DEAR BOB: My neighborhood seems to be in a vicious cycle. Other neighborhoods around town show significant appreciation in market value. But ours is flat. When realty agents list homes in my area at prices comparable to the other neighborhoods, the buyer’s mortgage usually is denied due to a low appraisal. Even after a second or third appraisal, the seller is then forced to reduce the sales price by $10,000 to $15,000 or lose the buyer. Can a home seller refuse to lower his price when the buyer’s mortgage is denied due to a low appraisal? – Robert M.

DEAR ROBERT: You probably read in the newspaper recently that homes, on average nationwide, appreciated more than 9 percent in the last 12 months. That is a fantastic appreciation rate. Historically, homes usually appreciate in market value about 5 percent annually.

Purchase Bob Bruss reports online.

Perhaps homes for sale in your neighborhood have asking prices that are too high. Listing agents recommend asking prices based on recent sales prices of comparable nearby homes. Maybe they aren’t using truly comparable recent home-sale prices to establish market value in your neighborhood.

Appraisers estimate the actual market value of a home from the sales (not asking) prices of comparable neighborhood homes sold within the last six months.

Just because a home buyer offers a price that the seller accepts doesn’t determine the market value of that specific home. Until the buyer can pay that price, usually with the help of a mortgage from a lender who requires a professional appraisal, no sale occurs.

Yes, a home seller can refuse to lower his asking price. However, smart home buyers always include a mortgage contingency clause in their purchase offers so if the home doesn’t appraise for the price offered, the buyer can cancel the sale.

Don’t blame the appraiser if a home doesn’t appraise for the price offered by the buyer. Maybe the buyer offered too much, based on recent comparable neighborhood home sales prices.


DEAR BOB: I am 78. My husband is in a convalescent home due to a stroke. He is unable to remember places or names. I plan to transfer title to my home to my children to avoid probate and save inheritance tax. Is there any other option? – Lucy G.

DEAR LUCY: Please don’t do that without consulting an estate-planning attorney. If both you and your husband hold title to the home, and if he is incompetent, you can’t transfer the title without court approval unless you have his signed durable power of attorney.

More important, gifting your home to your adult children now could be a major mistake. Then you lose control, such as if you need to obtain a reverse mortgage for tax-free income. Also, as gift donees your children will be burdened with your probably low purchase price cost basis.

A far better alternative is to transfer title to your home into your revocable living trust. It avoids probate costs and delays. But you retain full control. More details are in my special report, “Living Trust Pros and Cons for Avoiding Probate Costs and Delays for Your Heirs.” I’ll mail you a copy for $4 sent to Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at


DEAR BOB: My husband and I are considering buying an investment home in a vacation area. We would put it in a rental program. If we can rent it at least two weeks every month it won’t have a negative cash flow. Or, should we buy a pure rental house for investment? I prefer the first option because we could personally use the home for vacations. What do you advise? – Kristi C.

DEAR KRISTI: Never, never, never buy a part-time rental property, which you must be able to rent to “tourists” to avoid negative cash flow.

Consider yourself very fortunate if you can keep such a property rented at least two weeks every month, as you described, to avoid negative cash flow. But during the slow season, that house might be vacant for several months.

If you can’t afford to keep that house vacant 100 percent of the time during the slow season, please don’t buy it. Although homes in most vacation areas have recently done quite well in market value appreciation, there is no guarantee that will continue.

I presume your primary reason for buying is to create a sound realty investment. Part-time homes in vacation areas don’t meet those criteria.

If your goal is to profit from a sound rental house investment in a good neighborhood, forget your wild idea to buy a house in a vacation area with hopes of renting it a few weeks each month.


DEAR BOB: My daughter recently sold her condominium through a so-called discount broker for a 4 percent sales commission. She was very pleased with their service. They put her listing into the local MLS (multiple listing service), placed it on their Web site and on, and advertised her listing in the newspaper every other week. She held Sunday open houses for three weeks until a buyer made a purchase offer. Then she phoned the listing agent who prepared the sales contract and everything proceeded to a satisfactory closing about 30 days later. Why are you so tough on discount brokers? – Ted N.

DEAR TED: I am not “tough” on discount brokers. One of my good friends, Lyle Martin, is the founder of the fastest-growing nationwide discount franchises (Assist2Sell). He is active in his local association of Realtors and is highly respected in the real estate profession.

However, most home sellers need a full-service real estate agent to successfully guide them through the home-sale maze, which gets more complicated all the time.

Discount brokers are right for many home sellers. But other sellers need a full-service agent to handle all the 1,001 details of a typical home sale. I am neither pro nor anti-discount broker.


DEAR BOB: I am 68 and am interested in a living trust. But I was told it doesn’t apply to my situation. My lawyer has my power of attorney on my house. Other investments are to be distributed to my five children. The only real estate I own is my home, worth about $300,000. I am single and operate an active business. According to your article, I might not be doing the right thing. What do you advise? – Myrna Y.

DEAR MYRNA: I especially relate to your letter because my father grew up in your town (Mankato, Minn.). I have fond memories of visits with relatives there.

But I am shocked you gave your lawyer a power of attorney to transfer title to your house and other assets. Why would you do that? I hope you realize, after you die, that power of attorney form automatically terminates.

A power of attorney form is not a substitute for a will. Better yet, you need to consider deeding the title to your home and other major real estate assets into your revocable living trust. Then you can control what happens to your major assets in that revocable living trust while avoiding probate costs and delays. Please consult an attorney who specializes in living trusts.


DEAR BOB: I am a widow, 75, who owns a home with a $28,000 mortgage. My house is worth at least $300,000. I currently work part-time, earning about $12,000 per year. But I would like to retire. Although my house has a $28,000 mortgage, can I get a reverse mortgage, which would provide me at least $1,000 per month? – May C.

DEAR MAY: Yes. You can get a senior citizen reverse mortgage. However, $28,000 of your reverse mortgage must go in a lump sum to pay off your existing $28,000 mortgage. The reason is a reverse mortgage must be recorded as a first mortgage.

After that, you can use your reverse mortgage entitlement anyway you wish. You can set up a credit line or monthly payments for your lifetime, even if you live to 120.

More details are in my special report, “Secrets of Tax-Free Reverse Mortgage Income for Senior Citizen Homeowners,” available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center


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