Q: I plan to sell my home in the next few months. Is it wise to have a professional home inspector prepare a report before I list my house for sale so I can use his findings to help establish the sales price?

One agent tells me I should not have the report made because if buyers rely only on his report, then I am liable if the inspector misses something. The agent says home buyers in my area usually will not have their own inspection done if I had one available, and therefore I am taking on more liability. What is your opinion?

Mary B.

El Sobrante

A: I strongly disagree with that agent. Every home seller should have a pre-listing professional home inspection, as well as other customary local inspections, such as for termites, dry rot, energy efficiency and building-code compliance.

Then you will know the condition of your home and if it has any serious defects you should repair before listing the home for sale. Savvy home buyers always have their own professional inspections. Unless asked, you don’t even have to show your inspection reports obtained before listing. Buyers should be encouraged to hire their own inspector after you have accepted their purchase offer.

Q: I plan to sell my home and move out of state to a lower-cost area. I have about $300,000 profit in a rental property on which I want to do a 1031 exchange. At the new location, comparable properties are worth about $250,000, so I plan to trade for two properties.

Must I transfer all my profits from the exchange to the new properties, or can I finance the properties with a new mortgage and pull out some of the profits? How soon after making the exchange can I convert one rental property into my personal residence?

Pete R.

Ranchos Palos Verdes

A: In an Internal Revenue Code 1031 tax-deferred exchange, all the properties must be held for investment or use in a trade or business. Your personal residence is not eligible.

To qualify for such a trade, often called a Starker exchange, you must trade equal or up on both total price and equity. That means you can’t take out any taxable “boot,” such as cash without owing capital-gain tax on that “unlike kind” personal property.

Yes, you can trade one property for two (or more) properties, as long as you meet the basic test of exchanging equal or up on both total cost and equity. That means you can’t receive any net mortgage relief or put cash in your pocket.

However, after the tax-deferred exchange is completed, you can refinance the acquired properties to take out tax-free cash.

IRC 1031 does not say how long an acquired property must be held as a rental before converting it to your personal residence, but most tax advisers suggest renting it for at least six to 12 months before converting.

Q: I have seen endless mentions in your articles about living in your principal residence at least two of the last five years before its sale to qualify for that $250,000 tax exemption (up to $500,000 for a qualified married couple). But what proof does the IRS require if they question eligibility? How does the seller prove it was the primary residence?

Susan C.

Sacramento

A: Unless the home seller is audited, the IRS does not require any proof the Internal Revenue Code 121 principal-residence-sale requirements were met. If you qualify for the full exemption, up to $250,000 for a single principal-residence seller, or up to $500,000 for a qualified married couple filing a joint tax return, you don’t even report your principal-residence sale on your income tax returns.

If the IRS should question your eligibility, you will need proof the home was your principal residence. Evidence could include utility bills, voter registration, driver’s license, income tax returns from your principal residence sold, bank accounts and nearby employment.

Q: We rented a house on a one-year lease based on the rental property manager’s promise to landscape the backyard. But we failed to put it in writing. The manager promised to have it installed by Oct. 1. It is now January and we still have just dirt in the backyard. He says he’s a man of his word “where a handshake still means something.” But the owner can’t afford to put in the landscaping now. We’re tired of dirt and rocks in our backyard. Can we break our lease?

Ron F.

Fontana,

San Bernardino County

A: In real estate, oral agreements mean nothing. You should have obtained that landscaping promise in writing, signed by the owner (not just the property manager).

If you break the lease, due to failure of consideration, and the landlord takes you to court, it is up to the judge to decide if you were justified.

However, when a tenant breaks a lease, the owner has a duty to mitigate damages by attempting to re-rent. At worst, you probably would be liable for only a few months of rent while the house is vacant. For more details, please consult a local real estate attorney.

“The 10 Key Questions Smart Home Buyers Ask to Avoid Getting Ripped Off,” is available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010, by credit card at (800) 736-1736 or at www.BobBruss.com. Questions for this column are welcome at either address.