Question: Can you explain the new "economic stimulus" plan and what it will mean for homeowners?

Answer: The stimulus plan -- which passed with huge bipartisan support in both the House and the Senate -- will distribute cash to more than 100 million households in an effort to stave off recession. Most importantly in terms of real estate, the stimulus bill will raise both conventional and FHA loans limits for the remainder of 2008.

The conventional loan limit will increase from $417,000 to $729,750. The top FHA loan limit within the continental U.S. will go from $362,790 to $729,750.

With higher loan limits, buyers will be able to obtain larger loans at lower cost. This should encourage sales in high-cost areas, plus it is hoped that inventories will be reduced and that borrowers with toxic loans will refinance with fixed-rate mortgages.

While the stimulus package is plainly good for real estate, not everyone believes that the stimulus package will do much to offset a recession. As financial commentator Jim Cramer explains in New York magazine, "the plan will do nothing, other than get some politicians re-elected, because it doesn't address the core issue: the decline of home prices in America and the broader financial impact of that decline."

Question: I won the bid on a HUD property. I signed and submitted my earnest money check for $1,000. It was then signed by HUD representatives. Unfortunately, there seems to be a discrepancy in the timeliness of getting my earnest money into the proper hands within 72 hours. I received a call from my listing agent, stating that the contract had been canceled. He apologized that the earnest money was not delivered by the deadline; however he was trying to get the contract reinstated, as he knew I still wanted the home.

The HUD contractor has canceled the contact due to the fact that the earnest money was one day late. They also requested to keep the earnest money.

The listing agent wrote letters explaining that the money was late due to a serious medical issue he had.

Answer: Given that a medical emergency was involved -- and given HUD's goal to sell homes in its inventory -- everyone involved should understand that this is simply a deal that should go through.

You and the listing agent can contact HUD's inspector general by calling 1-800-347-3735. Individuals are encouraged to call regarding "reports of fraud, waste, abuse, and serious mismanagement in HUD-funded programs and operations."

Question: When using a broker to purchase a home is it proper etiquette to give a gift upon closing?

Answer: A gift at closing from a client is evidence of appreciation for a job well done and perfectly acceptable. Indeed, my usual policy with brokers who do a good job is to give them an envelope at closing -- with a brief letter of recommendation inside that they can use in presentations or on their web site to attract more business.

Question: What percentage can a buyer expect to save from an original asking price since we are now in a recession. Can a person save 5 percent? Ten percent?

Answer: There's no general rule which says that buyers are somehow entitled to a given discount in a slow market. Instead, you have to look at every transaction as being unique and consider such issues as the initial offering price, any seller contributions or concessions, the condition and location of the property, demand in the local area, the interest rate and the need for the owner to sell. Add it all up and a 10-percent discount may be too little, meaning you'll overpay for the property; just right, meaning both you and the seller will agree to a given price and terms; or too much, meaning the owner can do better with another buyer and you'll lose the house.

Question: A home was advertised at $245,600, but when I went to look at the home the builder said it was a "typo" and that it should have been advertised at $345,600. The website listed the builder as the seller of the home. Does the builder have an obligation to sell the home at the advertised site if it was "their" mistake?

Answer: No. The Federal Trade Commission says that under the Fair Competition Act, "products should be sold at the lowest prices displayed. If, however, it is obvious that the lower price is an error, then the FTC might not require the merchant to charge the lower price."

The FTC adds that a "sale above advertised price might be permitted under the following conditions: where the advertisement states that the prices advertised are subject to error and if the merchant is able to establish that the wrong price was indeed advertised in error; or where the advertisement carrying the wrong price is immediately followed by another advertisement correcting the initial price."

In other words, there's no requirement for marketing perfection. The $100,000 price differential in this situation is simply and obviously an error, one the builder should quickly correct.

Question: I bought a house four years ago. It's been my principle residence. I want to sell it. Do I have to reinvest the profit to avoid capital gains? In the last month I stayed at my boyfriend's house, I haven't sold my house, but I will in the near future.

Answer: You need not reinvest profits from the sale of a prime residence to avoid a capital gains tax. "To exclude gain," says the IRS , "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."

Please see a tax professional for specifics.

Question: We are about to buy a new home. I'm wondering if it's a good idea to hire my own home inspector for pre-drywall and final walk-through inspection? And what criteria do I use to pick a home inspector?

Answer: You want an experienced home inspector. If your jurisdiction licenses home inspectors, so much the better.

You want a home inspector to look at the property three times: First, after the foundation has been poured; second, when the framing is up but the walls remain open and; third, at the pre-settlement walk-through.

Question: If real estate is "local," then why do so many media and real estate outlets put out national reports?

Answer: Is the number "873" big or small? You don't know without context.

In a similar sense, national real estate information is routinely and properly reported because it provides a benchmark that allows us to see how a local area is doing relative to the national marketplace. The idea is not that national measures describe what's happening down the street, but rather that national sale and pricing data help us better understand the general economy.

Moreover, the real estate industry has made a big deal out of national websites and listing aggregators. If the industry believes that national sites are important than it plainly follows that national data must also be important.

Question: I'm looking to sell some land I have in Texas, so that I can buy some land in Kansas. I heard through the grapevine that you can do some sort of property exchange and then you don't have to pay taxes. Is this right? What did I hear about?

Answer: Most likely what you want is a 1031 tax deferred exchange. Such exchanges do not automatically eliminate your tax liability, however they can DEFER it for years and perhaps decades.

Do not begin to sell your Texas property until you have first spoken with an exchange expert. There are various deadline and paperwork requirements that must be met to have a proper exchange that meets IRS standards. For instance, you will need a third party to hold the proceeds from the sale of the first property, you must identify replacement real estate within so many days, etc.

Question: My elderly mother is moving into a nursing home next month and would like to simply deed her home over to a grandchild. Will this mean she has to pay taxes or any kind of closing costs? She owns the home and pays no mortgage.

Answer: Is your elderly mother competent? Are there other grandchildren? Does your mother have a will and a living will? Will her estate face a claim from Medicaid? (Remember, there's a five-year "look-back" period for gifts which may impact eligibility for the program.)

Please go no further with this until your mother has met with an attorney who specializes in elder law. Without proper paperwork and planning your mother or her estate could face a variety of complications and costs.

Question: Is is true that when the Federal Reserve lowers their rate that banks raise their interest levels?

Answer: No. The Federal Reserve sets the "discount" and "federal funds" rates, rates which impact the cost of borrowing for banks. When the Fed raises rates then banks raise their prime rates , when the Fed lowers the discount and federal funds rate then the prime rate and other rates decline. The exception is credit card rates, which are routinely unrelated to any understandable measure or cost.

Question: I'm getting ready to have a new wood privacy fence installed. Do you know if fences normally add value to a home?

Answer: Fences help define boundaries, they have value in terms of privacy and they can make properties more saleable. As to how much value a fence might add to a given property, that's likely to be a matter of conjecture.

For instance, in a neighborhood where every property has a nice fence then your new fence would be normal and expected. In an area with few fences then your addition might increase the value of your property. For specifics, speak with local real estate brokers.

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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.