Question: My husband and I are trying to buy a foreclosure fixer upper. The house we found is in a great neighborhood for $129,000. Similar houses in the area sell for $170,000 to $180,000. There's one catch: The owners lost the house during renovations. The previous owners removed all flooring and one of the walls is not finished.

We talked to our lender and although we have a pre-approved loan for $150,000 the lender won't provide a mortgage for this property because there's no flooring.

Basically we could get a loan for a fixer upper that has flooring (even in bad condition) but we cannot get a mortgage for this property. Is there anything we can do to buy this house? We have the 20% down payment and money to fix up the house.

Answer: The lender is doing you a huge favor. This property is not a "fixer upper," it's an inverse demolition project that would require considerable time and construction skills to make whole -- after which you would be unlikely to make a profit.

In many markets today there is a wide universe of properties for sale at good prices and with sensible financing. In such an environment why take on a project with very little upside?

The property is priced at $129,000, but with closing costs figure $135,000. Like properties in good condition and with floors and walls in the same area sell for a maximum of $180,000. If you sold the property a year from now for $180,000 you would have marketing and closing costs of perhaps $14,400. That means you would collect $165,600 at closing. Subtract your acquisition cost ($135,000) and you have about $31,000 to cover expenses.

Those expenses would include mortgage interest for a year, the interest not paid on your down payment, property taxes and insurance. In addition, of course, there is the little matter of floors and walls -- as well as other repairs and replacements that inevitably will be required.

Even in the best case you would likely do better and have less risk by placing your money in a savings account.

You are qualified to borrow $150,000 and you have at least $30,000 for a downpayment. The view here is that you're best served by taking on a less ambitious project, say a home that needs cosmetic repairs. Speak with local brokers about properties that are in the path of future development in your area.

Question: Over the past 50 years I purchased four houses and applied the profit from each sale to the newer house. If I sell now will I have to report all those profits? I'm an 80+ young widow and I have concerns about the taxes that my children might be forced to pay.

Answer: You will need to sit down with a tax professional to get the numbers right, but in basic terms if you sell today and have lived in the property for two of the past five years then the first $250,000 in capital gains would be excluded from federal taxes.

Alternatively, let's say you don't sell and the property is transferred to your children within your estate. They would receive the property at its "stepped up" value, meaning that capital gains issues would essentially disappear. There would be no inheritance tax unless your estate was valued at more than $2 million. In effect, a tax-free transfer for virtually all estates.

You should also look into the possibility of making a gift -- and also the right of Medicaid to "look back" five years to recapture money from "beneficiaries" when significant gifts are made.

The best approach to resolve these questions is to speak with an attorney who specializes in "elder law." Be sure to ask about wills and living wills.

Question: I'm considering buying a second home on a New Hampshire lakefront. The asking price is $825,000 and I'm trying to determine what a fair offer would be relative to the market.

Now I know that if this was a residential area, then I'd probably start at 15% less than the asking price. That said, lakefront homes aren't being impacted as much by the market and I've had a hard time locating information about houses bought and sold in the area during the last 12 months. Anyway, I'm thinking $779,000 or 5% less asking. What are your 'general' thoughts?

Answer: Your note raises a number of concerns.

First, past sale information and current comps are readily available from any number of sources, including area real estate brokers, online sites and the local property tax office,

Second, the idea of preset, standardized negotiating discounts -- whether 5 percent, 15 percent or whatever -- is an invitation to financial loss. The reason? The discounts are subtractions from the owner's asking price and who can say if the initial asking price is anywhere close to reasonable? In other words, if market conditions are right you may be able to get a much-larger discount -- or you may be bidding to little to be taken seriously.

As to lake prices being largely unaffected by current market conditions, that's a theory which cannot be proven without actual sale information.

Lastly, as a buyer it's not your job to make a "fair" offer. Sounds mean, but the reality is that your goal as a buyer is to pay as little as possible for the property. At the same time, it's the goal of the seller to get as much as possible. Usually both parties meet somewhere within reason or there's no transaction.

Go no further with this until you have more facts in hand. A good buyer broker who knows the local market would be an asset in this situation.

Question: Is it better to accept a cash-only buyer or one who has lender financing? Or does it make any difference to me?

Answer: Assuming the two offers are for the same price, you want the all-cash model.

Why? You don't have to worry about lenders approving the buyer and no one will ask you to help defray the seller's loan costs by paying points.

That said, you should expect an all cash buyer to require exactly the same verifications as you would find with a financed transaction -- title examination, survey, termite check, etc.

Question: How do I go about finding how much equity I've gained in my house?

Answer: In rough terms, you take the current market value of the property and then subtract all liens. If a property is worth $500,000 and your remaining mortgage balance is $200,000 then your equity is $300,000.

A more realistic approach is to assume that selling the property will require the payment of marketing and closing expenses. In this case the property would be worth $500,000 and you would then subtract some percentage for expenses to sell. If 8 percent is a reasonable figure, then you have $460,000 ($500,000 less $40,000) from which you would subtract the $200,000 loan balance, giving a conservative equity figure of $260,000 in this example.

Question: Why would a lender want to accept a short sale?

Answer: If humanly possible a lender would not want to accept a short sale and neither would anyone else.

In a short sale a lender is asked to allow the sale of the property at a discount, meaning that the outstanding loan will not be fully repaid. The lender in such a situation is eating a loss.

A lender faced with a short-sale offer is not required to accept such a proposal. However, a short-sale may be attractive if it represents less of a potential loss than having the borrower default and taking back the property.

Question: What's an FHA loan?

Answer: In the usual case, a "conventional" mortgage requires 20 percent down or some sort of mortgage insurance so that a property can be bought with less cash up front.

The FHA program is nothing but a mortgage insurance program created by the federal government in the 1930s. With FHA financing you can borrow a given amount and purchase with about 3 percent down. As with any insurance plan, there's an insurance premium to pay in exchange for coverage under the program. If you default on the loan, the FHA will pay the lender what you didn't.

Traditionally, the FHA plan has been an excellent financing vehicle for first-time buyers. Such loans do not contain prepayment penalties, but they do have strict underwriting standards, a requirement which is hardly unfair.

Question: I'm a tenant in a condo project. You need a sticker to park at the complex. The sticker fell off my car and I decided not to get another one. Since then I have gotten a bunch of violation notices on my car. Now the condo association is telling my unit owner that I have to leave. What can I do?

Answer: Get a sticker for your car.

You received a number of violation notices. You're lucky. The condo association may well have had good grounds to simply tow your car off the property.

Condo property is private property. For reasons of safety and security -- and to reduce liability -- the condo association has established a way for property owners and their tenants to park on the property. Requiring property users to get a sticker is hardly unfair or onerous. No less important, buy purchasing a unit the owner of your rental agreed to accept the rules and regulations imposed by the condo regime. Those rules and regulations apply to you as a condo-unit tenant.

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