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Buying a home

Posted February 05, 2014 in Adel
Construction continues on four bi-attached townhouses in the Evans View neighborhood in Adel.

Construction continues on four bi-attached townhouses in the Evans View neighborhood in Adel.

Home sales are up in Adel thanks to a tax abatement program that has saved buyers thousands of dollars in property taxes.

New home construction — 47 permits were issued — totaled $12.7 million in 2013, the most since city officials enacted a seven-year property tax abatement program in 2011. The owner of any new house constructed through 2016 will receive a 100 percent tax abatement for seven years.

“That was the catalyst in attracting us to come out and do the development,” says Bill Spencer, president and owner of Landmark Development, the company behind Bailey’s Grove south of Adel. “It also was the catalyst that attracted people to come out to Adel and buy the lots. It was a significant factor in starting the development momentum. Without it, development just would not have taken off.”

Bailey’s Grove started with 19 lots in 2011. Another six were added in 2012 and 47 in 2013.

Seven years of no taxes was good news to Becky Bailey, who last year bought a new townhouse in Adel.

“I was very much grateful for the seven-year tax abatement because without that I wouldn’t have been able to purchase this home,” she says.

Kevin Howe and Julianna Cullen, Realtors with Iowa Realty, stand in front of a bi-attached townhouse that is being constructed in the Evans View neighborhood in Adel.

Kevin Howe and Julianna Cullen, Realtors with Iowa Realty, stand in front of a bi-attached townhouse that is being constructed in the Evans View neighborhood in Adel.

In addition to the no taxes perk, Bailey says she wanted a new house because she didn’t want to have the repairs and maintenance associated with an older house, such as a new roof.

Kevin Howe, a Realtor with Iowa Realty, says the tax abatement had a huge effect on the housing market in Adel. There were 116 homes sold in Adel and the surrounding area in 2013. Twenty-one of those were new construction.

“We’ve seen a huge spike in new construction,” he says. “Part of the attraction has been the tax abatement, but we’ve also talked to a lot of people who have moved into Adel for the school system.”

Howe says both new homes and existing resale homes have been selling well. The price range for most of the new homes is $250,000 and higher, while resale homes have been selling for lower amounts.

Kent Glenn, a Realtor with Anderson Real Estate, says the tax abatement program can make it more difficult for resale homes that are of a comparable price point to a new house.

“When you’re looking at a $20,000 to $30,000 savings, it can sway people to the new homes,” he says.

Brett Klein, Adel’s city administrator, says there have been other positive offshoots of the tax abatement program: increased work for the construction trade and subcontractors, as well as more activity for the businesses in Adel as buyers come to town to view lots and houses.

Home-buying process should start with pre-approval
Experts agree the first step in buying a house is to receive pre-approval from a lender. This is as easy as a 10-minute phone call that results in a pre-authorization letter that lists how much the buyer can spend, says Tim Canney, the branch manager of Lincoln Savings Bank in Adel.

Pre-approval requires the prospective buyer to share his or her income and undergo a credit check. Lenders look at the buyer’s debt-to-income ratio when determining the amount of a loan the person can receive. In general, Canney says a person’s debt should not exceed 40 percent of his or her gross income.

Bill Spencer, president and owner of Landmark Development, stands in front of one of the houses being constructed at the Bailey’s Grove development. The development started with 19 lots in 2011. Another six were added in 2012 and 47 in 2013. More could be added in the future depending on the market.

Bill Spencer, president and owner of Landmark Development, stands in front of one of the houses being constructed at the Bailey’s Grove development. The development started with 19 lots in 2011. Another six were added in 2012 and 47 in 2013. More could be added in the future depending on the market.

Canney says real estate agents prefer buyers receive pre-approval before they begin to look at houses to ensure they can afford what they are looking at. Once a purchase agreement is created, all income and tax information is verified in a process that usually takes about 30 days.

Howe agrees pre-approval is the first step.

“This allows them to understand what their buying power is, and they can start to budget,” he says.

Canney says when looking for a lender, prospective buyers should make sure they use one that has access to different types of loans. Various loans require different credit scores and down payment percentages in addition to requirements for mortgage insurance. Other types of loans have factors that can benefit veterans or young couples by offering 100 percent financing.

He also recommends prospective buyers ask for recommendations or use someone they’ve already done business with when looking for a lender. Canney cautions people from using online lending sites because he has seen people get taken advantage of with rates and fees.

