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Question: My husband and I found a house we really like that was originally for sale six months ago for $499,000. The property was bought two years ago for $490,000, the price has now been lowered to $489,000 and listed as a short sale.

They haven't received any offers on the property, there is a lot of work to be done and I don't feel it's worth near the amount their asking, especially in the current real estate market. Before I would ever make a offer, I would also like to get the house inspected to see how much more work needs to be done.

My question -- what is exactly a short sale? How much typically (10-20%) can you expect the lender to take off the purchase price? How can I find out exactly what the bank/broker/owner would accept as an reasonable offer as I don't want to offend them, but want to get the lowest price as possible for this house.

Answer: Let's take 'em one at a time.

First, a short sale is a home that is being sold for less than the value of the mortgage. This cannot happen unless the lender agrees and often lenders will not agree.

Second, the size of the discount will depend on your local market. There is no set amount or percentage. What you can universally expect is that the lender will try to limit the discount as much as possible.

Third, don't worry about "offending" the owner, the broker or the lender. Buying a home is not a high school dance, everyone involved is an adult. Alternatively, treat all parties to the transaction respectfully and try to understand their interests and motivations.

Your goal as a buyer is to acquire the property with the best possible price and terms. If the other side is unhappy with your offer they will ignore it, decline or make a counter-offer. However, if they can't do better they may well accept your offer, whether they like it or you.

Your offer should certainly be dependent on a professional property inspection satisfactory to you by an inspector of you choice.

You are best served by working with an experienced buyer broker before going further with this transaction.

Question: What would a bailout of Freddie Mac and Fannie Mae mean for me, Joe Homeowner?

Answer: The consequences of a bailout would be enormous. First, if there was a bailout it would suggest that a bailout was necessary. As this is written there is simply no evidence that such a rescue is required or justified. What people are worried about are projected losses and projections can be wrong -- just ask the smart people on Wall Street who sold Enron shares to the public.

Second, a bailout would substantially impact the economics of the federal government and likely lead to higher mortgage rates, less value for the dollar and lower home values nationwide.

Third, essentially the mortgage system would be nationalized, hardly a good result for a free-market economy.

Question: How long does a typical homeowner own their home for in the United States?

Answer: There are various numbers bouncing around, but they change with economic conditions because it's easier to sell and finance a home when interest rates are low and the job base is growing. Also, people tend to move less often as they age.

Investors commonly compare mortgages rates to 10-year Treasury bonds. The reason? Most loans last about ten years because homes are commonly sold or refinanced every decade or so.

Written by Peter G. Miller for www.RealtyTimescom. Copyright © 2008 Realty TimesAll Rights Reserved.