Buying new construction

Buying a new construction home differs significantly from purchasing a resale property. Rather than bidding on an existing house, buyers often select a lot, choose a floor plan, customize finishes, and monitor the build over several months.

49 steps across 12 sections

1. 1. Assess Your Finances and Get Pre-Approved

  • Determine your budget including down payment, closing costs, and upgrade allowances.
  • Get mortgage pre-approval before visiting model homes. Builders require proof of financing.
  • Understand that new construction may require a larger earnest money deposit (often 5-10% of purchase price vs. 1-3% for resale).

2. 2. Research Builders

  • Check the builder's reputation: Better Business Bureau, state attorney general complaints, online reviews.
  • Visit completed communities and talk to current homeowners about their experience.
  • Look for local and national builder awards and recognitions.
  • Verify the builder is licensed, insured, and bonded in your state.
  • Research the builder's financial stability — a builder going bankrupt mid-construction is a nightmare scenario.

3. 3. Choose a Community and Lot

  • Evaluate the neighborhood: school districts, commute times, proximity to shopping and amenities, future development plans.
  • Lot selection matters: premium lots (cul-de-sac, backing to green space, water views) cost more but hold value better.
  • Avoid lots near busy roads, commercial zones, or future construction phases that may bring noise and traffic for years.
  • Check the lot's grading and drainage plan. Poor drainage causes foundation and flooding problems.
  • Corner lots and lots adjacent to community amenities may have more foot traffic and less privacy.

4. 4. Select Your Floor Plan and Customizations

  • Tour model homes but remember they are fully upgraded — the base model will look different.
  • Prioritize structural changes early (extra rooms, expanded garage, higher ceilings, rough-in for future bathrooms) because these cannot be easily added later.
  • Visit the builder's design center to select finishes (countertops, cabinets, flooring, fixtures).
  • Get a written, itemized list of every standard feature and every upgrade with pricing.

5. 5. Review and Sign the Purchase Agreement

  • Builder contracts are written by the builder's attorneys and heavily favor the builder. Have your own real estate attorney review the contract before signing.
  • Key contract elements: base price, upgrade costs, estimated completion date, earnest money terms, financing contingency, escalation clauses, dispute resolution method.
  • Ensure the contract includes a financing contingency so you can get your deposit back if your loan falls through.

6. 6. Secure Financing

  • Lock your interest rate at the right time. Builders with long construction timelines may require extended rate locks (which cost more) or offer float-down options.
  • Compare builder-preferred lender incentives against independent lender rates. Builders often offer closing cost credits ($5K-$20K+) for using their lender, but their rates may be higher.
  • Understand the difference between a construction loan (draws during build, converts to permanent mortgage) and standard purchase financing (single closing at completion).

7. 7. Monitor Construction

  • Visit the site regularly at key milestones: foundation pour, framing, rough-in (plumbing/electrical/HVAC), pre-drywall, finishes, final.
  • Document everything with photos and notes.
  • Communicate concerns to your builder representative in writing (email) for a paper trail.

8. 8. Schedule Inspections (See Detailed Section Below)

  • Hire your own independent inspector at minimum for the pre-drywall and final stages.
  • Do not rely solely on municipal code inspections — they check code compliance, not quality.

9. 9. Conduct the Final Walk-Through

  • Create a punch list of every defect, scratch, misalignment, and incomplete item.
  • Verify all agreed-upon upgrades are installed correctly.
  • Test every system: HVAC, plumbing fixtures, electrical outlets, appliances, garage doors, locks.
  • Do not close until critical punch list items are resolved or funds are held in escrow.

10. 10. Close on the Home

  • Review all closing documents, warranty paperwork, and HOA documents.
  • Confirm the builder has obtained a Certificate of Occupancy.
  • Receive all manuals, warranty registrations, and maintenance guides for installed systems and appliances.

11. Red Flags to Watch For

  • No financing contingency You could lose your deposit if your loan is denied.
  • Unlimited price escalation clauses Some contracts allow the builder to raise the price due to material cost increases with no cap. Negotiate a cap (e.g., 3-5%) or a walk-away right.
  • Vague completion dates with no penalties The contract should specify a target completion date and what happens if the builder misses it significantly (e.g., right to cancel after X months delay).
  • Mandatory arbitration with builder-selected arbitrator This eliminates your ability to sue and stacks the deck. Push for neutral arbitration or court resolution.
  • Builder can substitute materials "of equal or better quality" This language allows downgrades. Request right to approve substitutions.
  • No right to independent inspections If the builder tries to prevent you from hiring your own inspector, that is a major red flag.
  • Excessive earnest money with limited refund scenarios Understand exactly when you can and cannot get your deposit back.

12. What You CAN Negotiate

  • Closing cost credits Builders protect the sale price (it affects neighborhood appraisals) but will often offer $10K-$20K+ in closing cost assistance.
  • Free or discounted upgrades Countertops, flooring, appliances, smart home features, landscaping packages.
  • Lot premiums The premium price on desirable lots is sometimes negotiable.
  • HOA fee coverage Builder may pay first 6-12 months of HOA dues.
  • Extended warranties Negotiate longer warranty periods beyond the standard.
  • Rate buy-downs Builder pays to reduce your mortgage interest rate.
  • Fence, landscaping, or outdoor additions These are common throw-ins.

Common Mistakes

  • Not hiring your own inspector
  • Not having an attorney review the contract
  • Falling in love with the model home
  • Over-upgrading through the builder
  • Not visiting the construction site regularly

Pro Tips

  • Visit the site after heavy rain
  • Talk to homeowners who closed 6-12 months ago
  • Photograph everything during construction
  • Bring a tape measure to the model home
  • Ask about the builder's subcontractors

Sources

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