QDEAR BOB: You had a recent item about two brothers who owned a house; one brother had bad credit. When they refinanced, the mortgage lender insisted the new loan be in the name only of the brother with good credit. You said both brothers can deduct their share of the mortgage interest each paid. My question is about two unmarried people where one owns a home with a mortgage. For the second individual to deduct mortgage interest and property taxes, must that person be listed on the mortgage, just the title, both or neither? -- Leslie M.

ADEAR LESLIE: To be entitled to deduct home mortgage interest and property taxes as an itemized income tax deduction, you must make the actual mortgage or property tax payment, or a portion of it; and be legally obligated to do so.

There are many possibilities. If your name is on the title deed, but not on the mortgage obligation, you are entitled to the itemized tax deduction for payments you actually made. Your co-owner can deduct the other part of the payments he or she made.

Another possibility occurs for home buyers who are purchasing on a "contract for deed" or similar agreement where they do not yet hold the title, which remains in the seller's name. In such arrangements, the seller retains the title but the buyer or buyers make payments to the seller, who then keeps up payments on any pre-existing mortgage. Such buyers are "equitable owners" entitled to the mortgage interest and property tax deductions.

Still another possibility occurs for homeowners who bought "subject to" an existing mortgage without formally assuming it. Because they hold title, and would lose the property by foreclosure if they fail to pay the mortgage payments, they are entitled to deduct the mortgage interest and property taxes paid.

A frequent situation where the payer is not entitled to the deductions occurs, for example, when a son voluntarily pays mom's mortgage and property tax payments on her home, but he is not on the title and would not be harmed if he didn't make those payments.

DEAR BOB: I am buying a house and recently learned about my real estate agent's $250 "administrative fee." The agent is getting the listing and selling commission. She did not tell me about this $250 fee. If I refuse to pay and the listing-selling agent refuses to waive the fee, can I demand my down payment deposit back and cancel the sale? Although I am paying cash for the house, this fee was concealed under "conventional financing" on my closing statement -- Kay M.

DEAR KAY: Some real estate brokerages attempt to charge unsuspecting home buyers and sellers an administrative fee, which is 100 pure profit for the brokerage. Congratulations on resisting that unnecessary fee. The sales commission paid by the home seller is sufficient to cover the brokerage's overhead.

If I were you, I would make a friendly phone call to the real estate agent asking her to pay the $250 administrative fee from her sales commission. Most agents will gladly do so to save the sale, though they dislike these fees imposed by their brokerages as much as buyers and sellers do.

You would be in breach of contract to your home seller if you refuse to complete the purchase over this $250 item.

If your agent refuses to pay the $250 fee, I would instruct the closing settlement agent to refuse to pay that fee. Another alternative is to pay the $250 fee and then sue the agent and the brokerage in local small claims court.

DEAR BOB: My wife and I bought our primary residence in May 2000 for $255,000. In December 2002, we moved to another home across town and rented out our former home until we sold it in June 2005 for $553,000. How do we handle the recapture tax for the depreciation deductions taken after we moved out in December 2002? Do we qualify for the $500,000 principal residence sale tax deduction? -- Ethan B.

DEAR ETHAN: You clearly qualify for the Internal Revenue Code 121 principal residence sale $250,000 tax exemption (up to $500,000 for a married couple filing jointly) because you owned and occupied the home 24 of the 60 months before its sale. However, this exemption does not include the depreciation you deducted since converting your home to a rental property in December 2002. The depreciation deducted on your former principal residence is "recaptured" (that means taxed to us normal folks) at a 25 percent federal tax rate, plus any state tax. Consult a tax adviser for details.

DEAR BOB: I've owned a home for 20 years and lived in it 21/2 of the past five years. My wife and I married in August 2003, but she never lived in this home I owned. We now rent out this home and I moved into her home. We are considering selling my house. I know I would be entitled to the $250,000 principal residence sale tax exemption. What about filing our tax returns as married? -- Dean F.

