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Did we do the right thing?

Question: We bought our home about five months ago and are very happy with our purchase. However, I have been wondering if the real estate agent did anything wrong. We met her at a Sunday open house. As she showed us through the home, we said it was a nice home, but the price seemed too high for us. Then she told us that in her opinion her listing was overpriced. When I asked what price the seller would take, she said she didn't know, but she would be willing to present our offer about $20,000 below the asking price.

We knew that would be a bargain, so we agreed to make such an offer. The seller accepted our offer that evening.

Two things concern me. One is the listing agent encouraged us to make a low-ball offer. The second is the seller's acceptance of our first offer with no negotiation. Do you think we were set-up? _ Morris W.

Answer: No. The real estate agent probably knew her listing was overpriced. However, the agent often has no choice but to accept an overpriced listing or not take the listing at all. When I was actively selling real estate as an agent, I often took overpriced listings with the understanding the seller would reduce the asking price if no purchase offers materialized.

As for the agent's encouraging you to make an offer $20,000 below the asking price, there is nothing wrong with that. Perhaps the agent knew the seller might accept such an offer. Of course, it would be unethical for her to tell you the seller would accept such an offer.

I see nothing wrong with the listing agent's sales tactics. She was using good sales tactics to get you to make an offer. The final decision was the seller's, not the agent's.

The only thing I would be concerned about is your first offer was accepted. I know how bad that feels because that means the seller might have sold for a lower price if you had offered less. But be happy with your bargain and forget about how you stole that home from the poor unsuspecting seller.

Bemoan a loan

Question: We have about $45,000 equity in our home. Our first mortgage has a 7.5 percent interest rate, so we are reluctant to refinance. But with that much equity, I hate to leave it sitting idle. (1) Do you know any lenders who make wraparound mortgages? (2) Would we be better off getting a new first or second mortgage? _ Sheridan R.

Answer: Since you didn't give the balance on your first mortgage, I can only give you general advice. If the balance is over 50 percent of the additional amount you can borrow, then you will be better off adding a new second mortgage, rather than refinancing with one large first mortgage.

Compare the total loan payments both ways, but you will probably come out best by adding a new second mortgage and leaving the old first mortgage alone. Sorry, I do not know any lenders who make wraparound loans.

Put it in writing

Question: My husband and I obtained title to our home from his mother. We are buying the house from her. What concerns us is we have only a quit claim deed. I thought we should obtain a warranty of some sort? _ Julie P.

Answer: A quit claim deed means the grantor conveys whatever title she owned in the property. It can be the conveyance of a full fee simple absolute title. Or it can be delivery of no title at all if the grantor didn't own the property.

For example, I can give you a quit claim deed to the Empire State Building, but it conveys no title rights because I don't own the Empire State Building.

But a quit claim deed is perfectly safe if you also obtain an owner's title insurance policy. If you did not buy such a policy at the time you obtained the quit claim deed, I suggest you buy an owner's title policy now. It will protect you against many unexpected title risks which even the world's greatest title searcher cannot discover, such as forged signatures in the chain of title.

Moving on down

Question: I want to sell my expensive home and buy a less costly one. But I want to use the "over 55 rule" $125,000 tax exemption to reduce the basis of my new home. I can sell my current home for about $350,000 and I want to buy a replacement for around $300,000. Can I use the $125,000 exemption to reduce the basis on my new home? _ Fred H.

Answer: No. I am not aware of any method of doing so. You can use your once-per-lifetime $125,000 exemption by subtracting it from the net (adjusted) sales price of your old home. That would bring your $350,000 sales price down to $225,000.

If you buy a replacement home costing at least $225,000 in this example, then your profit tax is deferred. But the basis of your replacement home is not reduced by the amount of your $125,000 exemption. Please consult your tax adviser for further details.

Robert J. Bruss is a nationally syndicated columnist on real estate. Write to him in care of At Home, St. Petersburg Times, P.O. Box 1121, St. Petersburg, Fla. 33731.

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