11 Tips For Buying A New Construction Home

When I first decided to become a homeowner, I had my mind set on buying an existing home because of all of the horror stories I’d heard about home construction. 

Little did I know that I would see that existing homes can be a lot of work if the seller hasn’t kept up with repairs. Nor did I know that I would accidentally find a new construction home that I really liked.  

After looking at several older homes, I came to the realization that building a house would be the best way to get the type of house I would be looking for and wanted. Little did I know that the process of building a home involved so many more considerations than buying an existing home.

(I am not a financial or real estate expert. All information is based on my own personal experience and research. This information is not financial or real estate advice. It is for educational purposes. This post includes some affiliate links. If you click an affiliate link and make a purchase, I may receive a small commission.)

I’ve since sold that first home and bought a second one that was also a new build. From both instances, as well as the experience of others who’ve gone through the process, I’ve learned a lot. 

Related read: How I Decided I Was Ready To Buy A House

If I were buying a new construction home now, here’s what I would do before, during, and after the process.

Pre-contract

1. Research the builder

Not all home builders are created equal. And not all of them are good. Some home builders have a better reputation than others, and their reputation can vary state-by-state and city-by-city.

If you look at multiple home builders, you’ll find that some provide more features in their base prices than others. Upgrades vary from builder to builder, and not all builders offer cash bonuses for upgrades or closing costs.

So it's a good idea to do your due diligence and research the ones you're considering. You can research builders in your area by

• seeing if there is any recent news, good or bad, about them on a local and national level
• search for reviews of them on social media
• visiting the home builder's newer neighborhoods in your area
• talking to people you know who've bought homes from them
• asking to visit the builder's design center before signing a contract
• finding out what's included in the base price and what's not
• getting information about their home warranty to see what is and isn't included

This is important to do before you sign a contract. Because if you find information about the builder after signing a contract that may cause you to reconsider, it can cost you your deposit. In the grand scheme of things, if you have real concerns, you may save money by losing the deposit versus buying a house that can have costly issues and repairs down the road.

2. Have your own real estate agent

If you're buying a new construction home, especially if it's your first time building, consider having your own buyer's agent instead of relying solely on the sales agent working in the builder's model home.

The builder's sales representative works for the builder. Your own agent can help you understand the transaction from the buyer's side, help you navigate the contract and construction process, and potentially connect you with inspectors, lenders, contractors, and other professionals.

There's also a practical reason to establish this relationship before you visit or register with a builder, because builder policies regarding buyer-agent representation and registration can vary.

If this is your first new construction purchase, having someone who has been through the process before can be particularly valuable. You may not know what questions to ask yet, while an experienced agent may know which questions are worth asking.

I had a buyer's agent when I bought my first new build home. It was really helpful because we ran into some issues with the builder at the end of the build. Having a buyer's agent on my side helped with getting the builder to pay attention to and respond to my requests. As well as serving as a witness during conversations.

3. Read the contract before signing

New construction contracts can be very different from a typical resale transaction, and the builder's contract can spell out things such as:

• construction timelines
• what happens when there are delays
• deposits
• cancellation provisions
• change orders
• upgrades
• closing requirements
• inspection rights
• warranty procedures
• what happens if the appraisal comes in below the purchase price
• what happens if financing falls through
• dispute resolution

I'd recommend having a buyer’s agent, or if you want to get really serious, your own real estate attorney review the contract. This is particularly helpful for a first-time new construction buyer.

Related read: How I Saved The Down Payment For My First House

4. Build a realistic budget

Yes, budgeting. A house is one of the largest purchases you will make in your life, and it has the potential of being your most stressful purchase. Setting and sticking to a budget helps to lessen the stress.

Going into the home-buying process, I set a max and min budget. This was based on the minimum that would get me the type of house I wanted and the maximum I could and felt comfortable paying.

I found that if you’re buying a tract home with set floor plans, the price advertised is usually a starting or base price and not the final price you’ll pay for the house.

The reason is that there are all of the options and upgrades you’re able to add. This can also happen if you’re doing a custom build. If you start with a price, it can change because of additional change orders for everything from changing finishes to adding more landscaping.

