is now tied up in probate court. My brother hired a lawyer to prove our dad was not competent to write his will, so his prior will, which gave one-third to each of his three children, would prevail. Meanwhile, my dad's house and other real estate deteriorate because there is no money to maintain or sell it. Would a living trust have avoided this problem? -- Dorothy H.

DEAR DOROTHY: Yes. If your late father had placed the title to his real estate and other major assets into a revocable living trust, his assets probably would not be tied up in probate court today. Although it is possible to contest a living trust, it is rarely done.

This situation is an example of why probate avoidance is so important, especially for large estates.

You and your sister should discuss with your lawyer the benefits of reaching a settlement now with your brother, because you stand to lose $333,000 if he wins the will contest.

DEAR BOB: About six years ago, I was diagnosed with inoperable terminal cancer. My doctor told me I had, at most, a year to live, probably less. So I deeded my house to my only heir, my daughter. Thanks to experimental drugs, my rare form of cancer went into remission. But about four months ago, my daughter was killed in an auto crash. Her will, dated 1999, leaves her assets to her now ex-husband. I have no idea why she didn't change her will when they divorced in 2002. The unhappy result is "my house" where I am still living goes to my daughter's ex-husband. Do I have any legal recourse? -- Wanda G.

DEAR WANDA: Consult a lawyer. From your description of the situation, it appears the house you deeded to your late daughter now indeed belongs to her ex-husband.

Your situation is another reason why property owners should not transfer titles to their heirs, in anticipation of death. A far better alternative would have been to place your home's title into your revocable living trust, naming your daughter as successor beneficiary.

However, she died first. After that event, if you had a living trust, you could have changed it to reflect your new wishes. More important, you would have retained complete control, including the ability to sell or refinance your home. When you deeded your house to your daughter, you lost control of it.

At this time, I know of no legal remedy to regain control of your house from your late daughter's ex-husband.

DEAR BOB: We bought our home about three years ago. The neighbor who owns the house at the rear of ours has constantly complained that "our fence" is about five feet on his side of the boundary and he wants us to remove it. But we didn't build this fence. It was built by a previous owner. Can we be forced to move the fence?

-- Damon H.

DEAR DAMON: Because you didn't build the fence that is allegedly on the neighbor's property, it's not your fence. In fact, if you try to remove it, you might be liable for trespass. Consult a lawyer for details.

DEAR BOB: For more than 35 years, we paid fire insurance premiums on our home to the same insurance company.

Last year our home was almost destroyed by a fire that started at a neighbor's home and quickly spread to our nearby house due to high winds. Thankfully, we were not at home.

Our house was a total loss. But when we tried to settle with our insurance company, they wanted to pay us only for the depreciated value of our home, not what it would cost to rebuild. We have a so-called "replacement cost" homeowner's insurance policy.

Finally, we hired a public adjuster and an attorney who, just last month, reached a settlement for about $65,000 more than the insurance company originally offered. It won't be enough to rebuild our home the way it was before the fire. But your readers should know what a rip-off homeowner's insurance can be. -- Hugo R.

DEAR HUGO: Thank you for sharing your experience, from which we can all learn. In the last few years, most insurance companies have radically changed the coverage of their homeowner's insurance policies.

Most insurers used to issue "guaranteed replacement cost" policies even if the rebuilding cost more than the policy limit. However, in the 1991 Oakland, Calif., firestorm, many insurers had to pay much more than their policy limits and they learned not to issue those policies any more.

Today, the best you can get from most homeowner insurers are policies for not more than 10 percent or 20 percent over the policy limit.

DEAR BOB: My mortgage company is not correctly applying my monthly payments. I have found a difference of about $900, which they refuse to acknowledge. I have gone to the Better Business Bureau but nothing has been resolved. I always add an extra $100 each month to my regular monthly payment, to be applied to reduce the principal balance. But it is not being applied correctly. What can I do? -- Muhammah B.

DEAR MUHAMMAH: Write a polite letter to your mortgage servicer providing exact details of why you think your payment was incorrectly applied. Give the loan servicer 10 business days to respond.

You probably won't get any response. That's when you should sue the loan servicer in the local small claims court for breach of contract damages of the amount you think was misapplied. If the loan servicer doesn't respond, you automatically win a default judgment.

DEAR BOB: What is the difference between a land trust and a living trust? -- Jideofor D.

DEAR JIDEOFOR: A land trust is a method of holding title to real estate. The primary benefit is privacy to keep the owner's name off the public records.

A revocable living trust is a probate avoidance method. Living trusts have a secondary benefit if the property owner becomes incapacitated, perhaps with a serious stroke or Alzheimer's disease. Then the successor trustee can take over property management.

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.

{copy} 2004, Inman News Service