Real estate agent can help navigate buyers through the  complex process
Howe also recommends prospective buyers meet with an agent to discuss their wants and needs in a house and pinpoint some geographic areas in which they want to live before they begin looking at houses.

There are benefits to working with a real estate agent rather than trying to navigate the home-buying process one’s self, Howe says. These include having the entire process handled by a professional who is an experienced negotiator from the purchase agreement to questions about lending, financing and fees to resolving issues that could arise during the home inspection.

“The bottom line is we can help them make decisions along the way, and if they’re doing it on their own, if you make a mistake, it can be fairly costly,” Howe says.

Tim Canney, the branch manager for Lincoln Savings Bank in Adel.

Tim Canney, the branch manager for Lincoln Savings Bank in Adel.

Because there is an aggressive buying market in the Adel area, Glenn recommends buyers offer the best price they can for a house because there is a lot of competition.

“Very few people are going to be able to steal a home in this market,” he says, adding that pre-approval is also important.

Making a low offer hoping to get a house at a lesser price might backfire in today’s market. Another buyer might come in with a better offer that you would have been willing to match.

We’re seeing that happen here a little bit lately and that’s just the market,” Glenn says.

In addition, experts recommend the buyer ask the seller for a home warranty, which typically covers most issues associated with the heating and cooling system, plumbing, electrical, roof and most appliances for one year. Some sellers will already offer such a warranty as part of an incentive to make their house more attractive to buyers.

“Whether it’s a new house or an old house, you’re moving into something you’re not familiar with, so it eliminates any unpleasant surprises for the first year,” Howe says. “It’s a little bit of extra peace of mind. It’s not a substitute for a home inspection, which is going to be pretty thorough and identify any issues with the house or issues that could come up later.”

Ken Chapman, owner of Adel TV & Appliance Heating & Cooling, recommends buyers have the heating and cooling system of any house they are considering purchasing inspected by a HVAC professional to ensure it is operating efficiently and has adequate air flow.

He says he would recommend replacing any unit that is 16 years old or older because sometimes older furnaces can cause health problems with carbon monoxide emissions.

Eric Schepers, an agent with State Farm, says it’s also important for home buyers to make sure they have the appropriate insurance policy that covers various possible claims so they don’t run into any unforeseen surprises.

In addition, he recommends home buyers learn about insurance discounts that are available such as utility rating plan discounts that can be an option for new homes or those houses with new electrical, plumbing and heating and cooling systems and those that are available for home alert systems or certain types of shingles.

“Many of my customers that purchase one of these homes have been surprised when the insurance costs go down even though they purchased a bigger home,” Schepers says.

Adel’s housing market favors sellers, but more housing is being built
Howe describes the current housing market in Adel as more of a seller’s market, meaning houses sell well with more buyers in the market than houses available. Compared to other central Iowa communities, he says there are fewer houses on the market in Adel and fewer homes than there were a year ago.

As of mid-January, there were 49 houses for sale in Adel and the outer area of the town.

“That’s another thing that makes it a little more of a seller’s market is there are less homes for sale,” Howe says. “It’s all supply and demand.”

Canney, the bank branch manager, says rates are favorable for those buying houses. Rates are still considered historically low, though they’re a little higher than they were a few years ago. Depending upon the type of loan and the buyer’s credit, the best rate for a 15-year loan is 3.5 percent, and 4.375 percent for a 30-year loan.

Several development companies are currently selling lots to builders, with some houses under construction. Realtors and city officials expect construction to pick up when spring arrives.

Klein, the city administrator, says he expects more activity in 2014 with between 70 and 100 new houses being built.

Spencer, with Landmark Development, says there is more room for another 100 lots at Bailey’s Grove that will be market driven. Of the 47 lots that were platted in 2013, 25 are sold or pre-sold to builders. Those lots are designed for houses that will sell for between $300,000 and $400,000.

His company also is considering another site in the city to develop 60- to 70-foot-wide lots that would be entry-level houses. In addition, Spencer says Landmark wants to create a development with estate acreages that would be located on the eastern side of Adel.

Spencer also operates Showplace Builders, a company that will build about a half dozen custom houses in Adel this year. Most of the construction has been for single-family homes — both two-story homes and ranches, he says.

Howe says a bi-attached townhome development in the Evans View neighborhood has done well. There were 12 built, four of which are still under construction, and all but two have sold. Several of the sales were to individuals or couples who were looking to downsize.

“They’ve been really popular,” he says.





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