One of the common things I’ve seen that can increase the price is 

• Premium lots, which could be a corner lot because they tend to be a little larger, or a lot in a more desirable part of the neighborhood 
• Structural options such as adding another closet, expanding a room, closing in an open space, an additional window, or adding more plumbing or electrical, just to name a few 
• Upgrades to things like design, appliances, landscaping; adding window treatments, fencing, or other extras

You’ll want to make sure you have a clear understanding of all of the upgrade options and what they cost. So ask for an upgrade price sheet before signing, rather than making decisions one upgrade at a time. This helps to avoid costly surprises later.

Though my budget changed a few times, I ended up purchasing my first new build house for less than my maximum purchase price. While that did mean there were several upgrades I had to pass on that would have taken me to the top end of my budget, I didn’t regret it.

5. Look beyond the model home

When it comes to the new build, it’s not just the house that will be built but the lot the house will be built on. A beautiful model home can distract you from the fact that the lot is what you're actually buying. If the lot itself has issues, that can cost you money down the road.

To research the actual lot, here are some things to look for on the property

• drainage
• grading
• slope
• standing water
• proximity to retention ponds
• road noise
• neighboring lots
• power lines
• future development
• sun exposure
• backyard privacy
• proximity to busy roads

For some of these, you may need to visit the lot multiple times and in different types of weather.

Another thing to check is the property's flood risk. FEMA's National Flood Insurance Program notes that even lower-risk zones aren't risk-free, while certain high-risk zones can require flood insurance when there is a federally backed mortgage. While being in a no-flood zone doesn’t mean there’s no chance of the property flooding, it does give an indication of the type of risk level you could be looking at.

Also see if there are any plans for empty land around your neighborhood. That vacant field beside your house may not stay a vacant field. That’s happened to me. The large lot behind my house is now becoming a new neighborhood, so there will be a bunch of houses behind my backyard.

Related read: How To Financially Prepare As A First-time Home Buyer

6. Understand your financing and builder incentives

To get homes sold, builders may offer incentives. They can vary in price and type depending on the current home market. These incentives usually come with a caveat of using the builder's preferred lender. Some common types of incentives are 

• closing-cost credits
• temporary interest-rate reductions
• permanent rate buydowns
• design-center credits
• upgrades
• other purchase incentives

The key here is to not look at the incentive in isolation and let the builder incentives make the financing decision for you. A builder's preferred lender may offer an attractive incentive, but don't assume that automatically makes it the cheapest financing option. Compare the builder's offer with other lenders using comparable loan terms.

During and after the build

7. Get independent inspections throughout construction

One of the biggest things I would do differently when building a house is have independent inspections performed at several points or stages during construction.

A new house can still have construction problems. A municipal inspection is also not the same thing as having an independent inspector working for you. The CFPB specifically recommends choosing an independent home inspector who is accountable to the buyer.

If the builder allows it, consider having your own inspector look at the home at these stages:

Foundation inspection

Have the foundation inspected before too much of the construction covers it up. This gives the inspector an opportunity to identify potential serious problems that could become much harder to see or address later.

Pre-drywall inspection

This is particularly useful because the electrical, plumbing, framing, and other components are visible before drywall covers them. Your inspector can look at what's happening inside the walls before you lose that visibility.

Final inspection

Have the completed home inspected before closing. Don't assume that because the house is brand new, everything is automatically correct.

From new construction reviews I’ve been seeing, I would also consider having a mold test performed as part of the final inspection. Particularly if there have been significant moisture issues, water intrusion, or long exposure to the elements. A mold inspection/testing plan should be discussed with an appropriately qualified professional because the appropriate testing can depend on the situation.

First year inspection

Typically around the one-year mark after your home is finished, the builder will do a walkthrough with you to see what things need to be fixed or addressed. These usually don’t cover normal wear and tear but items that weren’t done properly or addressed when the house was built. This could be things like closet walls not being fully painted or missing knobs. 

It can be helpful to have an inspector come through and do a full inspection of the house a few weeks before your walk-through with the builder.

Use an inspector you choose yourself

Don't automatically use the inspector recommended by the builder. You want the person inspecting your home to be working for you and to be able to point out problems without worrying about maintaining a relationship with the builder.

