5 Things to Consider When Buying New Construction

Curt Reichstetter

Mar 22, 2023

4 min read

Updated: 6 days ago

5 - First Visit

The signs at the front of the neighborhood will use terms like "starting from" when mentioning a price. Know that this is the price of a base house on a base lot and does not include anything extra. Most of the homes will run $50-$100K over that base price. How is that possible you may ask. Upgrades! Upgrades is the answer! The model home is going to be chock full of all the upgrades and you will want all of them! It's very important to look at the builder's standard features. You most likely will want different color carpet, or different cabinet doors, maybe you want the subway tile in the shower or crown molding in the living room. Add-ons such as fireplaces and decks may also be an extra cost. And for the love of Pete, don't make any changes during the building process or you will pay not only an upgrade fee, but also a "change order fee". Having your own agent to help sort through all this will be a great benefit to you.

4. Lot Selection

This can also be an extra fee so you need to know which lots are premium lots and which are standard. Mostly this will have to do with location, such as a cul-de-sac, or near the pool. You'll also want to check out the layout and slope to see what kind of yard you will have. It can be difficult to picture when it's just a big patch of dirt.

3. The Contract

iIf you've bought. home in the past you may be used to the standard Purchase Agreement that most Realtors use in our area. That's not the case in new construction. Each builder is going to have their own contract that will be completely different. This is also a great time to have your own agent who will help you read through the contract and understand it. If you have any legal questions you will want to get advice from a lawyer too.

2. Financing

This too is different than the usual re-sale purchase. Often builders have their own lenders and closing agents. You are not obligated to use them but there are often incentives to do so. If you choose to use your own lender the type of loan is different from a traditional mortgage, at least in the beginning. You may be dealing with bridge loans or construction to permanent loans. Your lender will be more than happy to help you sort that part out. These last two options are more often used when you are not building in a new development, but perhaps on a stand alone lot that you purchased separately.

1. Builder Reps

hese are the people you will meet upon walking into a model home in a new development. The most important thing to remember is that they work for the builder, not for you! Most often they are not Realtors or even licensed real estate agents, and they are not required to be. It is completely possible to buy a home talking only to this builder rep and not have your own agent. But I would not advise it! These reps are under no obligation to explain the contract, or the plans, or the process to you. I'm not saying they are mean unethical monsters, they aren't. They are perfectly nice and helpful people.......that work for the builder! If you get one thing from this article it should be to get you own agent, particularly one experienced in new construction! BTW in case you were wondering, I spent the first 15 years of my career selling new construction, so yes, we can help you here.

Frequently Asked Questions

Should I bring my own real estate agent when visiting a new-home community?

Yes. Buyers should arrange representation before or at the first visit because builder registration rules may affect whether an outside agent can represent them. The builder's representative works for the builder, not the buyer.

Can a buyer negotiate the price of a new-construction home?

Sometimes, but builders may prefer incentives, closing-cost contributions, financing promotions, or upgrade credits instead of reducing the recorded base price. Availability depends on the community, inventory, demand, and construction stage.

What should buyers know about lot premiums?

A lot premium is an added charge for a particular homesite or location within the community. Buyers should evaluate drainage, slope, orientation, adjacent uses, future construction, road exposure, and whether the premium is likely to matter at resale.

Are builder contracts the same as standard resale contracts?

No. Builder contracts are prepared for the builder and may address deposits, completion estimates, substitutions, financing, inspections, delays, warranties, and default differently from a typical resale agreement. Buyers should read every provision and obtain appropriate legal advice when needed.

Should a new-construction buyer use the builder's lender?

The builder's lender may offer valuable incentives, but buyers should compare the full loan terms, rate, APR, points, fees, cash to close, and lender requirements. An incentive is only useful if the complete financing package fits the buyer.

Does a brand-new home still need inspections?

New does not mean flawless. Buyers may consider inspections at appropriate construction stages and before closing, subject to the contract and builder rules. Independent inspection can help identify incomplete or defective work for follow-up.

What upgrades are most important in a new-construction home?

Prioritize items that are difficult or expensive to change later, such as structural options, layout, electrical placement, windows, or major systems. Cosmetic selections may be easier to replace after closing, and too many upgrades can push the total cost beyond comparable resale value.