QDEAR BOB: When my wife and I bought our home, we applied for a mortgage at the bank where we have done business for many years, and where my company has done business as well. All went well until the bank's appraiser said the house we wanted to buy was worth about $23,000 less than the price we had offered and the seller had accepted. Phone calls to the appraiser and the bank loan officer did no good.

We applied for a mortgage with my wife's credit union. The credit union sent out its appraiser, who said we got a bargain purchase price. Our new mortgage approval, including the appraisal, took only three days for what turned out to be a better mortgage. As a result, I pulled our company's multimillion-dollar accounts from that bank. You are so right that appraisal is an art, not a science. How can two experienced, licensed appraisers be $23,000 apart on their appraisals of an upscale home in a subdivision of similar houses? -- Robert T.

ADEAR ROBERT: You did the right thing to first call the appraiser to see if he made a mistake and then call your bank loan officer. He should have requested a "review appraisal" to double-check the appraiser's work.

When both individuals refused to correct the situation, you acted properly in taking your business elsewhere, including your business bank accounts.

Over the years, I've received my share of bad appraisals. Unfortunately, there is little a home buyer can do when the lender hires a bad appraiser and refuses to even have that appraisal reviewed.

But most appraisers are professional and do a superb job in a tough and competitive business.

DEAR BOB: My husband and I own our home as joint tenants with right of survivorship, and we have no written wills. For now we can't afford to change anything because we live paycheck to paycheck. Someday, we will probably be able to afford a living trust. We bought our then-new home about two years ago for cash, but we recently had to take out a $50,000 mortgage. Do you think it is smart to sell our home now and give some money to our six children? We are senior citizens who are worried that if we land in a convalescent hospital the state will put a lien on our home. -- Mary G.

DEAR MARY: You and your husband should each have a written will. Joint tenancy is fine if you die separately. Then the surviving joint tenant receives the house. But suppose you both die at the same time, such as in a car or airplane crash? Then your estates would be subject to probate court costs and delays.

Selling your home and giving your six children some money now is not smart. Where would you move? Your children would thank you and quickly spend the money.

You say you are both senior citizens, so I presume that means you are both older than 62. If so, you are eligible for a tax-free reverse mortgage, which will pay you money each month or whenever you want it. Your reverse mortgage can be used to pay off that $50,000 mortgage so you won't have any more mortgage payments.

DEAR BOB: I read your recent article in which you explained how to buy a home with little or no cash by taking over an existing mortgage. How can I find such a home with an assumption mortgage? -- Rod W.

DEAR ROD: Millions of existing home mortgages are assumable by home buyers with decent income and credit. Almost every adjustable-rate mortgage is assumable. Work with a good buyer's agent, explaining you want to buy a home and take over an existing mortgage. Most mortgage lenders allow assumptions for minimal assumption fees of 1 percent or less.

DEAR BOB: We made an $11,110 down payment on a house to be built in 12 months in Orlando. After the recent hurricanes, we are having second thoughts. What would happen if we back out of this contract? Would we lose our down payment? -- Olga O.

DEAR OLGA: The purpose of your down payment deposit is to obligate both you and the home builder. If you refuse to complete your purchase, you might lose your deposit and be liable to the builder for any breach-of-contract damages.

Read your purchase contract to see what it says will happen if you fail to complete the purchase. A year from now, you might have a completely different attitude. Or, if you are absolutely certain you don't want to buy that new house, you might want to sell your purchase contract if it is assignable. Consult a lawyer for details.

DEAR BOB: I am due to be released from prison in about five months after serving my sentence for forgery at age 19. While in prison, I have educated myself, obtaining my GED. I spend my free time in the prison library reading the newspapers, as well as anything I can find about real estate and law. When I get out, I have a job waiting with a relative's printing business. Although I am grateful, I don't want to spend the rest of my life as a printer. Is it possible for a convicted criminal to obtain a real estate sales license? -- John R.

DEAR JOHN: Your situation reminds me of a college student in my class years ago. He had served time for a drug violation and was out on parole. He wisely took my evening course while working at a boring job he hated. My class was the highlight of his week, he told me.

His question was whether he could obtain a realty sales license. I suggested he apply for the license exam, disclose his conviction, and see what happens. Later, I learned he passed the sales license exam but was called in for a hearing. He showed the examiner his excellent work record, as well as several recommendation letters, including mine. The state gave him a restricted sales license. Last time I heard, he is doing great selling homes.