DEAR DEAN: You clearly qualify for the Internal Revenue Code 121 tax exemption of $250,000 because you owned and occupied your principal residence at least 24 of the 60 months before its sale. However, marrying your wife in 2003 does not mean you get an additional $250,000 home-sale exemption. The reason is she doesn't meet the two-out-of-last-five-year occupancy test.

DEAR BOB: Mom and stepfather divorced many years ago. Mother was given the right to live in their home and my stepfather was ordered by the court to stay away. The house remained in both names. He has since been sent to a mental hospital by the court. Mom does not believe he will ever be released. However, she cannot get any information from the hospital, including whether he is dead or alive, because of privacy laws. She still lives in the house. How can she get the house in her name only? -- Evan B.

DEAR EVAN: Your mom's divorce lawyer should have made certain her ex-husband signed a quit claim deed to her at the time of the divorce. She should contact that lawyer for assistance because it probably would be malpractice if he failed to complete that title transfer. If that doesn't work out, perhaps because her divorce lawyer is dead, I would suggest bringing a quiet title lawsuit in the court jurisdiction where the home is located.

Before doing that, she should check with the county or city where the stepfather might have died. If he died there, a death certificate will be recorded.

Your mother needs a lawyer to guide her through this legal maze to clear the title to her house.

DEAR BOB: I live in a manufactured home park where the residents are shareholders. I contacted two financial institutions to secure a home equity loan. Both said they don't loan on manufactured homes. Isn't this illegal discrimination? I don't want to obtain a senior citizen reverse mortgage at this time. -- Ron M.

DEAR RON: Unless you own the land beneath your manufactured home, I don't know of any lender willing to make a home equity or reverse mortgage loan secured by your residence. Being a shareholder in your manufactured home park is not sufficient.

That's because if there is a default, the lender can only foreclose on your personal property manufactured home.

However, if your manufactured home is located on a foundation on a deeded lot that you own, then you would be eligible for either a home equity loan or a senior citizen reverse mortgage.

DEAR BOB: Which comes first, selling our current home or buying a larger home? We live in a hot market for home sales. Having made two purchase offers for homes listed for sale, and having them rejected, we are frustrated. We are working with a buyer's agent who is equally frustrated. She says our next home purchase offer should not include a contingency clause for the sale of our current home. But we are reluctant to sell our current home before finding a larger house to buy. What should we do? -- Doris H.

DEAR DORIS: Most home sellers wisely refuse to accept purchase offers contingent on the buyer's sale of their current home if better non-contingency purchase offers are available.

A good friend of mine, Brian, recently had a similar problem. He and his wife decided to sell their home to buy a larger one for their growing family. They had no trouble selling for more than their home's asking price. But they insisted on a 120-day rent-back period to give them time to find and buy their replacement home.

Not all home buyers will agree to such a delayed four-month move-in date. However, it would solve your problem by allowing you to sell your old home first with a reasonable rent-back period of three or four months.

DEAR BOB: Our house has been our best investment, by far. I won't bore you with the details, but I have given up on the stock market because our house has more than doubled in market value since we bought it about 10 years ago. We have refinanced twice, taking out tax-free cash for improvements and to send our daughter to college. My question involves the house next door. The nice widow homeowner has become a good friend. She baby-sits our kids and is like a grandmother to them. She is considering selling her home to move to a nearby assisted-living home. We are considering buying her home at its market value. But we know the rent, even with a 20 percent down payment, won't cover our monthly mortgage payment. Should we buy this house, hoping it will continue to go up in market value? -- Bren C.

DEAR BREN: I have bought many negative-cash-flow rental houses, such as the one you describe, and I have always profited from the appreciation in market value. If you have sufficient other income to pay the negative cash flow, and if you feel the local home sales market will continue to appreciate, then you will be making a potential sound investment. But if the local economy is stagnant without potential to improve, don't count on market-value appreciation for that adjoining house.

DEAR BOB: I converted my former home to a rental property about six months ago. Being a new landlord, I am not familiar with procedures. I rented to a newlywed couple who are charming, but the husband recently lost his job. He says the local job market is slow, but I hear from other people that the job market is excellent. The couple paid half their May rent but not their June rent. How long should I wait to evict? -- Nathan R.

