How to choose a real estate agent

Q. I've read your column for years - now it's my turn to ask for guidance. I will be putting my house on the market in the near future (I hope). As selling events go, it should be pretty basic. I bought it 23 years ago, it is completely paid for, any gains will be relatively small (maybe $50,000 and likely less), there are no family issues, inheritances, etc.

What I'm looking for might best be summarized as "seller's do's and don'ts" - things like how to pick a Realtor and any other insights that would help reduce the stress of this event.

A. Let's start with your profit, your capital gain, because that's easy to sum up. As you will have owned and occupied your principal residence for more than two of the five years before you sell, your profit of up to $250,000 won't be subject to capital gains tax. The homeseller's tax exclusion is twice that, $500,000, if you're married and file jointly.

You might as well start by understanding some terms. An agent is simply a general term for someone who is authorized to act on your behalf. Most states issue licenses to salespersons and to more experienced brokers. Brokers may set up their own firms; salespersons must remain under supervision by managing brokers - as do some brokers who prefer that arrangement.

The word "Realtor" is limited to members of the National Association of Realtors, a private trade group. Like Xerox and Frigidaire, it's properly capitalized, but it is in danger of slipping into everyday language. Not all licensees are Realtors.

There's no rule about whether you'll be better served by an experienced older broker or an eager young sales agent, a man or a woman, small office or nationally franchised one. In the end, what matters is your rapport with the individual agent. You want someone who is familiar with your neighborhood, inspires confidence, explains what's going on and pays attention to your particular needs. To gain the widest possible exposure for your property, use a firm that cooperates with other offices through a multiple listing system, assuming one is available locally.

Interview at least three agents, even if you like the first one you talk with. You'll learn a lot from them. To locate them you can:

• Get in touch with the person who sold you the house, if you have good memories about the purchase.

• Ask friends and relatives for referrals - but remember you want someone who is active in your neighborhood.

• Stick a "for sale by owner" sign on your lawn for a day or two, just to attract enterprising agents who are interested in your area.

• Call the phone numbers on nearby lawn signs, and ask the brokerages to send someone over.

• Visit nearby open houses. It's always helpful to look over properties that will be in competition with yours. And you can get some impression of the agents on the premises.

Stay tuned - maybe next week we can get in to how to judge the persons you're interviewing.

Q. My wife and brother-in-law are inheriting a small house from their mother. He has a friend who has offered to buy it for a fair price, but needs us to hold a mortgage. My brother-in-law is glad to do it, and is willing to take the whole mortgage and give us cash for my wife's share. Are there any legal or tax problems with that?

A. None that I can see. You should have a lawyer to settle the estate, so that's a good person to double-check with.

If he had asked, I'd have some advice for your brother-in-law. He should investigate the friend's credit and income before agreeing to anything. (One can always say, "Sorry, my lawyer insists.") And he may want to consider Shakespeare's caution that loan oft loses both itself and friend.

Q. I own a rental property that is listed as a short sale (the loan is in default and the value is less than the loan balance.) Private mortgage insurance is in place to stop any losses to the lender. Will this protection to the lender prevent a loss and federal tax liability for me?

A. That insurance does reimburse the lender for any shortfall, but I'm afraid it doesn't protect you. The IRS considers that when you receive money and don't pay it back, that counts as taxable income.

Special consideration has been given in recent years to mortgage debt forgiveness. Congress recently got around to extending this exemption for 2014 short sales, but this exception only runs through Dec. 31. Congress may well extend it again, but there's no way to tell right now. When your house sells for less than is owed, you may owe income tax on the deficit - or you may not.

• Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (include a stamped return envelope), or readers may email her through askedith.com.

© 2015, Creators Syndicate Inc.