Question: I just signed the contract on a new house 10 days ago and gave $10,000 as an initial deposit. The builder has lowered the price of the property by $30,000. How can I get that new price for my signed contract house. Can I cancel the contract or ask builder to lower the base value on the existing contract or compensate me with $30,000 worth of upgrades?

I'm first time home buyer and I thought I made a good deal last week and now the price is even lower. I do not want to lose $30,000 on the house. What can I do?

Answer: Imagine if you had a contract with the builder to purchase the home for $300,000. Imagine that a week later the builder raised the price to $330,000 and people were willing to pay that amount. Would you then march into the builder's office demanding to pay an additional $30,000? What would you think if the builder came back and asked if you would accept a $30,000 price increase?

You have a contract which reflects the best price and terms you could negotiate at a given time. You can certainly ask the builder to modify your agreement, but generally I would expect little or nothing to happen. For specifics, show the agreement to a local real estate attorney to see if you have any leverage in this matter.

Question: I'm selling my house by myself as a FSBO. However I want to use a friend to help me sell my house. He does not have a real estate license and I'm going to pay him $10,000 for helping me find a buyer and handling the paper work. Or does he need a real estate license if he accepts a payment.

Answer: Is it true or not true that a real estate transaction is a complex matter? Can your friend complete a proper real estate agreement with the right form for your community? Does your friend know how to supply all required disclosures? How will you price your property? What does your friend know about deeds, fixtures, easements, warranties, seller contributions, etc? Who will hold the buyer's deposit?

Now ask: Can you get the best possible price and terms if you do not use a skilled and experienced professional? If sales in your area have slowed, will you do better with or without people who have ongoing contact with would-be purchasers? What will it cost if the transaction goes wrong?

Jurisdictions generally define a real estate broker as someone who acts for another and for a fee in the sale, purchase and management of real estate. Providing real estate services for a fee and without a license is typically prohibited.

Your home is a huge asset. In most cases, a home is the largest asset you have. Why would you potentially entangle that asset in a host of problems if such dilemmas can be avoided?

If a licensed broker does not meet statutory standards there's usually a state-run guarantee fund to protect consumers against financial loss. You can also sue for malpractice. What is it that you can do if your friend creates an unwarranted liability?

What will you do if a purchaser is represented by a buyer broker? Will your friend have the skills and experience necessary to negotiate as an equal on your behalf?

If you're not going to use a broker, then at least get an experienced real estate attorney to help you.

Question: My parents flew to California for two days to look at condominiums. The broker showed a condominium the first day that my parents completely loved. They put an offer on it that same day, and the vendor came back with a new price, so my parents put a second offer on it. We were waiting for an answer on that second offer but we didn't hear from anyone for a day and a half.

The broker and the condominium manager in charge of sales assured us that the unit would be put on hold for us with no money down. Due to this we stopped the search of condos on the first day. Then my parents had to leave town.

A day later we called to see what was going on with the deal and the broker told us that there was a man that had put that particular condo on hold days before but he had been having problems with the lenders so he was going to cancel the agreement. However he never did and he was able to come up with the money the day after we had put the second offer so the condo was given to him. The broker shouldn't have showed us that condo. We even stopped our search and now we're back home with nothing. We are not sure if it was that the other man had an agreement with them that hadn't been broken or that the other man had offered more money to start with and was able to come up with it before we started the paperwork. There was no written agreement between us and the seller's party, only witnesses from both sides. Is it possible to sue or demand a paid trip back to California? Or were we just very unlucky?

Answer: None of the above.

Both your parents and the other buyer apparently placed a verbal "hold" on a property. There was no deposit and nothing in writing. Your parents (and the other buyer) could have walked away from the condo unit without penalty, owing the developer nothing. Since real estate agreements must be in writing, there was no contract binding the parties to do anything.

Your parents twice placed an offer on the unit. The offers were never accepted, therefore there was again no contract.

The broker was right to show the condo. There was no sale agreement on the unit, thus the condo developer could not say it was "under contract." The unit was available because the developer had yet to accept an offer.

If there was a sale agreement, then the developer could still look for back-up contracts provided that the purchasers knew the condo was under contract.

Even though your parents had no purchase agreement to buy the condo unit, they elected not to look at other properties. This is not the fault of the condo developer or the broker.

The purchase and sale of real estate is in great measure an emotional process. The perception of "losing" a property can be very upsetting, even if no offer was accepted.

If your parents are not working with a buyer broker they should do so when next they visit California.

Question: A friend and I bought a house in January of 2006. It was a foreclosure and we had planned on fixing it up and reselling it after living there for two or three years. We were both single guys with bad luck in dating, so we figured it was a good investment opportunity. Neither of us could afford the payments on our own, so we went in together (and yes! everyone WAS right ... bad idea).

Well, about three months after buying the house, I met a girl who is now my fiancee and we're getting married in May of 2007. We want to buy my friend's half of the house, but he's refusing because he doesn't want to get hit with the taxes by selling before two years.

Since it was a foreclosure, and we've added an additional bedroom and bathroom, the value has increased and my co-owner would be realizing gains from this transaction.

As you can see, I've really gotten myself into quite a jam. What can I do?

Answer: I can see the ad now, "Investing in real estate can help your social life ... ."

Your co-investor wants to get the tax benefit of the residential capital gains write-off by living in the property for two of the past five years. By doing this he could, as a single taxpayer, shelter up to $250,000 in profits from taxes. This makes sense.

While it's likely true that your additional bedroom and bath will add to the property's value, it's also true that you had expenses from these capital improvements which will reduce any profit from the sale.

What to do? One approach would be to offer your co-investor more for the property than an open sale might produce so that his after-tax result will be what he might get after two years. However, this would mean less profit when you sell.

A second idea is to move out, rent your half of the property to your co-investor until he has two years of occupancy, then buy out his interest and move back into the property. Speak with a tax attorney, CPA or enrolled agent for specifics. Your time at the property prior to moving out would count toward the two-year residency requirement.

"To exclude gain," the IRS explains, "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."

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Published: December 29, 2006

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Have a real estate question for Realty Times? Wondering about buying, selling, financing, refinancing or renting? Here's where you can send your question to Peter G. Miller, OurBroker®, a nationally-known columnist, author and reporter. Peter G. Miller has written six books -- including The Common-Sense Mortgage -- a guide with hundreds of thousands of copies in print. Miller was the original creator and host of America Online's Real Estate Center and joined Realty Times in 1998. Send your questions to . Because of the volume of mail received, individual questions cannot be answered privately and not all questions can be used. Published letters may be edited for space and style and all letters become the property of Realty Times upon receipt.