Building a new home has some wonderful perks and is a great option for many buyers. But it does differ from the standard resale purchase, so it’s important to be informed about the process.

Price

The base price advertised is never the final price, because it doesn’t include your structural options (do you want a full bath in the basement?) or design options (do you want hardwood floors in the bedrooms?). You can expect to add anywhere from $15,000 to the base price for basic upgrades, to $75,000 or more once it’s all said and done. If your max budget is $600,000, look for new construction advertised as “Starting in the mid-$500s.”

Timing

It typically takes anywhere from 4-12 months from the time you sign the sales contract to the time you settle and move in. Most new communities have “immediate-delivery” or “quick delivery” homes available, but with little-to-no customization options.

Negotiating

Negotiating with a builder is often based more on incentives than price cuts. For example, they may have a preferred lender and title company, and would give you a $10,000 closing cost incentive if you use both. Or they may offer to throw in a credit towards design options, upgrade carpet to hardwood, or turn a half bath into a full. It’s easier for them to offer these incentives than to take dollars off the bottom line sales price. 

Process (can differ by builder)

  • 1st Visit – Meet with a sales center rep and tour the model homes
  • 2nd Visit – Select a model and reserve a lot
  • 3rd Visit – Select structural options, sign the sales contract, make your initial deposit
  • Within a few days of signing the contract – Finalize your lender and select your design center options
  • 2 months before settlement – Attend pre-drywall walkthrough
  • Before pre-settlement walkthrough – Schedule your own inspection
  • 2-4 weeks before settlement – Attend pre-settlement walkthrough
  • Day of settlement – Attend final walkthrough

 

Walkthroughs

  • Pre-Drywall – Typically about 2 months before settlement, once the roof and exterior walls are up but before the drywall is up. It allows you to see where electrical outlets are positioned, how rooms will be divided, etc.
  • Pre-Settlement – Typically about 2-4 weeks before settlement. It allows you to see an almost finished product and note any punchlist items (wall scuffs, cabinetry dents, crooked outlets, etc).
  • Final Walkthrough – Typically the day of settlement. It allows you to make sure all punchlist items were addressed and home is ready to move into.

 

Warranties

Most builders will warranty anything that happens to the home within the 1st year, and anything structural within the first 10 years. Your new appliances will also be warrantied through their respective manufacturers.

Representation

The builder’s contract only protects them, so it’s important to have your own agent represent you and your interests. Try to arrange your first visit to a new community with your agent. If you can’t, be sure and tell the sales rep that you are working with an agent, to ensure they allow you to have your own representation. Your agent will schedule all meetings and inspections, keep track of timing and important dates, and step in if any issues arise.

Pros

  • You don’t have to worry about a bidding war
  • You rarely have to worry about a low appraisal
  • You don’t have to worry about home inspection items
  • You don’t have to worry about what a previous owner may have done or concealed
  • You don’t have to worry about anything that happens to the home for at least the first year of ownership
  • You can customize the home exactly to your taste

 

Cons

  • You don’t have much control or recourse if your home’s completion is delayed
  • The required initial deposit is higher than a standard resale deposit, and an additional deposit is typically required for design center selections
  • Unless you select an immediate-delivery home, the timing only works if you don’t have to move in the next 1-3+ months
  • You are paying an up-front premium for a brand new and fully customized home, so it can take a bit longer to build up the equity in your home

 

Other Tips & Info

  • Builders typically open new communities in phases and increase the home prices with each phase. So while they may be more willing to negotiate or give incentives in the final phases of a community, you’re likely paying more in the base price by that point
  • You will pay a “lot premium” depending upon the home site location (corner lot, backing to trees, etc.)
  • Builders don’t advertise the costs of their structural & design options until you are under contract, but they should be able to give you an accurate idea of the average total cost of upgrades in your initial meeting
  • Don’t get too carried away with the design options. For resale purposes, granite is granite whether it’s Level 1 or Level 5 granite. Instead, focus most on options that can’t be changed later, such as lot location, elevation and structural options
  • Schedule at least one inspection (right before the pre-settlement walkthrough is best) with someone you hire to check the quality of work
  • Your property taxes the first year will be much less than normal, because they are based on the land amount only for that tax year

 

If you have other questions about new construction, or would like to know about the custom homebuilding process, please email me at palmer@palmerharned.com.

This content is not the product of the National Association of REALTORSĀ®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.