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Editor’s note: Robert Bruss is temporarily away. The following column from Bruss’ “Best of” collection first appeared Sunday, March 12, 2006.

DEAR BOB: We own a home in a popular vacation area, but it is only a two-bedroom, one-bathroom house. However, it is in a very good location and is in tip-top condition. Last August we signed a 90-day listing with a superb realty agent. She warned us the average sales time in the market was about 150 days. We only received one “low-ball” purchase offer. The house has been off the market since our listing expired. We have talked with several other local realty agents and they all advise us the market has “slowed” in the last few months and two-bedroom houses are not in great demand. Although we don’t have to sell fast, we want to sell because we rarely use the house. What would you do in our situation? –Daren W.

DEAR DAREN: You own what is known among real estate agents as a “difficult house.” Over the years, I’ve bought and sold my share of such residences, although I didn’t know they would be a “difficult house” when I purchased.

(Purchase Bob Bruss reports at www.bobbruss.com.)

However, when I decided to sell a “difficult house,” I found one technique always works: The method is a lease with option to purchase.

Most real estate agents will never tell you about lease-options. The reason is the agent has to wait for most of his or her sales commission until the option is exercised, often a year or two in the future.

Personally, I bought my current home with a lease-option. The sales agents had to wait about six months to receive their commission until I exercised my option after I sold my previous residence.

My favorite way to sell a home with a lease-option is to run a classified newspaper ad such as “$10,000 MOVES YOU IN. Open Sunday 2-4. Bring your checkbook.” The ad then describes the house and lists the address.

When properly marketed, lease-options work to sell “difficult houses.” There are always more lease-option buyers than sellers. More details are in my special report, “How to Profitably Use a Lease-Option to Buy or Sell Your Home or Investment Property,” available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.bobbruss.com.

WAIT 24 MONTHS TO USE $250,000 HOME-SALE TAX BREAK AGAIN

DEAR BOB: In 1990 we bought a rental condo on which we deducted depreciation over the years. In January 2003 we made the condo our primary residence. We sold it in July 2005. Then we moved into a house we had purchased in July 2000. If we sell this house now and close the sale in June 2006, can we sell without paying capital gains tax? –Lucy M.

DEAR LUCY: No. Run, don’t walk, to your personal tax adviser’s office. It appears you are about to make a very costly mistake.

If I follow your letter correctly, you lived in the former rental condo as your principal residence for at least 24 of the 60 months before its sale. Therefore, its sale qualifies for the Internal Revenue Code 121 principal residence sale tax exemption up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return in the year of the home sale).

However, the depreciation you deducted during the condo rental period will be “recaptured” and taxed at the special 25 percent federal tax rate (plus any applicable state tax).

As for your house that you want to sell in June 2006, it cannot qualify for the IRC 121 tax exemption. The reason is because you used IRC 121 for the July 2005 sale of your condo principal residence.

IRC 121 can only be used once every 24 months. Because you used this generous tax break for the June 2005 condo sale, you cannot use your tax exemption up to $500,000 again until July 2007. If you sell your house in June 2006, your capital gain will be fully taxable.

NO EASY WAY TO GET BOYFRIEND OFF CONDO TITLE

DEAR BOB: In 2003 my then-boyfriend and I bought a condo together as tenants-in-common. Because my credit and income were much better than his, the lender suggested obtaining the mortgage and taking title in my name alone since I paid the down payment. However, about a month later, I foolishly signed a quitclaim deed to my boyfriend for a 50 percent interest in the condo. He paid half of the mortgage payments each month. But in October 2005 I caught him cheating on me with another girl. I kicked him out and I haven’t heard from him since. However, I want to get him off the title. How can I do that? –Jennie J.

DEAR JENNIE J: There is no easy way to get him off the condo title. Presuming you can find him, you will need to sweet talk him into signing a quitclaim deed of his 50 percent interest to you.

Since you paid the down payment, he has little or no equity in the condo. But he will probably want something in return for his notarized signature on the quitclaim deed.

Cash usually works. Sooner or later, he will need $1,000 or $2,000 cash for his notarized signature. Don’t appear eager. It might take six months or longer, but eventually he will accept your offer and sign the quitclaim deed. However, be sure his signature is notarized and the deed is in recordable form.

DON’T PANIC ABOUT LOST DOCUMENTS

DEAR BOB: I need to sell my condo, but I have misplaced the four documents I received at the time of purchase in 1996: the original recorded deed, bill of sale, certificate of approval, and the title insurance policy. The lawyer’s office no longer has copies of these documents. Do I need all four documents? What should I do? –Nancy M.

DEAR NANCY: The exact answer depends on the state where your condo is located. Shame on your attorney for not retaining copies of your documents. However, you might not need them.

I suggest you contact the title insurance company that insured your purchase. They can inform you which documents are required in your state and what can be done if you can’t find these documents.

If you handle the sale of your condo through the same title company that insured your purchase, the transaction will probably go very smoothly.

“BRIDGE LOAN” CAN PROVIDE CASH TO BUY NEXT HOME

DEAR BOB: We plan to sell our home in a popular city location so we can move to the suburbs. But I am concerned while we wait for our house to sell, the “perfect house” will become available where we want to move. Can we get a loan on our current home to give us the cash to buy our next home? –Angelina L.

DEAR ANGELINA: Yes. The situation you describe is perfect for a “bridge loan.” Presuming your have good credit and good income, your bank should loan you virtually the full amount of your realistic home equity, which you can then use for the deposit and down payment on your new home.

Another easier alternative, if you have a large home equity, is to obtain a home equity credit line secured by your current residence. Many banks loan up to 80 and even 90 percent of market value on home equity credit lines. Then just write a home equity credit line check for the cash you need to buy your next home.

NO IMMEDIATE TAX PROBLEM CONVERTING RENTAL TO RESIDENCE

DEAR BOB: Are there any potential tax problems for converting a rental house, acquired in an Internal Revenue Code 1031 tax-deferred exchange, into my personal residence? –William D.

DEAR WILLIAM: Converting the property from a rental into your personal residence is not a taxable event. The reason is that there has been no property sale.

However, because the property was acquired in an Internal Revenue Code 1031 tax-deferred exchange, you must own it at least 60 months before you can sell it and claim the Internal Revenue Code 121 principal residence sale tax exemption up to $250,000 (up to $500,000 for a married couple filing jointly).

That’s presuming that you own and occupy the home for at least 24 months during the 60 months before sale. For full details, please consult your tax adviser.

PROS AND CONS OF INTEREST-ONLY MORTGAGES

DEAR BOB: Several times you mentioned “interest-only” mortgages. What are the pros and cons of such loans? –Leigh C.

DEAR LEIGH: The primary advantages of interest-only mortgages are a) your monthly payment is at the minimum amount, and b) your payment is 100 percent tax-deductible interest.

The primary disadvantage is you won’t be building any equity in the property by paying down the mortgage balance each month.

If you plan to keep the property only a few years, then an interest-only mortgage is advantageous. However, if you expect to keep the property many years, and eventually want to own it free and clear, an amortized mortgage would be better.

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