DEAR NANCY: Every state has what is known as a "statute of limitations," which means that after the statutory period of time, you can no longer file a lawsuit. In some states (such as in the District of Columbia where I practice law) it is three years; it will vary from state to state. You should check with a local attorney to determine what this period is in your state. And although you discovered the problem on Christmas Eve, if you are still within time, I would treat the day you bought the property as your target date.

However, you raise a key question: How difficult would it be to prove that your seller knew about the problems? If you can find repair or plumber bills during the time your seller owned the property -- or if some of your neighbors are willing to testify that they saw plumbers in the property on several occasions -- that may be strong enough to take the matter to court.

But litigation is time consuming, expensive and -- more important -- always uncertain. Perhaps you would be wise to chalk this up to a bad learning experience and correct the problem on your own. You may be able to get your insurance company to assist with some of the repair dollars.

Did you have the house inspected before you went to closing? If so, you may have a case against that inspector.

DEAR BENNY: My daughter and her husband own a small, unoccupied, well-maintained home that has been on the market since October 2007. They have received no reasonable offers to buy and have been under a great deal of pressure from the Realtor to reduce the price. They did reduce it by $20,000, but still no offers have been made anywhere close to the asking price. In February they took the house off the market and listed it with a rental agency. Among the interested parties was a rent-to-buy offer. They are not sure how safe this situation is, but feel that someone who may purchase the home in two years would take better care of it than a short-term renter. What is your advice on such an arrangement? --Dinah

DEAR DINAH: Clearly, having a rental income and having someone live in the house is better than having no rent and a vacant property. There are two kinds of "rent to buy" arrangements:

• Rent with an option to buy. Here, you set a price that the tenant will buy at the end of the stated term. There is no guarantee, however, that a sale will ultimately take place. Furthermore, this is a gamble on both sides. The property may be more valuable two years from now, but you will be selling at the price you set today. Alternatively, the market value may decrease, in which case your tenant will either want to negotiate a new price or walk away from the transaction. In recent years, to make the deal attractive and to give an incentive for the tenant to buy, many landlords are giving some credit for rent paid toward the ultimate sales price.

• Right of first refusal. Here, no price is set, but at the end of the term, you try to sell the property and when you get a valid offer, your tenant has the right to match that price.

In either situation, you need a local attorney to assist you in drafting the legal documents to reflect your agreement. Your real estate agent can -- and should -- check out the prospective tenant, to make sure that he or she can pay the monthly rent, and that all references have been carefully checked and confirmed.

So long as you get a decent tenant, I agree that if the tenant ever plans to buy your property, he or she may take better care of it.

DEAR BENNY: What rights does a buyer have to walk away from a transaction if the seller does not comply with the terms and conditions of the contract or is in default? --Dan

DEAR DAN: The answer should be spelled out in the sales contract. Typically, from my experience, buyers have two options when their seller refuses to complete the sale. They can sue for specific performance, which means that a lawsuit is filed asking the court to force the seller to sell the property to you. Or they can file suit for damages -- such as the loss of the bargain, and any out-of-pocket expenses they incurred in getting ready for settlement. If the buyers ended up buying another house, and had to pay a higher interest rate than they would have with the first house, this may also be included in your list of damages.

And in many cases, depending on the facts, the judge may award damages as well as specific performance. If your sales contract provides that the prevailing party in litigation can recover legal fees from the losing party, the judge may be willing to order that you get your reasonable fees. Otherwise, each side pays its own attorneys.

DEAR BENNY: We own a $400,000 condo free and clear. We rent it out at $1,350 per month with HOA fees at $336 per month and real estate taxes at $125 per month. We have a very good renter. We will need the funds from the sale of that property at retirement in the next year or two, but would like to avoid the tax liability that the sale will incur. We have been advised to sell by carrying the loan and thus receiving both principal and interest payments with a contract that assures that the buyer cannot refinance and pay off for five years. What size down payment do you recommend? And is this a good idea? --David

DEAR DAVID: You are discussing what is known as an installment sale. Because this is investment property, you are not eligible for the up-to-$500,000 exclusion of gain that married couples who file a joint income tax return can get for their principal residence ($250,000 if you file a separate tax return).

If you sold the house and got all of the cash at settlement (also called "escrow" in western states), you would have to pay capital gains tax on your profit. Currently, the federal tax rate is 15 percent. Additionally, you may have to pay a state capital gains tax and you may also have to recapture any depreciation that you have taken over the years.

If, on the other hand, you take back financing, you will pay tax on the interest you receive (at your ordinary income rate), but there is a formula by which you will pay capital gains tax. According to the IRS, "An installment sale is a sale of property at a gain where at least one payment is to be received after the tax year in which the sale occurs. You are required to report the sale on the installment method unless you 'elect out' in the year of the sale. If you elect out, you report all the gain as income in the year of the sale ... Under the installment method, you include in income each year only part of the gain you receive, or are considered to have received. Use Form 6252, Installment Sale Income, to report installment income each year. You will need to file Form 1040, and may need to attach Form 4797 and Form 1040, Schedule D."

How much of a down payment should you take? I recommend a minimum of at least 20 percent of the purchase price. You want to make sure that your buyers put down enough money so that they will be reluctant to go into default.

Talk with your accountant for specifics involving your transaction

Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com

Exaggerating in advertising not only leads to disappointment, it can have legal consequences. For example, sellers have been sued over misrepresenting square footage.

Usually, sellers think their house or land is bigger than it is. They hope that by advertising the property as bigger, they will sell for a higher price. But, if the sellers are later sued when the buyers discover that the property is quite a bit smaller, the sellers could end up paying out far more than the profit they received from the sale.

