How much to offer for a house is not an exact science

Q. We have been house hunting for several months, and we are ready to write up an offer for one we like. Do you have any advice on how much to offer?

A. Before you begin and your emotions take over, settle in your minds the top price you'll pay if you have to, and don't share it with anyone.

Some sellers who hate haggling list their home at a rock-bottom price. Others add something on to what they'd really take, just to see whether they can get it. Consider their situation. Are they spending money every month on a vacant house, or are they elderly homeowners under no particular pressure who have emotional ties to a longtime homestead?

If the property has been on the market for months at a given price, the buying public has voted it isn't worth that much. On the other hand, don't fool around if a house has just come on the market and is uniquely appealing or underpriced. If you believe several offers are coming in, consider offering something above the list price.

Some buyers believe you start low, the sellers counter with some concession, you come up a bit and so on, all in writing of course. But too many volleys often result in hard feelings and kill the deal. It's wise to make your first offer pretty close to what you'd pay if you really had to. That may tempt the sellers to wrap up the deal, even if it isn't exactly what they wanted.

Good luck!

Q. When readers complain about their home having been on the market with no success, you usually recommend lowering the asking price.

My husband and I put our home on the market about 10 years ago and had no success for several months. I asked our Realtor to lower the price. He suggested instead offering a higher commission to agents representing buyers. This immediately motivated buyers' agents to show their clients our home, and it sold a couple of weeks later.

Why don't you ever recommend this strategy?

A. Mostly, I suppose, because I like to think any cooperating broker who has an appropriate buyer already knows about your property and should be showing it. After all, fiduciary duties require a buyer's agent to put the buyer's interests first.

But you're right, of course - sometimes the offer of extra commission does catch agents' attention. At any rate, congratulations on your sale.

Q. I have a rental property in San Francisco and am thinking about selling it. I purchased it for $610,000. My Realtor says I can sell it for more than a million dollars.

Will I have to pay capital gains? And if I do a 1031 exchange and turn this property into something else, when will I have to pay these taxes? Would my son owe taxes if I gift the house to him over time?

A. Yes, if you sell, you will owe capital gains tax on your profit, and you will have to recapture (add back to your cost basis) the depreciation you claimed or could have claimed over the years as an expense.

If you buy a replacement investment through a 1031 exchange, the tax will be deferred until you sell the next property. Such an exchange can be complicated, and it involves strict deadlines. You'd need to work with professionals to set it up.

If you give the property to your son, he will take over your cost basis along with the real estate.

With any rental property, and certainly with this amount of money involved, you should be getting your information from a tax professional.

Q. I am a 90-year-old lady in good health. I have three children, and I bought a house three years ago to be near my son.

My two oldest children think I should go ahead and sell the house. My youngest thinks that if I do, I might end up in a nursing home and Medicaid would need to use the money for my care.

I have heard that they can do that for up to five years. Is this true? Please let me know about the Medicare ruling.

A. You mention both Medicare and Medicaid in your letter. Medicare is the federal health program for seniors; Medicaid is the program for seniors with very low income.

That five-year look back you ask about has to do with qualifying for Medicaid. It provides that any assets you've given away (to your kids, for instance) in the five years before you apply for Medicaid would be counted as if you still owned them. It has nothing to do with whether you sell your house or not.

• Contact Edith Lank on www.askedith.com, or 240 Hemingway Drive, Rochester NY 14620.

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