Question: I'm getting ready to purchase a new home and found out the rental investments (four of them) on my credit report are driving my score low. What's the best way out of this. Should I set up a company to hold these companies?

Answer: In general terms, lenders will count 75 percent of your net rental income to help you qualify for financing. The problem is not that you have four rental properties, it may be that they do not produce enough income. Also, you now have four rental properties, so lenders may view you as a professional investor and apply tougher qualification standards as a result.

Question: I bought a house that was agent-owed and have had problems ever since. I decided to sell after a year and found a major foundation defect.

The agent who owed the home made a lot of money but only disclosed that there was a little water in the basement due to extremely heavy rains and that only happened once. I moved in and a couple of weeks later my rec room had a lot of water. I found a room that I didn't know was there and it was full of junk and water was coming in. I took pictures and sent them to the agent's broker and she paid to have it cleaned out and I fixed the water problem. The hot water heater went and I fixed it. The garage door had problems because it wasn't installed properly. I now have sewer problems, foundation problems and a list of other things. I didn't have it inspected because I was buying it from a broker and it had a home warranty. What can I do?

Answer: Sellers have a right to maximize prices. That is not an issue. Also, hot water heaters can go at any time, so that's also not an issue with a seller. And, homes can be sold "as is," so that can be a factor.

As well, you are a buyer and have an obligation to protect your interests. You can do that by taking such steps as hiring inspectors, requiring title insurance and using a buyer broker.

That said, brokers who sell their own properties will have problems if defects are found -- or even alleged -- unless buyers have been afforded the benefit of independent inspections and separate representation.

The idea should be that if you're a licensee selling your own property you should make certain that the buyer is not relying on you for information or dependent on you for advice.

If what you say is correct, then as a buyer you may want ask if the broker would like to make repairs, compensate you, buy back the home or make up any losses from a sale. These are likely better options for the broker than having you hire an attorney or asking real estate regulators to investigate the transaction. Given that the broker has already paid for some damages, she may be willing to go further. See an attorney for details.

Question: On the pre-closing walk through of my mother's house the buyers and their agent claim they turned on the kitchen faucet and water came gushing out, flooding the kitchen. They ultimately called our agent who went to look but did not really assess the situation. The closing continued and escrow for the damage was suggested. They declined the escrow and asked for $18,000! It ended up that we gave $10,000 and we're to get access to the house and copies of the repairs for insurance purposes.

Now they're not cooperating and we would like to further this pursue. Is the buyer broker liable for the damages since she accompanied the buyers who damaged the property?

Answer: Was it not possible to direct the water into a sink where it would drain harmlessly or to turn off the water to the sink or even the entire house until a plumber could be called?

It's difficult to imagine any circumstances outside of a Laurel-and-Hardy movie under which merely turning on a faucet would cause damage into five figures. Please have an attorney demand all repair and insurance paperwork. Once you have full information it will be easier to assess what actually happened.

It's also difficult to imagine what the buyer broker did that was wrong. Is it unreasonable to turn on a faucet? Did your broker attend the walk-through?

Question: Is it right for a listing real estate agent to fabricate a multiple offer situation in order to obtain a higher selling price for a client? Is there a consumer protection agency that can offer recourse for buyers who feel they have been duped? How does a buyer in a "biding war" actually know for sure there are other offers involved.

Answer: This is a complex matter. On one hand, if you're a buyer you do not want your offer "shopped" to other would-be buyers. You want your bid to be quiet and not revealed to those who may bid against you.

Alternatively, if you've been told there is another offer and as a result you bid higher, then your offer should require that if you win you will be shown a copy of the highest competing offer with the buyers' names blanked out for reasons of privacy. This way there will be evidence of another offer.

The other offer should be sufficient, under terms "satisfactory" to you, to justify your offer, otherwise you should be able to withdraw your offer without penalty.

The term "satisfactory" should mean something more than an another offer of equal or near-equal price. For instance, have you been offered the same contributions, credits or concessions that were made available to other bidders?

Real estate licensees are obligated to protect the public against fraud, misrepresentation, or unethical practices. If a broker claims to have received one or more written offers when none exist, or where the terms have been misrepresented, the matter should be raised with local real estate regulators. If investigators confirm there was no alternative written bid, then -- at the least -- the listing broker should lose his license.

Question: Do you have any information on getting out of an apartment lease? Can you get out of your lease without any penalties if you are buying a home? My husband in a veteran ... would that help us get out of the lease at all?

Answer: Let's look at this differently. Say your lease is until September but the property owner can lease the place now for an extra $200 more per month. Would it be okay to kick you out, even if you did not have a replacement address?

The idea of a lease is to protect both parties. You want an apartment at a given cost for a certain amount of time and a landlord wants an assured stream of income.

The best way to handle this is to go to the landlord, explain what you want to do, and offer to help re-let the property -- keep the place nice, maybe pay for some ads, etc. The betting here is that the landlord will be helpful.

Question: I purchased (property A) almost 20 years ago. Three years ago I purchased (property B). I moved from A to B and changed my homestead. Last month I sold my homestead property (property B) and moved back to (property A). I have just found another property (property C) I would like to buy.

Property A has never been established as a rental property (I just never did anything with it). I would like to sell (property A) and use the money for the purchase of (property C). Neither of these properties were considered as fix and flip, they were both my homes. If I sell (property A) would I have to pay capital gains tax or is there any way for me to do a 1031 exchange?

Answer: Let's sort through this one property at a time.

You sold property B after living in it for two of the past five years. It should qualify for a full capital gains write off as a prime residence.

You now live in property A. You have lived there a month, but you had previously lived there. In total, you lived there for two of the past five years. However, you can only take the residential write-off once every two years. As the IRS explains :

"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."

Lastly, to have a 1031 tax-deferred exchange you must have a property used in business or trade. In your situation, you have two personal residences (Properties A and B) and thus nothing to trade. (You could trade an investment property for a residence, providing the residence is then used in business or trade.)

For specifics, please see a tax professional such as a CPA, tax attorney or enrolled agent.

Question: I recently considered adding a solar heating system to a home I'm buying. The solar installer gave me some information from a pro-solar organization which quoted a study indicating that by saving a certain amount of money a year in utility bills, the value of the home would rise in the marketplace. They offered this as one of the reasons why solar was a good investment. Certainly state incentives are helpful when it comes to installing solar if I want to stay long term in the home.

However, when I asked my broker, who has convinced me of her skill and professionalism, she replied that she did not think that it added any value to the home, except that it was more attractive for those individuals who were already interested in such an arrangement. Any opinions?

Answer: Each time the cost of energy goes up the value of such a system increases. Solar energy may not be perfect, but it offsets the use of other fuels, cuts utility bills and helps make the country more energy independent. Generate enough power and you may actually be able to sell it back to the local electric utility.

The value of such a system will vary by market, but if every home in the country had one we would be doing something significant to reduce energy importations, help our balance of payments, make the dollar stronger and make us less dependent on foreign nations.

If a solar system works for the property and you can afford it, go for it. It's good for us all and in the future may make your property more desirable.

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