DEAR NATHAN: You have already waited too long. Within a few days of rent nonpayment, my procedure is to deliver to the tenant the required notice to pay rent or move. This usually produces results, such as a rent check. However, if I don't receive the rent money, my next step is to hire an eviction lawyer. Although I am a lawyer and could handle the eviction myself, I prefer to turn the matter over to an eviction professional.

No matter how much you might like those newlyweds, and feel sorry for the husband's loss of his job, you aren't doing yourself or them any favor by delaying the eviction process. Either you will get paid the rent, or you will get rid of those tenants who are costing you money. By the way, there are always good sales jobs available.

DEAR BOB: I am the sole title-holder of my house. Can my husband and I both qualify for the capital gains tax exemption if we sell the home? Or does the exemption apply to the property owner only? We have both lived in the house for 23 years and have been married all of that time. -- Sara H.

DEAR SARA: Although title to the home is held in your name alone, both you and your husband can each qualify for up to $250,000 tax-free capital gain profits each ($500,000 total). Internal Revenue Code 121 requires each spouse to have occupied the principal residence an "aggregate" 24 of the 60 months before its sale and you must file a joint income tax return in the year of home sale to qualify for the $500,000 exemption. Consult a tax adviser for details.

DEAR BOB: Your recent article says Internal Revenue Code 121 can be used every two years to claim the $250,000 principal residence sale tax exemption. Was that a mistake? I thought use of IRC 121 is limited to once per lifetime? -- Holmes P.

DEAR HOLMES: The Internal Revenue Code 121 principal residence sale $250,000 tax exemption can be used over and over again without limit. However, it cannot be used more frequently than once every 24 months.

Of course, that's presuming you owned and occupied the principal residence being sold for at least 24 of the 60 months before its sale.

IRC 121 is a great way to create a tax-free business by purchasing bargain-priced fix-up houses, renovating them, and reselling for tax-free capital gains up to $250,000 (up to $500,000 for a qualified married couple). The only disadvantage is living in the home during renovations. Consult a tax adviser for details.

DEAR BOB: If a property buyer pays for a title search, why must he also pay for title insurance? Shouldn't the title searchers take responsibility for their work? If a property is subdivided for a new development, why is a full title insurance premium charged to each buyer? Why is the title premium based on the sales price? If there was a previous title insurance policy, shouldn't that insure the property buyer? I recently read than only 5 percent of title insurance premiums go to pay claims. Then why is title insurance so expensive? -- Thomas D.

DEAR THOMAS: I could write a book to fully answer your questions. For a one-time premium, an owner's title insurance policy protects the property buyers and their heirs from dozens of potential title risks. You especially need title insurance when buying a newly subdivided lot -- perhaps the subdivision title work was defective or perhaps there are construction mechanics' liens.

The title premium is based on the property sale price to set a maximum policy limit. The reason title insurers pay out an average of only 5 percent of premiums collected is they spend most of the premiums on title research to avoid insuring titles that are unmarketable. Title insurers also need to earn profits to stay in business.

DEAR BOB: My boyfriend and I own our home together as tenants in common. We have lived in our house more than two of the last five years. Since we are not married, can we each qualify for $250,000 tax-free profits each ($500,000 total) when we sell? -- Linda V.

DEAR LINDA: Yes. Because both names are on the title, and you each owned and occupied the principal residence an "aggregate" 24 of the 60 months before its sale, you each qualify for up to $250,000 tax-free capital gains when selling.

DEAR BOB: In 1997, my wife and I bought our home for $329,000. In 2003, we decided to divorce. I obtained a new $250,000 mortgage in my name alone, plus a $125,000 home equity credit line to pay my ex-wife one-half of the equity at that time. Does this increase my tax basis when I sell? -- Steve K.

DEAR STEVE: Yes. The mortgages are irrelevant for calculating your new adjusted cost basis after you bought out your wife's interest in the house. Your adjusted cost basis is your original 50 percent of the home's purchase price, plus 50 percent of any capital improvements added during ownership, plus the amount you paid your ex-wife to buy out her interest in the property. 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.

(c) 2005, Inman News Service