I recommend you take that printing job and give it 100 percent effort. Also, take all the real estate evening courses you can get at a local community college. Consider becoming a real estate investor rather than a salesperson. No license is required to invest in real estate and your potential profits are much greater than commissions for selling property.

DEAR BOB: The contagion of the "administrative" and "transaction" fees some realty agents charge in addition to their sales commissions has now spread to the title insurance business. As a real estate agent, last week I closed a transaction representing sellers of a property. The title insurance company charged $500 for document preparation, additional closing fees of $1,000, and signing fees of $200. When I questioned these fees for my clients, I was told "all the title companies are doing it now." My best advice: Be aware, ask first, and compare is a good rule for consumers. -- Jonathan H.

DEAR JONATHAN: I have often criticized realty agents who impose unnecessary administrative fees on their buyers and sellers, on top of their sales commissions. Your letter is my first encounter with title insurers adding extra fees on top of their normal charges.

Title insurers are earning huge record profits. There is no valid reason for them to nickel and dime buyers and sellers for extra closing fees.

DEAR BOB: I just thought you should know about how great a really good mortgage broker can be. I know there are a few sleazeball mortgage brokers out there, but my husband and I had a real tough situation. We sold our old home because of my husband's job promotion and transfer. His employer's relocation company was worthless. We found the home we wanted to buy. But, we have a checkered credit history. My credit report is great, with a 740 FICO score. My husband's credit report is pretty bad, with only a 594 FICO score. We obtained our credit reports and FICO scores at www.myfico.com, so we knew our situation. The mortgage lender recommended by my husband's employer refused to help us. Then we saw a little ad in the newspaper that said, "Credit problem? No Problem." We applied. Within four days, we had a 100 percent mortgage at 6.25 percent fixed interest with only a 2 percent loan fee. Thanks to that mortgage broker who knew about an out-of-town lender for our situation, we are happily settled in our new home with 100 percent financing. Just thought you should know a good mortgage broker can get an "impossible" mortgage. -- Jessie Y.

DEAR JESSIE: I have often said experienced, savvy mortgage brokers can obtain home mortgages in situations such as yours.

For example, I've written before about my mortgage broker friend, Don Douglass, who obtained an "impossible" home loan for my buyers, Melvin and Denise. They wanted to buy the house they were renting from me, and I wanted to sell it to them. But they had bad credit, even though Melvin has a great job as a county employee.

It took Don several months to find a lender willing to make their loan, but about a week before the closing date, Melvin went out and bought a Mercedes, obtaining a car loan from his credit union. As a result, that messed up his credit report and made him ineligible for the mortgage to buy the home.

Fortunately, Don saved the day by telling Melvin to get rid of that car and its loan, which he did. The lender cooperated, and today Melvin and Denise still enjoy their home.

DEAR BOB: Although I am disabled and on welfare, plus a Section 8 housing subsidy, I want to buy a condo or a townhouse. As I am unable to work, I don't see much hope to ever own a permanent home. Is there any way I can buy a modest little condo or townhouse to call my own? -- Clara W.

DEAR CLARA: Yes. You are fortunate to already be qualified for the Section 8 federal housing program for people with low income. As a general rule, you pay up to 30 percent of your income for rent and the federal government pays the balance under the Section 8 program. There are also purchase programs available to Section 8 participants.

As a landlord, I've had Section 8 tenants who paid as little as $10-per-month rent with the federal government paying the balance. My Section 8 "star tenant" lived in one of my rental houses for 13 years until her children were grown and either employed or in college. Then the local housing authority, which administers Section 8 funds, said she didn't need a subsidy any longer. She then moved to a nice garden apartment, which she could afford on her hospital employee income.

Contact your local Section 8 housing authority for details about their homeownership programs. Because you are already qualified for Section 8, you might be able to obtain fast approval to use your rent subsidy to buy a home rather than renting.

DEAR BOB: In February we signed a contract to buy a house to be built in a new subdivision. The promised delivery date was Sept. 30, but the builder now says our new home will be completed by Jan. 31. Meanwhile, we told our landlord we would be moving out, so we didn't sign a new lease. The result is we have to pay $75 extra rent each month. Also, we learned our home builder has a bad reputation for construction complaints. Do we have any recourse? -- Ted W.

