Question: I was told by our real estate broker that if the buyer fails to purchase the house per the terms of the contract, the house cannot go back on the market until arbitration is completed over the earnest money deposit, which can take months. Is this true?

I am asking because I'd like the buyer to raise the amount of their deposit, but my broker says it's pointless since you will have to pull your home off of the market for an extended period.

Answer: I think there has been some mis-communication here.

Your question apparently concerns a buyer deposit that was made with a contract.

You now want to increase the deposit, however that cannot be done if you have a contract because a contract cannot be modified without the agreement of both parties. Why should a buyer agree to a larger deposit unless you're willing to also make a concession of some sort?

If the buyer attempts to withdraw from the agreement then you may have several options: You may be able to keep the deposit, you may be able to sue the purchaser or possibly both. However, if the buyer does not agree to forfeit the deposit, then the matter may be turned over to a third party such as a court or -- in one state -- a real estate commission. The matter will then be worked out by mediation, arbitration or a full-blown trial. While this is going on the buyer will not have their deposit -- but there may be a claim which clouds your ability to market the property.

The bottom line: First, if you see a dispute arising over a deposit, discuss it with an experienced real estate attorney. Second, forget about raising the deposit amount once a contract is in place.

Question: I'm in the process of buying a three-bedroom, one-bath fixer for $10,000. The house was to close but the broker informed me that the title search will take more time -- maybe as long as two months more, maybe even longer before it's complete because there was no will. The seller is paying the broker a $1,000 fee. The seller will also be charged over $5,000 for the title search. Is this excessive for a $10,000 property?

Answer: What the seller pays for professional services is a private matter. Your concern is with what you're paying for the property, not what the seller does with the money. The sums involved may reflect the difficulty of settling an estate -- and the estate may include far more than the property you're purchasing.

Your interests are different: Are you receiving good, marketable and insurable title? Are you responsible for any liens against the property? Are you responsible for any environmental clean-up costs? Etc.

Do you have a buyer broker representing you? If not, have an attorney in the jurisdiction where the property is located review the transaction to assure that your interests are protected.

Question: Immediately after the closing on a sale of 17 acres of vacant land, I noticed that the contract provision, "the sales price will be adjusted based on the latest survey obtained" was "overlooked." I pointed it out to the very young broker, working on his first sale, who replied that "maybe he can write a personal check for $25,000." What responsibility does the broker have regarding contract provisions?

Answer: Let's sort this out. First, a variable price based on a final survey is common with the purchase of raw land.

Second, it may not be that the purchaser will owe an additional $25,000, it may that the sale price will need to be adjusted downward. As well, a savvy purchaser might want to cap his exposure.

Third, you don't know what the buyer and broker discussed between themselves -- the buyer may have been perfectly aware of the issue.

Question: My husband and I are both gainfully employed full-time and we also own a small business that's free of any loans or liens. We recently became hooked on "flipping" reality TV shows, and flirted with idea of purchasing a distressed property to flip. However, I opted to do some research first -- and I'm glad I did. It appears that based on the cooling resale market, this isn't a good time to flip a property.

We are, however, still interested in real estate as a potential investment. My idea is to purchase one or more single-family homes in our area, rehab them (we're looking primarily at foreclosures and other distressed properties), and then hold them as long-term rentals. We would consider doing rent-to-own/lease options for potential renters, as well, if we can find a good leasing agent with experience in these types of transactions.

So, my question is this: Is investing in long-term rental property a good strategy? Is our plan advisable or are we about to make a huge mistake, in your opinion? We do own a home with financing at a very good interest rate; we can access our home equity for cash flow purposes, if needed.

Answer: Flipping is seen too often as a no-effort, instant profit investment strategy without much mention of the risks and hazards involved. You were smart to look into the concept because flipping is nothing but short-term ownership -- an inherently difficult investment at some times and in some markets, especially slow and down markets.

As to buying and holding for the longer term, this gives you several potential benefits in the best case: Rising rents, rising values and much to write off.

However, in the real world you also have repairs, vacancies, rising interest levels and -- sometimes -- stagnant or falling values. Thus to go further you need to have a solid understanding of local values and real estate demand. To accomplish this you're best-served by hiring a local broker with extensive experience handling single-family investments and investments with one-to-four units.

Question: I was wondering if the realty agent handling the sale of my home, upon the buyer's default, can use the contract deposit to pay herself a commission and for the online appraisal and then what is left, and then pay me? The buyer signed a release of the good earnest money.

Answer: That you have a properly-written deposit release can mean the money is yours without arbitration, mediation or a trial. However, the broker found a ready, willing and able buyer and thus is entitled to compensation. How much compensation? Practices vary, but take a look at the sale agreement -- it likely outlines what happens if the deposit is lost. For instance, it may provide that the broker is entitled to half the deposit, up to the value of the commission.

Question: I have a foreclosure that's less than one-year old. Is it still possible to get a home mortgage loan?

Answer: After a foreclosure or bankruptcy lenders like to see that you have re-established a positive credit history. It typically takes at least two or three years to qualify for rates and programs that are reasonable. Lenders also want to look at the reasons why there was a foreclosure -- maybe there was a car accident, job loss, local disaster or the death of a spouse that resulted in foreclosure and not financial mis-management.

However, once there has been a foreclosure or bankruptcy you must show flawless credit to get back on track with lenders. Make a point of paying every bill on time and in full to re-establish credit.

For details, speak with lenders about the programs which may be open to you. Be sure to ask about rates and terms -- most likely you will need a "bad credit mortgage" if you finance within three years.

Such loans should be seen as short-term mortgages, loans to be refinanced as quickly as possible.

Question: Does my son qualify for an exclusion? He is not yet on the trust deed -- it is only in my name. My plans were that he live in it, buy it from me and then can he take the exclusion by including the time that he lived in it while it wasn't in his name. Is that correct -- or must he be on the trust deed first?

Answer: For purposes of the residential write-off, the key is two years of owner-occupancy. As the IRS states:

"To exclude gain, a taxpayer must both own and use the home as a principal residence for two of the five years before the sale. The ownership and use periods need not be concurrent. The two years may consist of 24 full months or 730 days. Short absences, such as for a summer vacation, count as periods of use, but longer breaks, such as a one-year sabbatical, do not. The taxpayer also must not have excluded gain on another home sold during the two years before the current sale."

For details, please see a tax professional.

Question: We're interested in buying a house in an area with a current buyer's market. We found a house that has an unpermitted second floor built about 10 years ago, making it around 5,200 square feet.

The tax records show the house as having 2,250 square feet, three bedrooms and two baths. The total number of rooms, if completed, would be nine bedrooms and 3 1/2 baths. The garage was also converted into 2 bedrooms, probably unpermitted. As far as we know, the seller has recently submitted the plans for the addition to the county for approval.

How much tax would be assessed for the additional square footage? Who should we contact to find out an estimate for the assessed taxes once the house is finished? I'd like to know before we make an offer, so that there are no surprises, should we go into escrow.

Answer: Just curious, if the total number of bedrooms is tripled, what about the electrical, heating and air conditioning systems? Are the kitchen and dining areas sufficient to serve such a bigger home?

As the seller is currently seeking permits, you can structure your offer to require that all permits must be secured 24 hours before closing. Your broker or attorney can provide specifics. For tax information, contact the local property tax office.

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