Doesn't it make sense for me to sell my house on my own? This way I can pocket the Realtor's commission. Right?

Wrong! It's not that simple. For one thing, the typical buyer is no fool. He'll expect you to deduct the commission for HIS benefit before you even start serious negotiations. Then you're on your own to handle some tough bargaining, curiosity seekers, credit checks and intricate financial arrangements. In the long run, you'll find that a Realtor will sell it for the best price and in the shortest amount of time. You've got a lot invested in your home. It makes sense to sell it the professional way.

One normally refers to stocks and bonds as blue chip investments. Shouldn't real estate be included in this category?

A well-built home in a good neighborhood is, indeed, a blue chip investment. In fact, real estate values - long term - increase more than the value of stocks and bonds. And housing values have always more than kept abreast of the general rise in consumer prices.

There is no reason to believe that this situation will change in the future. There is an increasing demand for homes. Also, real estate tax breaks allow you to keep more of what you earn. It's a blue chip investment - plus!

I'm trying to sell my house on my own and I'm being swamped with "curiosity seekers". How do you limit these intruders?

Curiosity seekers are one of the plagues which the do-it-yourself broker has to contend with. It's not only an inconvenience, but it could be a risk to open the door, day and night, to all who knock. The best solution is to place your home in the hands of a realtor. He or she will weed out curiosity seekers from prospects at the office, visit you only by appointment, and will always accompany prospects. On top of that, you'll probably end up with more money than by selling it on your own.

Several Realtors have told me that my house is overpriced by about 20% and, in the long run, could cost me money. How can this be?

Because overpricing stops buyers from considering your home. No matter how much is spent on advertising, an overpriced home will not sell. Prime prospects who should have bought, have gone elsewhere to buy. When a home remains unsold too long, interest stops because buyers become wary. Eventually your house will sell, but for less than you could have realized had you priced it realistically. Use extreme caution in pricing you house more than 5 percent above its market value.

In your opinion, how much of the home-buying decision should be a family process?

It's desirable that house-hunting be done by husband and wife wherever possible. However, in the case where a move over a considerable distance is involved, the best arrangement is for either the husband or wife to look separately and then for both to get together to make the final decision-making inspection.

I have a chance to buy a "Handyman Special" worth $96,000 for only $80,000 because it needs repairs. I can arrange for the $80,000 but need another $16,000 for repairs. Help!

Your answer may be a construction commitment loan based on the future value of your home - after improvements.

If the bank agrees to an 80% loan, it will give you $64,000 (80% of the $80,000 sales price) for payment to the seller. It will release the remaining $12,800 (80% or the $16,000 improvements) when the work is completed.

I think my home is worth a certain amount. My neighbor says it should sell for more, but a prospect claims it's worth less. Whose opinion is correct?

The value of your home is not what YOU think it should be, or your neighbor or even a casual prospect. It is determined chiefly by the location, the neighborhood and the current market.

Nobody, but nobody, is more acutely aware of the current housing market than an experienced local real estate firm like ours. Put your faith in our hands and we'll recommend the best possible selling price.

I have a mortgage loan that is fifteen years old and have now accumulated enough money to pay it off early. Do you think this is wise or could I put my money to better use?

It depends on the difference between current interest and your mortgage interest. Chances are you might be better off to keep the mortgage. With a mortgage that is old, the interest on the debt and the interest you'd get from investing it would probably not be too far apart. With the right investment, you might even get a higher rate of return. The advantage is that you have a cash reserve while still earning almost as much, if not more than you would by paying off the debt.

What advice do you offer on the subject of painting your home before putting it on the market?

If the outside is badly in need of paint, it may be worth your time to paint it before you start showing the house. Chipped and faded paint is not only unsightly, but may discourage a sale. Most people do not want to move in and have to undertake such a big job. The same advice goes for the inside. No point to completely repainting or papering your walls since the buyer may want to select his own colors or patterns. However, if a particular room looks especially shabby, it will be worth your effort to paper or paint it.

