A home inspection is vital in estate sale purchases

Q. My son is buying his first home. He found a nice house that is an estate sale. Is there anything difference about bidding on an estate property? Anything he should watch out for?

A. Buying from an estate can be a good way to find a bargain. Often the house is standing vacant, with someone under pressure to wind things up.

Heirs who did not actually live in the house, though, can't be expected to know all its problems and make proper disclosures. It's particularly important, in that case, to make the deal subject to (or dependent upon) a satisfactory report by the buyer's own home inspector.

Q. In 2002, my mother executed a quitclaim deed transferring her home to me (with her retaining lifetime use). In May 2007, she went into a nursing home. In May 2008, I sold the house.

I have always done my own taxes, but am in a quandary about how to report the sale since I didn't live there.

I sent for some IRS publications: 523 (Selling Your Home); 544 (Sale & Other Dispositions of Assets); and 551 (Basis Of Assets). I'm more confused than ever. Do you have any suggestions?

A. If by "lifetime use" you mean the legal term "life tenancy," your mother was actually owner of the house for her lifetime. That was worth something, and the IRS has tables based on life expectancy, telling what percentage of the proceeds is hers. Her share of the profit should be tax-free, because she owned and occupied the house for at least two of the five years before the sale.

Cost basis for the house includes your folks' purchase price plus money spent on permanent improvements over the years. It may also have changed (for the better - higher) when your father died.

I expect you simply owe long-term capital gains tax on your share of the profit. If the home was rented out before you sold it, that complicates things. I'm not an enrolled agent or a CPA, and that's as far as I go. This time you'll have to break down and get professional help with your tax return.

Q. We are selling our house For Sale By Owner. Are we responsible for paying commissions to agents that are brought in by the buyer?

A. No. The matter of payment is entirely between those buyers and their agents.

Of course you would be liable if you signed a one-time agreement to pay an agent in the event you ended up selling to his or her particular buyers. An agent sometimes requests that, perhaps at a reduced rate, before bringing buyers in. Sometimes FSBO sellers agree. Sometimes they don't.

Q. If I am approved for a $250,000 mortgage and I find a house worth $240,000, can I still get the whole loan for $250,000? Or am I only allowed to get the $240,000?

A. Not only must you qualify for a mortgage loan, but the property must also. When you borrow the money, you sign a promise that if you didn't make the payments, the lender could have the place sold at public auction to pay off the debt (or foreclose the loan.)

Because there's no guarantee how much an auction would bring, most banking regulations say it isn't safe to lend you more than 80 percent of the value of the real estate. That's why lenders usually require some kind of insurance or guarantee if your cash down payment is less than 20 percent.

And for sure they won't lend you more than the place is worth.

Q. What is/are the current problem(s) of real estate in the U.S.?

A. Every now and then someone sends in what I suspect is a homework assignment. But OK, here's a list of what occurs to me offhand: Upside-down mortgages, vacancies, falling prices, foreclosures, high energy costs, rising unemployment, shaky stock market, tightening credit, unsold developments, mortgage fraud, expensive building materials, bankruptcies and major changes in the practice of real estate brokerage.

That's all for a start.

Q. Is there a way to find out how much other offers have been on a house I potentially want to buy?

A. If the seller doesn't want to tell you, the seller's agent is not allowed to. If you're using your own buyer's agent, perhaps your broker can find something out. Or perhaps not.

• Edith Lank will personally respond to any questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.

2008, Creators Syndicate Inc.