Things to Consider When Buying New Construction Homes

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Whether you’re a first time home buyer or practically a seasoned home buyer, new constructions are bound to pop up in your house hunt. They come from a variety of sources in a variety of scenarios—from national builders to local developers; from one-off homes to larger subdivisions. New constructions are readily available as long as you put in the work to check them.

But as available and appealing as new constructions can be, are they the right path for you? It’s important to remember that you’re buying from the person who built the house, not the person who called it home. That means that you need to shift your expectations. Here are some things to keep in mind while you make your decision.

Weigh the pros and cons

While it’s great to make yourself at home in a newly constructed home that’s shiny and untouched, you need to make sure that a new construction is going to suit your lifestyle.

You can buy a new home one of three ways—buying a new home that was already built, having a semi-custom home built from a set of palette finishes and upgrades; or having a purely custom home designed to your specifications. But before you get dazzled by granite counter tops and fresh hardwood, ask yourself a few questions, especially if you’re not custom designing and building your home from the ground up. For example:

1. Brand new homes can cost more, and all the amenities and upgrades that you want can add up too. Can your bank account handle the stress?
2. New construction neighborhoods and developments are typically built far from city centers and necessary destinations like schools and supermarkets. Are you willing to brave the commute?
3. New construction developments don’t have established communities—or really established anything. Even the trees are tiny. Will that be a problem for you?
4. New houses are built practically on top of each other. Will the lack of privacy and space drive you nuts?

You need a great agent

Not to say that the builder’s preferred agent is a bad decision—but they do have particular motives in mind, and it’s not your best interest. It’s important to find an agent who will represent you and your needs. This agent will be helping you with everything from advising you on how to structure your offer so that the builder will bite to making decisions that will affect resale value. Make sure that there’s no conflict of interest—get your own agent.

New homes are often sold before they’re built

Builders need to turn a profit—they typically won’t take on a project without receiving financing up front. Then they map out both a construction and sales process (i.e. they’ll sell as many homes as possible before they’re even built). They like to be able to go to their lenders with positive prospects. For that, they need early buyers to sign contracts.

You can usually get a sense of what your new home will look like and where it will be located in the community, and you’ll have to put down a deposit. It’s also important to remember that not all of the homes will be available at once—they’re released in phases to gauge market health. If the market is good, the price on later stage releases will be raised.

Early birds get cheaper worms

As we mentioned above, builders want to get some of their to-be-constructed homes under contract quickly. This shows the lenders that the builder can come through, and shows prospective buyers that the properties are desirable.

This means that early in the sales process, there may be room to negotiate the price down. However, it also means that you’re committed to the project. That means if sales don’t manifest or you don’t want to move ahead, you may lose your down payment.

Builders aren’t emotionally attached to homes—it’s a numbers game

Home builders, unlike your average seller, are not attached to the home that they are selling to you. They’re focused on turning a profit, not on the memories they built there. The average seller may have questions and uncertainties, which may result in sentimental price hikes and negotiation roadblocks. Builders only want to know if you’re qualified and can get a loan. They set prices less arbitrarily and more based on inventory, and may be more willing to negotiate.

Get creative to get discounts

While it’s true that developers aren’t big fans of dropping prices, it doesn’t mean that they’re completely opposed to negotiation. That means that you need to get creative. Instead of asking them to drop the price, ask them to perform upgrades or pay closing costs. They might be willing to include a fence or landscaping, or upgrade your carpeting or appliances as part of your purchase. They are more willing to perform upgrades than to drop prices because publicly dropping prices sets a precedent for other buyers in the neighborhood. Upgrades are a less obvious way for them to sweeten the deal.

Tip: What you see isn’t always what you get. When you walk through the model, make sure to distinguish which features comes standard, which are upgrades, and how much each option costs. Get your agent to get a list of what features are standard, and a list of common upgrades and their costs.

Do your research on the builder—get a guarantee

If you’re buying new, you need to do your due diligence. First, make sure that the builder’s reputation isn’t mud. Search online for reviews, testimonials and news. Make sure any concerns that arise are covered in the purchase agreement.

Furthermore, since the home you’re buying is probably not a completed house, you need some kind of guarantee that the home will be ready on time. Usually the completion date will be contingent on permit approvals or availability of building materials, but an estimate should be included in your purchase agreement documents. Make sure you ask your agent to point out what happens in the event of a delay either in construction or in closing in your agreement.

You need to protect yourself at all costs

Get the home inspected. Find out what’s covered by warranties. Find out what might happen in the future that will affect the value of the home. New homes have problems just like old ones do. Have an inspector make sure that everything is up to code and that everything works. Then check up on your warranties. Warranty coverages vary—some cover everything for years, and some cover less with varying time frames. Then there will be individual warranties for appliances, roofs, windows, etc. Figure out what’s covered and for how long so that you can address those concerns up front. Then, check with the city to see what the plans are for the surrounding area. If you want a close neighborhood, will traffic planning in the future compromise that? Be sure. Protect yourself and your interests.

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2 comments on “Things to Consider When Buying New Construction Homes”

  1. Thanks for the great info, it actually is useful.

  2. Sarah Smith says:

    I want to buy a newly built house. Thanks for the advice about how you will need a great agent to help you secure the structure. It would also be smart to find a house that is within your budget.

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