Is it true that it does not make sense to buy real estate when the inflation rate is low?

Let's not kid ourselves. Whether it's 4% or 20%, inflation is inflation and unless you do something to protect your hard-earned money from losing its value, you lose.

If you hide $1,000 in your mattress, and sleep on it for ten years at a 5% inflation rate, the $1,000 will be worth only half of its buying power when you remove it from the mattress. On the other hand, if you purchase a home for $100,000, its value would have appreciated 50% to $150,000 during the same 10 years that you incubated your cash in the mattress.

When selling a home, is it a good idea to leave a lot of personal items for the new buyer as frosting on the cake or do you advise selling personal items that you really don't need?

Frost the cake! It's a good idea to include as many extras as possible. Draperies that you don't need, shelving, porch furniture that you won't have use for, or maybe that extra lawn mower are some examples. Make sure the agreement spells out what goes and what does not.

I told my real estate agent that I wanted $120,000 for my house. He offered to sell it if he could keep anything OVER that amount as his commission. What do you think?

If an agent proposes to guarantee you a certain sum from the sale of your home in return for the chance to keep anything OVER that amount, you have been offered a "net listing". This arrangement is open to so much abuse that it is illegal in about half the states.

Any number of complications can arise. The AGENT'S interests are now paramount although the law requires that you, the client, must come first.

How did the homeowner fare under the latest change in the tax rules?

May I say, Fantastic! The new law allows homeowners to avoid paying taxes on the first $250,000 of profits in a home if they are single, or on the first $500,000 of profits if they are married at the time they sell the home.

Because a homeowner can use the exemption repeatedly, so long as he or she lives in each house for at least two years, most will never have to pay taxes on profits from home sales.

This change exempts over 99% of homes sales from capital gains taxes.

I plan to buy a home in the near future. When should I decide on whether to select a fixed or variable mortgage?

Actually, this should be a last-minute decision. The financing market changes often enough so that the best financing mode one month may not be the best the next month. If you expect to live in the house for a long time and you feel that interest rates will increase, you may lean toward a fixed rate. An equally sound case can be made for the lower initial interest offered on variable rate mortgages. If you don't expect to live in the home for a vey long time, the variable rate mortgage would be the answer.

What is meant by the word "leverage" when used in conjunction with investing in real estate?

Leverage arises because ALL of the income and ALL of the appreciation belongs to the property holder regardless of the amount of the loan. To illustrate, assume a $100,000 property was purchased for only $10,000 cash and a $90,000 mortgage loan. Five years later, the same property is sold for $150,000 (a 50% gain in value). After paying off the $90,000 mortgage, the investor would realize, not a 50% gain, but rather a 500% gain on his initial cash investment because he only invested $10,000 for the property. That's LEVERAGE!

I am about to purchase a new home. The builder promised that everything wrong will be taken care of and that his handshake will save a lot of paperwork. Should I trust him?

Many a business agreement has been made with a handshake and enforced by the courts. But when it comes to the never-never world of real estate, you cannot and should not rely on oral promises. In fact, the law in all states specifically requires that all agreements and conditions relative to the sale of real estate specifically be in writing to be enforceable. The way to put teeth into oral promises is to insist that everything significant be put in writing.

My Realtor suggested to me that he do a "solo act" when showing our house to prospective buyers. Wouldn't it be wiser for me to accompany them around?

One of the fastest ways to sell your house in a hurry is to keep out of it when it's being shown. First, tell the Realtor everything that should be known about the house, then let the REALTOR do the selling. He or she is a skilled negotiator and knows how to close a sale without emotional involvement. If you must be around when the house is being shown, greet the prospect graciously, take the children and pets and retire.

Why does everyone say that home ownership is one of the great hedges against inflation?

For one thing, your monthly installment payments never change (unless you have an adjustable rate mortgage). Also, your investment grows as the value of your home increases with rising prices. On top of that, you enjoy some fine tax advantages, especially the property tax and mortgage interest deduction.