Most buyers would be pleased to know that their home had been built by a renowned architect. It's fine to advertise that fact, if you have evidence to confirm that the information is accurate. Sometimes sellers or their agents think a house looks like it was designed by a certain architect so they advertise this as fact.

A number of years ago, a couple bought a home that was advertised as designed by Julia Morgan, whose most famous work was "La Casa Grande," William Randolph Hearst's home at San Simeon, Calif.

The buyers discovered just before closing that the house had not been designed by Julia Morgan. They had already sold their home and had nowhere to go, so they went through with the transaction. Even though the buyers found out about the deceptive advertising before the sale closed, they were able to successfully sue the sellers and their agent for false advertising.

Misleading advertising can occur regarding the numbers of bedrooms and bathrooms. Some sellers would rather advertise more than they should. But, if the fourth bedroom is a tiny sunroom with an add-on closet, buyers who need four full-sized bedrooms are going to be turned off when they realize that the house has only three rooms that can be used as full-time bedrooms.

HOUSE HUNTING TIP: From a purely marketing standpoint, it's usually better to undersell than oversell. Buyers who have expectations about your house based on the advertising will not buy your house once they realize it doesn't have what they want or need. Buyers who want a view want to be able to sit in a room and enjoy it. They won't be satisfied with a view you can see only if you hang over the side of a deck.

Buyers will be in a much more favorable mood to buy your home if they find that it actually has more than they were expecting. With this in mind, it would be better to advertise the four-bedroom home mentioned above as a three-plus-bedroom home. This way the buyers are expecting only three proper bedrooms. They may be delighted to find that there is an extra room that can be used as a home office, nursery, den or occasional guest room.

Disclosure laws vary from state to state. But, it makes good sense to be straightforward in your real estate dealings, especially when it comes to how you advertise your home to the public.

THE CLOSING: Buyers should make sure they do careful due diligence investigations to confirm information that's disclosed to them in an ad, or elsewhere, that would make a substantial difference to them, like whether an additional bedroom was added with permit, or whether the architect is who the seller says it is.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.

Driveway: A driveway, by necessity, tends to be a fairly dominant feature, and it is often one of the first things that a person sees when they arrive at your home. If you have a concrete driveway that is oil-stained, check with your local home center for cleaners that can spruce it up. While you're there, get a crack repair compound and take care of smaller cracks before they become larger. For asphalt driveways, a seal-coat can often make a big difference in appearance and help prolong the asphalt as well.

For concrete or asphalt that is badly damaged, it's time to be thinking about replacement. You can replace the driveway with the same material as before, or consider an updated look by using paving stones instead -- they hold up well in all types of weather, and can even be a very satisfying do-it-yourself project.

Walkways: When someone arrives, is there a clear and safe path to your front door? You may not mind walking across your front lawn, but guests and prospective buyers would definitely prefer a walkway. There are lots of options for creating a new front walkway or replacing an existing one, so check out your home center or some landscaping magazines for ideas.

Landscaping: Speaking of landscaping, do you actually have any? Is it well maintained? Few things look worse out front than an overgrown or neglected yard, and you can often remedy things with a little hard work and some minimal expense. Cut back or remove trees and bushes that have gotten out of control. Feed the lawn to get it to green up again, or consider removing all or part of it and replacing it with low-maintenance materials.

If you have planter beds, be sure they're weeded and have fresh bark in them. Plan your landscaping to create a visual appeal by not having all the same type of plant. Intersperse some plants that provide spots of color at different times of the year, and mix plants for different heights as well.

Shade Trees: Consider adding a couple of new shade trees in front. Trees are good for the environment in general; they help a home look more established and appealing; and they can help lower your summer cooling costs as well. Trees look best planted in odd numbers -- a grouping of three or five, for example -- and the folks at your local nursery can help you with proper spacing.

Exterior Paint: There is probably nothing that will help or hurt the outside of your home as much as how your paint job looks. A fresh coat of paint in up-to-date colors works wonders, while old, peeling paint in a color scheme that went out of style when Eisenhower was president can really ruin a first impression.

If the paint is in generally good condition and just has a few bad spots, spend a couple of hours with a paint scraper and a can of exterior primer to get things ready for touch up, then have your local paint store match you up a gallon of paint and touch up the primed areas so they blend in. You might also want to consider repainting the eaves or window trim in a fresh new color to liven things up a little.

A New Entrance: Your front door is one spot that every visitor has to pass though, and it can make a lasting impression. A fresh coat of paint or stain can sometimes do the trick, but if your door is badly beat up you should consider replacing it. Check with a local company that specializes in doors (not a home center) and see about having a new door matched to your existing frame. The door company will cut the door, mortise the hinges, and drill for the locks using your old door as a pattern, so you can slip the new door right into place without expensive frame alterations or extensive carpentry.

Whether you're getting a new door or working with your old one, make sure that there are no squeaks or groans when it opens, and that it fits well in the frame without binding. Check the operation of the door handle and deadbolt; check the condition of the weatherstripping; and don't forget the operation of any screen and storm doors.

Cleaning: Last but far from least, clean things up a little. Pick up any trash that's accumulated, including dead leaves, cigarette butts and other small debris. Wash the siding to remove dirt, dust and cobwebs, and wash the windows. Hose off the walkways periodically, and make sure that all exterior lighting is operational. Finally, clean off the front porch -- including porch furniture and knick-knacks -- so that that area is clean and inviting as well.

Remodeling and repair questions? E-mail Paul at paul2887@ykwc.net.