Smart Money: Widow feels stuck in old, deteriorating house

Dear Bruce: I don't know anyone who knows more about financial matters than I do, and I know little. I am 73 years old and widowed, and I have an annual income of $20,000, plus or minus. I work two part-time jobs to supplement my IRAs and Social Security. I own a 100-year-old home in a dying city, so houses are not moving very fast, if at all.

I have to pay someone to do most of the maintenance, and the supply of people who do that is ever changing. The competency level goes down rather than up. There are many issues in a house this old — windows, side wall insulation, plaster cracks and, in my case, a chimney with repairs that have cost almost as much as the house did back in the '60s. (It still leaks, too.) This eats up most of my "disposable" income.

To make matters worse, a store on the corner has expanded right up to the driveway of the house next door to me, and parking is scarce on this street. The store owner bought the house next door, and while it is now rented, I figure it's only a matter of time before it becomes a parking lot. I've already been to the zoning/planning board and wasted my breath about allowing commercial creep to cut deep into the middle-class residential area.

If I sold the house, I don't know where I'd go. Rent would eat up much of the monthly income, and buying another house is out of the question. My children live away and won't ever come back.

Should I try to obtain a reverse mortgage? And if I do, what should I look for? My father lived to be 97, so I'm hoping to be around for a while. — H.R., via email

Dear H.R.: I appreciate your circumstances. The troublesome part about a reverse mortgage is that an appraisal will have to be made, and given your description of the home, it's not going to appraise for much. Further, since you are relatively young, the amount you can get from a reverse mortgage is much less on a percentage basis because you still have a fairly long life expectancy.

I would talk to the owner next door. Since parking is an absolute requisite for a retail business, he may consider buying your house as an addition to his (future) parking lot. The fact that you tried but weren't successful with the zoning and planning board may work to your benefit. Even though the amount of money you receive for your house might not be as large as you would like, at least it would reduce your expenses and responsibilities.

You mentioned that maintenance expenses are eating you up but that buying another house is out of the question. You should reconsider renting. If things are as tight as you have indicated in your community, there must be rental properties that are available at a very competitive rate. I wish you well.

Dear Bruce: I understand there is a possibility that the capital gains on the sale of a home may increase, to 25 percent from 15 percent, for 2013. Has this become law yet? Should I sell in 2012? I am newly widowed and retired, and this is a big chunk on a $500,000 home. — P.G., Via Email

Dear P.G.: Nobody knows which party will be calling the shots after the November election, and on top of that, what will happen on capital gains is difficult to forecast. I think you are overly concerned, so let me explain.

There is a $250,000-per-person profit allowed on a primary residence for everyone. Furthermore, any tax is on the profit from the sale of the house, not on the net proceeds. The expense of any capital improvements you have made over the years would be deducted. You may have to spend some money to fix up the house before selling, and there may be real estate commissions to be paid. These expenses also are subtracted from the sale price. That having been observed, it's unlikely you will have a high tax bill.