There is no better inflation hedge than ownership of a home. And, most importantly, real estate values have always increased faster than the cost of living.

Do you have any suggestions on how to prepare a home for its best showing?

Don't just sell a house -- sell a home! For evening inspection, brighten your home from the front porch light on through all the rooms of the house. Little decorator touches, a vase of flowers, a plant, small pillows -- can add much to the comfortable feeling. If it's winter, a crackling fire adds irresistible charm. A working fireplace is a major attraction to home buyers. A large mirror can make a room look larger, reflect and magnify many of your best selling points. Create that subtle, lived-in atmosphere.

Why is a title search necessary when you buy a home?

Skipping the title search is like buying a new car without a warranty -- except the stakes are higher. Although you may be the only buyer, others may also claim rights to the property. There may be an easement to restrict the use of your land or unpaid taxes. An heir to a former owner may claim a share of the property. A title search will check for any such possible claims and determine if the title is clear. Your deed does not eliminate claims that others may have. It simply transfers the seller's right of ownership to you.

Just how important a factor is overpricing when selling a home?

Buyers buy homes by comparison. The average buyer is no slouch. He'll shop a particular neighborhood and home type. He'll rarely buy the first one he visits. It's too big an investment to be nonchalant. He will then compare prices against comparative value. He'll quickly throw out any obviously overpriced homes.

If the buyer really likes an overpriced home, he may make a counter offer at a lower price -- closer to its true value. Historically, the buyer probably will make his offer for one properly valued. Overpricing will hurt a sale.

What is meant by a restriction?

It is a clause in a deed restricting the use of the property. It might be looked upon as zoning on a very personal basis.

For example, a house in a commercially zoned area may have a restriction against use for any commercial purpose. This could create future financing problems because banks may refuse to loan money for other than commercial use.

From the point of view of the buyer, it is preferable that the agreement enumerate any and all restrictions. Bring them out in the open and get professional advice before going any further. It's for your own protection.

Why do so many homeowners go wrong when they try to set a realistic selling price?

Most people base their price tags on these factors: Original price, cost of improvements, hoped-for profit and what they think similar homes are bringing. The original price, improvements, and hoped-for profit only determine whether you gain or lose, but they have nothing to do with the right price to produce a sale. Prices of other homes? Most of the time you only hear of the asking price, not the selling price.

Solution: Consult a local Realtor whose business it is to KNOW how much a property can and will bring.

How does real estate investment fare as in a method of making you financially independent in retirement?

Being financially independent in your later years is a feat by itself. According to a study by the U.S. Government, of all people over the age of 65, only 6% are financially independent. Also, according to this same study, all of the lucky segment became financially independent partly or wholly through ownership of real estate.

No one buys their first home as a reason for financial independence at retirement, but that's the way it often works out.

Do you have any suggestions on how much a home should be lighted when being shown to a prospective buyer?

In my opinion -- the brighter the better! Give the prospect the best image you can of the comfort, beauty and livability you are offering. In other words, you want to sell a home, not a house. Full illumination is the best way to give your home the "lived-in" look. Furniture, rugs and fixtures take on a warm glow from the proper lighting. Kitchens should always be bright, turn on lights in all rooms and especially in closets and storage rooms. The brighter -- the better.

I understand the most important task in selling a home is deciding on the right sales price. How do you come up with the best price?

This is not done by looking into a crystal ball or consulting with a guru. The most important factor is the price of comparable sales in your immediate area. These are sales which have already been completed of homes as nearly like yours as possible. The sales should also be near in time, for five-year-old sales have almost no meaning in today's volatile financial market. Also, the homes should be similar in style, and condition as your property – the closer the better.

Why should I use the services of a REALTOR when I can buy all the real estate I need at the stationery store and just fill them in myself?