The CFPB similarly recommends choosing an independent inspector who is accountable to you rather than someone being paid by another party.

Before signing your purchase contract, ask the builder in writing whether you will be allowed to have independent inspections performed during construction.

If the builder won't allow reasonable access for independent inspections, that's information I'd take seriously. I'd want to understand exactly why before proceeding, and if you're uncomfortable with the answer, consider another builder.

Related read: 5 Hidden Costs Of Buying A House

8. Understand the process and schedule

Now you don’t have to be an expert on home building, but you should have a general idea of how the home build should go. What are the key steps in the process and the key milestones? This will help you be able to plan out inspections, the best times to check in, and what to expect.

Also, make sure you get a copy of the schedule or at least get your and your real estate agent's eyes on it. My biggest regret with my first home building process is that I didn't insist on seeing a schedule for the construction or insist that they provide a solid completion date. What I got from the builder was a vague time frame that was three weeks before the date they had in the construction schedule they were working against.

The builder may say there isn’t a schedule, but there usually is one, even a loose one noting when they are aiming to get certain things done. The schedule will change because of delays, but knowing what they are aiming for is helpful and also reassuring.

9. Stay involved during construction

Once you’ve signed a contract and the build started, there are still things for you to do. From my experience with the home-building process, I realized that regular check-ins with the builder and documentation are essential, and I wish I had done more of them. 

You can check in with the builder in a couple of ways:

Phone and email: Get the phone numbers and emails for the general contractor and salesperson. How often you check in with them will depend on your comfort level. I do suggest you keep up to date on where your house is in the process, what the next step is, and whether they are still on schedule.

Visit the construction site: If you live an easy distance from the construction site, it can be helpful to visit it at least once a week to see the progress. I took it a bit further and would visit once during the week and once on the weekend. I found it's best to visit when the construction crews aren't there; then you can actually walk through the house and get a close-up look at the progress. 

In addition to checking in, document everything that occurs during the process. When I visited the construction site, I would get a photo or video of anything I saw that looked off or concerning to me and send it to the general contractor, salesperson, and my real estate agent.

Create a digital or physical folder for the house to keep:

• the builder contract and receipts
• neighborhood amendments
• design and upgrade selections
• change orders
• inspection reports
• builder and real estate communications
• dated photos/videos
• warranty documents
• repair requests
• closing documents

All of this becomes especially useful if there is a disagreement later about what was supposed to be included or what was already repaired.

10. Plan for delays

Delays can happen for a myriad of reasons, such as bad weather, late shipments of materials, or not passing inspections. Many of these delays are out of your control and the control of the builder, but you can plan for them.

You can do this by making sure you have somewhere to stay should delays happen. If you’re renting, this could mean extending your lease for a few weeks or switching to a month-to-month lease. You could also hit up family or friends for a place to stay.

With my first build, the delays I experienced were totally the fault of the builder and were something they could have controlled. Because of that, the builder ended up paying for my entire move. That doesn't happen often, so it's better to be prepared. I suggest planning for at least a month of delays, but doing regular check-ins with the general contractor and salesperson can help give you a heads-up on delays.

11. Don't rush the final walkthrough 

The house you're buying is going to be your home. The place you plan to live for several years, perhaps the rest of your life. And if it's new construction, it's brand new, and in my opinion, this house should be perfect and look the way you want it to. So don't settle for any excuses or halfway-done work. If you don't like the way they did something, have them fix it or redo it.

When you do a final walk-through, take your time; don’t let the contractor rush you. Turn on faucets, run the shower, fill up the tub, turn on lights, open and close doors, and run your hands along the surface of your countertops. While you’ll probably have a chance to get the builder to fix anything that’s wrong after you move in, it’s best to locate major issues prior to closing.

As mentioned earlier, this is also a good time to have a final inspection from an independent inspector. I had this done before my walkthrough. So they were able to catch things for the builder to address, and then I could check and see whether they had addressed them during the walkthrough.

By finding major issues before closing, the builder can fix them without you having to be at the home to let them in. Believe me, it makes life a lot easier.

Once you move in, start making a list of everything you find that isn’t quite right and send in a warranty request for those items to be fixed.

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