DEAR TED: Read your home purchase contract. Does it promise a firm home completion date? If so, the builder might be liable to you for damages. But most home builders have tightly written purchase contracts, prepared by expensive lawyers, which explain there is no penalty if the builder doesn't deliver the home by the estimated completion date.

The fact your home builder has a bad reputation is outside the contract. If you want to get out of the purchase agreement, you might have grounds for breach of contract by the builder. Have a lawyer review your contract and explain your legal rights.

DEAR BOB: I know you have tackled this issue before, but I still don't understand. What does stepped-up basis mean for a house? My late husband and I owned our home as joint tenants with right of survivorship. He died in 2003. We bought our home in 1978 for about $200,000. Today, it is worth at least $650,000. What is my basis so I can see if I will owe any tax should I decide to sell? -- Doris F.

DEAR DORIS: The exact answer depends on the state where the property is located. If it is a non-community property state, you receive a new stepped-up basis to market value on the 50 percent of the home you received from your late husband, plus your original 50 percent share.

To illustrate, if the house was worth $650,000 when your husband died, you received a new stepped-up basis on "his half" of the house at $325,000, plus your original $100,000 basis, for a $425,000 total new stepped-up basis.

However, if your home is in a community property state, you probably received a new stepped-up basis on the entire market value of the home on the date of your husband's death. That means your new stepped-up basis is close to the $650,000 current market value. Consult a tax adviser for details.

DEAR BOB: I recently heard it is possible to receive a federal land patent on real estate. How does a person get one? -- Boyd P.

DEAR BOYD: A land patent is a real estate "deed" from the U.S. government to a federal property containing valuable minerals. To illustrate, that is how the California gold miners acquired title to their claims back in the 1850s. Today, to acquire title to federal land by a land patent, you must discover valuable minerals on that land in quantity. But the land is no longer free.

The federal Mining Act of 1872 requires payment of $2.50 per acre after you prove discovery of valuable minerals. But no mineral royalty payments to the federal government are required. This old federal law has been used in recent years to acquire title to large tracts of federal land where minerals were discovered by mining companies. But don't get any wild ideas about staking out a claim to federal land unless you can prove discovery of valuable minerals on your claim.

DEAR BOB: Help us understand tax-deferred exchanges in more detail. We want to trade our investment property for a "like-kind" investment property. The value of our property is $975,000. After all the sales expenses, our equity will be about $600,000. Do we have to trade at the $975,000 level or the $600,000 level?

-- Dennis R.

DEAR DENNIS: Here is the simple IRS 1031 tax-deferred exchange rule: To have a tax-deferred trade, you must exchange equal or up in both price and equity.

That simple rule means if you take out any cash from the transaction, called "boot," by owing less on the mortgage on the property you acquire than you owed on your old property, that boot is taxable capital gain.

DEAR BOB: We are thinking about refinancing our home loan, which has a 6.75 percent interest rate. The mortgage broker who made us our loan several years ago offers an interest-only mortgage at 5.75 percent guaranteed for five years with no closing costs. We plan to sell our home in three or four years. Is this a good deal?

-- Ron R.

DEAR RON: The big advantage of an interest-only home loan is that 100 percent of your monthly payment is tax-deductible interest. Another advantage is that your payment is as low as it can go at that interest rate.

The reason, of course, is there is no mortgage amortization or balance pay-down. If you expect to sell your home in a few years, mortgage balance reduction is probably of zero concern to you.

However, if you expected to stay in your home forever, then a zero-interest mortgage might not be a smart decision because you will never own your home free and clear.

DEAR BOB: Last year, my generous mom and dad loaned my wife and me $45,000 for the down payment on our home. We agreed to pay them 5 percent interest and have been faithfully paying each month. Can we deduct this interest on our 2004 income tax returns?

-- Nate W.

DEAR NATE: The answer depends whether or not your parents have a security interest in your home, such as a second mortgage. If they made you an unsecured loan, then your interest payments are not tax-deductible.

However, if your promissory note is secured by a second mortgage or deed of trust recorded against your home, then you can deduct the interest you pay your parents on your tax returns. Consult a tax adviser for details.

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