Question: The rental house we live in has only one bedroom but it sits on 1/2 acre. The landlord said that it was built to be added onto easily. Would it be more economical for me to look for a home that already accommodates at least two bedrooms or buy this place (which he would sell me for about $49,000) and pay a contractor to add on to it. The properties around here sell between $39,000 and $60,000.

Answer: When you expand a home you may have extra costs to consider beyond the addition itself. For instance, do you need a larger heating and air conditioning system? More electrical service?

Before going further, speak with several contractors -- and also speak with competing mortgage lenders to determine how your costs can be financed. Consider the combined cost to buy and improve the property you now rent with other properties on the market.

Question: I am a first-time homebuyer interested in purchasing a home or condo with the hopes of re-selling in five years or so. Do you think I stand to make more of a profit by purchasing a home or a condominium?

Answer: You are not buying a category of homes, such as all single-family detached properties or condos in the form of a townhouse or flat. Instead you are buying one property and that particular property may do better or worse than like properties nationwide or like properties locally for a variety of reasons.

But there should be caution here. First, no two real estate transactions are alike -- they are each non-homogeneic -- a fancy way to say that each location is specific and unique and that each purchase or sale occurs at one time, with one set of buyers and sellers and with one set of circumstance. Change any factor and the deal might be different.

The unique nature of real estate makes comparisons difficult. Example: All properties in Smithville increase in value except one. If you own that one losing property then the good news shared by your neighbors doesn't hold much benefit for you. One hundred percent of your real estate holdings have lost value.

Second, no one knows that a given form of property, or any property, will be more valuable in the future, either on a cash basis or after inflation. Real estate is a commodity and values can rise or fall. While the record for real estate has generally been good, there are no guarantees.

Try this: Buy the property that works best for you in terms of your needs, preferences and finances. Look for areas of future growth and properties you can fix up and improve with your labor.

Question: We purchased a very large house in a tiny town in the Midwest and need to move to Florida. The problem is that we cannot sell the home because our area is sparsely populated and not very affluent. What options do we have?

Answer: A general concept in real estate is that buyers seek the least expensive home in the most expensive neighborhood they can afford. In your situation you're selling the most expensive home in the community, thus finding a buyer is likely to be difficult.

What to do? Do you have a job that will be filled by a replacement? If yes, perhaps the new person needs a home. Are you within several hours of a large metro area where someone might want a weekend retreat or a quiet property? Can the home be used for a different purpose, perhaps as a bed-and-breakfast?

Realistically, your home will be difficult to sell because of the cost and the lack of a large, local and financially-qualified buyer pool. Speak with the brokers who sold the property -- they found you so perhaps they can find an equally-qualified purchaser.

Question: I'm currently rebuilding a home, and will probably need to borrow more than $11,000 from family and friends to finish. Will those people have to pay gift tax? I obviously don't want that to happen.

Answer: Anyone may provide a gift of up to $11,000 annually without tax consequences. For details, see: IRS Form 709-A.

However, if you "borrow" a proper loan arrangement should be established: There should be a written note evidencing the loan, an interest rate, funds transferred with a check or other written instrument, a repayment schedule, etc. The interest received should be seen as income. The interest paid may be tax deductible. For details, see a tax professional.

Question: A broker has found a buyer and the owner refuses to sell to anyone. Does the owner owe a commission to broker?

Answer: A listing agreement can be seen as a "performance" contract; that is, the broker earns a commission only when the specific requirements of the listing agreement have been met.

In general there are several issues to consider.

First, is the broker licensed? Without a license the "broker" has no standing to make a claim for a fee.

Second, did the broker have a written listing agreement with the owner? Without a written agreement how can the broker make any claim?

Third, was the purchaser "ready, willing and able" to buy the property under the exact terms and conditions required by the listing? This means not only a desire to purchase at a given price and with specific terms, but also the financial capacity to complete the transaction.

As an example, suppose the seller wants $500,000 with 10 percent down. The buyer offers $500,000 with 10 percent down plus requires the owner to leave the washer and dryer. If the appliances were not offered in the listing, then the offer did not met the exact terms of the listing agreement -- it asked for something more. In effect, it's a counter-offer and not an acceptance.

Or, imagine that the buyer bids $500,000 -- but only makes $18,000 a year and has no savings. In this instance, the buyer in not "able" to purchase the property so the terms of the listing have not been met.

Have a real estate question? Send your inquiry to . Because of the volume of mail received, Mr. Miller cannot respond to questions individually or privately. Published letters may be edited for space and style. For comments regarding other Realty Times articles, please contact individual authors by pressing here.

This column is designed to provide accurate and authoritative information in regard to the subject matter covered. It is made available with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional services. If legal services or other expert assistance is required, the services of a competent professional person should be sought.

Published: October 24, 2003

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