These printed forms are only a starting point. There are dozens of varieties of deeds, leases, and mortgage forms. Which ones are to be chosen to best protect yourself is a good question for openers. Then, it's what is crossed out, and what is added that gives you the value, security and protection that you pay the experts for. Believe me, some of the largest financial losses and legal entanglements have resulted from printed forms being incorrectly used.

I have received a written offer to purchase my property. What happens to the original offer if I make a counter offer?

A counter offer is a combination of a rejection of the initial offer and a new offer by the seller. When the seller demands a higher price, more down payment, or different terms, the buyer's original offer is, in effect, cancelled. Unfortunately, this may burn bridges behind you. If the buyer refuses your counter offer, there is no way you can force him to make good on the original offer because it will have been wiped out with the rejection and counter offer. This is a tricky area of negotiations that calls for expert advice.

I'm house-hunting and get confused when I try to remember the details of each house I viewed. Any advice?

Once your Realtor takes you house-hunting, he or she will probably show you several. Therefore, it's important to take notes on what you have seen or you may forget which home is where, how big it is, what shape it's in, and the price.

Your Realtor can provide you with a checklist to make this task easier. This way, you can instantly recall the location, price, construction, number of rooms, heat, fuel, taxes, and financial requirements. A photograph of the house to go with the notes helps, too.

How far should I go in making major improvements before putting our home up for sale?

An expensive addition or improvement can be the kind of thing that will cost you far more than you get back. True, the house should be spruced up and neat, but it's rare when a large financial undertaking will bring more than its cost in the final price. There is always the risk of miscalculation, too. Home improvements frequently end up costing a lot more than originally anticipated. You may end up with a faster sale and less inconvenience if you lower the price an equivalent amount.

What is the proper relationship between the cost of the lot and the value of the house on it?

Old rules of thumb have lost much of their meaning. It used to be that land represented about one-sixth of the home's purchase price. Then it moved up to one-fourth. And it will change again as the cost of land continues to rise or fall.

Nevertheless, the land value versus house value ration cannot be totally dismissed because it does, to some extent, affect the resale value of the property. It may not make much difference if you put an inexpensive house on an expensive lot, but it could be a mistake to have too much house for the land.

My home is for sale. One prospect offered to rent it with an option to buy. What is your advice on this situation?

The "Rent with option to buy" offer is usually made by someone who is not a serious buyer for ANY house. I'd suggest putting the offer aside and looking for a bonafide prospect who wants to BUY the house -- not rent it. However, if you MUST rent your home under these circumstances, be sure that there is a consideration for the option over and above the rent. Remember, you are reducing your sales prospects down to one - and that one is quite dubious.

I signed a lot of checks during the closing of the purchase of our home. Can you tell me which closing costs are deductible from my income tax?

Property taxes are usually pro-rated so that both the buyer and seller each pay the taxes for the portion of the year that each owns the property. Each may deduct this amount. Another deductible item is interest charged to the seller on the mortgage up to the date of closing. Also deductible as interest is the amount charged as points.

Fire insurance, FHA mortgage insurance, and charges for rent for occupancy before closing are not deductible.

It looks like I'm the exception to the rule. I put a lot of money into renovating an overpriced home and now I'll have to sell it at a loss. Any suggestions?

You might consider renting the house out for at least a year or so before selling. In that way, the house will be considered a business investment and you can deduct the loss as a business expense.

While you're renting it out, you can also benefit from other tax benefits such as depreciation and maintenance expense deductions. If you sell a house which is your primary residence and take a loss, this loss is not tax deductible. This is a tricky area, so check with your accountant.

I plan to buy a larger home. Do you have any advice on the merits of selling versus renting out our home?

I would strongly consider selling over renting. To keep the house rented, you'll have to pay advertising costs or fees to a broker. Maintenance costs take a bite out of rental income. Each time there is a turnover the house will have to be cleaned and redecorated. A vacancy can result in a loss that could take years to recover. A deadbeat tenant could take up to six months to evict plus legal costs. You're better off selling a single-family home and using the money to move up to a bigger and better house.