Winterset’s Eric and Brenda Trogdon have run the gamut when it comes to buying a home.
They bought their first home, located at 316 E. Benton in Winterset, a few years ago by going through a real estate agent.
“Our realtor was great,” says Brenda. “She listened to us and found a home for us that fit our needs at the time within our budget. Then she stayed on top of things until the day we closed and moved in.”
Just recently, however, they purchased another home in Winterset through an estate sale.
“We had to go through lawyers throughout the process,” says Eric. “It took a couple of months after we made an offer before it was accepted. A judge had to approve the sale. Then we had to wait a month or so before we closed on the home.”
While the process of purchasing the home through an estate was a little nerve racking at times, both Brenda and Eric say the wait was worth it.
“We got the home we wanted,” says Brenda. “Our present home is a three bedroom and has one bath. It was great when we first bought it because we only had one child. Now we have three kids. We simply outgrew this home.”
The house the Trogdons bought has four bedrooms and two baths.
“And the location is great,” says Eric. “When we decided to move, the location of our new home was the most important to me. I wanted an area which had a lot of kids in it for our children to play with, and it is on a nice lot. What made it even better was we got the house at a price we could afford.”
The house, however, needs some projects completed before the Trogdons can move in. Eric has done most of the work himself, but he can only do so on the weekends because his job as a heating and cooling technician keeps him busy during the week.
To pay for the house, the Trogdons took out a construction loan. They borrowed enough to pay for the home, but they are also borrowing money they need to make the repairs against what the assessed value of what the home will be worth after the repairs are made.
Eric also realized early on that their current home was not the one that his family would be in for the rest of their lives. So the couple started saving money for a down payment.
“The money we got back in income taxes over the last few years, as well as money left over after paying the bills, went into a savings account,” Eric says.
Because the Trogdons are making improvements to their property that will increase the assessed value of their property, the couple may be eligible for an incentive the city of Winterset has for people who purchase a home within the city limits.
“We have five-year tax abatement plan,” says Bob Hendricks, assistant city administrator and building and zoning administrator. “But they have to meet a certain criteria.”
The criteria, Hendricks explained, is the buyer has to increase the assessed value of the property by at least 25 percent.
For example, if a family buys a home with an assessed value of $100,000, they have to make enough improvements to the home to bring the assessed value to $125,000.
If that is done, then the city will forgive 75 percent of the taxes based on the new assessment the first year. The second year, it drops to 60 percent and will keep going down by 15 percent increments over the remaining five-year period of the abatement program.
By the sixth year, the homeowner will be paying the full taxes on the assessed value of the home.
“We even do this for people who want to add on an addition to their home or make other improvements,” Hendricks says. “As long as they improve the property by 25 percent, they are eligible to receive the abatement.”
Hendricks says there were 17 new homes built in Winterset in 2013.
“That’s pretty good,” he says. “But it is just over half of the amount of new homes built in 2004 and 2005. Those two years were real heydays for the housing market here. Thirty new homes were built in both 2004 and in 2005.”
When buying a home, people don’t always have to go through a real estate agent. However, buying a home is not as simple as writing out a check and then taking possession.
“A realtor is an advocate for those wanting to sell their home, or for people who are looking to buy,” says Shawn Nigg, an agent for Madison County Realty in Winterset. “A realtor has all sorts of tools at their disposal to assist a buyer in their search for the right home.”
Nigg says potential buyers should exercise caution if buying a home through the “For Sale by Owner” route.
“By law, a seller must have a disclosure list of what is wrong with the home — such as hail damage to the roof or water seepage in the basement after a heavy rain,” says Nigg. “First-time homebuyers may not know that.”
Also, says Nigg, a real estate agent is in a better bargaining position when negotiating the final price of the home.
“People may think they are getting a better deal or don’t have to pay out as much money by not going through a realtor,” says Nigg. “That is not normally the case.”
The Trogdons had their finances lined up before they purchased their homes. Tim Rethmeier, loan officer for Farmer’s and Merchant’s State Bank in Winterset, says it is worth the effort for those looking to buy a home — especially if it is they are a first time buyer — to make an appointment with their lender.
“It is important that people understand the process and the costs involved,” says Rethmeier. “It is not as simple as just coming in and filling out some papers. There is a lot more to it, and any lender would be happy to walk the buyer through the process.”
The first step to getting financed for a new home is, of course, filling out an application for a home loan, says Rethmeier.
“A completed application gets the ball rolling,” says Rethmeier. “We make a determination from the information provided in that application.”
A home loan application includes the income and assets of the potential buyer, as well as the debts.
“The key to filling out the application is to provide complete, accurate and truthful information about income and the debt situation,” says Rethmeier. “In some cases, the buyer may have to show proof of income through pay stubs or tax returns.”
If the application is approved, then a purchase agreement is drawn up, which starts the appraisal process of the soon-to-be purchased home. Also in the process, the abstract of the home is updated to clear up any issues and to make sure there is a clear title on the property.
Rethmeier says there is also a big difference when it comes to either financing a loan for an existing home or if a loan applicant wants to build a home.
“If a buyer wants to build their own home, they have to come up with 20 percent equity for the loan, and the bank would finance the remaining 80 percent,” Rethmeier says. “If they want to purchase an existing structure, the bank can finance up to 100 percent of the loan.”
Rethmeier says potential buyers could get a pre-approved loan for certain dollar amount and then try to find a home to fit that loan.
“The potential homebuyer then knows exactly what kind of home they can afford,” says Rethmeier. “They have a little more flexibility when negotiating a price to purchase a home.
The other way, of course, is when a buyer sees a particular home and they come in to see if they can qualify to get a loan for that specific amount.”
First-time homebuyers, Rethmeier says, can take advantage of the USDA Rural Housing Program loan.
“The USDA Rural Housing Program loan does have some restrictions, however,” he says. “The potential buyer must fall under the income guidelines. And the home they want to purchase must be in the rural area, not within the city limits.”
Rethmeier says he always tries to give an answer whether a potential buyer is qualified for a loan within 24 hours after an application is filled out.
“Either way, whether they qualify or not, they can move on to the next step,” says Rethmeier. “And the key thing to remember is just because we determine that the buyer is not qualified for that particular loan at that particular time, they can always come back and fill out another application if circumstances change.
“For example, the person may get a new job with a higher income, or that the price of the home was reduced.”
Rethmeier also says if the potential homebuyer is approved for a loan, the amount of time it takes for the entire process from approval to closing could take up to 45-50 days.
“I have seen it take 30 days, but that would be the fastest amount of time it would take, and that rarely happens,” he says. “The one thing I try to do is keep the homebuyer informed every step of the way. This is a big decision, and it is a stressful period for them. I don’t want them to be surprised by anything that comes up in the process.”