All went well until the bank's appraiser said our new home was worth about $23,000 less than the price we offered and the seller accepted. Phone calls to the appraiser and the bank loan officer did no good.

So we applied for a mortgage with my wife's credit union (where she has a small account). They sent out their appraiser who confirmed we got a bargain purchase price. Our new mortgage approval, including the appraisal, took only three days for what turned out to be a better mortgage.

As a result, I pulled our company multimillion-dollar accounts from that "big bad bank" which lost our business due to a bad appraisal. You are so right that appraisal is an art, not a science. How can two experienced, licensed appraisers be $23,000 apart on their appraisals of an upscale home in a subdivision of similar houses? Robert T.

A: Congratulations for taking your business away from that big bad bank. You did the right thing to first phone the appraiser to see if he made a mistake and then phone your bank loan officer. He should have requested a "review appraisal" to double-check the appraiser's work.

When both individuals refused to correct the situation, you acted properly to take your business elsewhere (including your business bank accounts).

Over the years, I've received my share of bad appraisals, as you did. Unfortunately, there is little a home buyer can do when the lender hires a bad appraiser and refuses to even have that appraisal reviewed.
   

But most appraisers are very professional and do a superb job in a very tough and competitive business. Each month I enjoy reading the excellent "Appraisal Today" newsletter published by appraiser Ann O'Rourke (www.appraisaltoday.com).

But I find it shocking to learn what she reveals goes on in the appraisal industry, which is far from perfect.

. . .

Q: We recently completed a tax-deferred exchange of three rental properties to acquire an upscale condo rental property. All the requirements of Internal Revenue Code 1031 were met. But two of the rental properties were acquired in 1978 and 1980. I recall reading in your articles that depreciation taken prior to 1997 would not be recaptured. But my tax adviser is unaware of such a requirement. Please clarify - Curtis B.

A: The tax code specifies that rental depreciation deducted after May 6, 1997, shall be "recaptured" (that means taxed to us ordinary taxpayers when the property is sold). There is a special 25 percent federal tax rate for recaptured depreciation.

However, because you made a tax-deferred exchange, and there was no sale, you need not be concerned now about recapture of depreciation previously deducted.

When you eventually resell the rental condo, that's when Uncle Sam will be waiting to tax the recaptured depreciation (unless you make another tax-deferred exchange). However, if you die while still owning the rental condo, there will never be any recapture tax due.

. . .

Q: My husband I own our home as joint tenants with right of survivorship. We have no written wills. Right now we can't afford to change anything as we live paycheck to paycheck. Someday, we will probably be able to afford a living trust.

We bought our current home brand new about two years ago for cash. But we recently had to take out a $50,000 mortgage. Do you think it is smart to sell our home now and give some money to our six children? We are senior citizens who are worried if we land in a convalescent hospital the state will put a lien on our home Mary G.

A: You and your husband should each have a written will. Joint tenancy is fine if you die separately. Then the surviving joint tenant receives the house. But suppose you both die at the same time, such as in a car or airplane crash. Then your estates would be subject to probate court costs and delays.

As for selling your home and giving your six children some money now, that is the dumbest idea I have heard in a long time. Where would you move? Your children will thank you and quickly spend the money. That's foolish.

You say you are both "senior citizens." I presume that means you are both over 62. Then you are eligible for a tax-free home reverse mortgage, which will pay you money each month or whenever you want it.

Your reverse mortgage can be used to pay off that $50,000 mortgage so you won't have any more mortgage payments.

. . .

Q: The contagion of the so-called "administrative" and "transaction" fees some realty agents charge in addition to their sales commissions has now spread to the title insurance business.

As a Realtor, last week I closed a transaction representing sellers of a property. The title insurance company charged $500 for document preparation, additional closing fees of $1,000 (no explanation or breakdown), and signing fees of $200. When I questioned these fees for my clients, I was told "all the title companies are doing it now"

As a longtime Realtor, my best advice is to be aware, ask first, and compare. Needless to say, I won't recommend that title insurer again to my clients Jonathan H.

A: Thank you for sharing that valuable information which I had not previously encountered with title insurers.

I have often criticized realty agents who impose unnecessary administrative fees on their buyers and sellers, on top of their sales commissions. But your letter is my first encounter with title insurers adding extra fees on top of their normal charges.

Title insurers are currently earning huge record profits. There is no valid reason for them to nickel and dime buyers and sellers for extra closing fees.

Write Robert J. Bruss at 251 Park Road, Burlingame, CA 94010. Questions also can be sent to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . His Web site is www.bobbruss.com

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