Guide to Buying New Construction Houses

A brand new construction house that is going to be sold.

In a previous post, we discussed the differences and characteristics of new homes compared to pre-built homes. If you love the idea of owning a brand new property and wondering how to get started, read on below.

Step By Step Process to Owning a New Build

Step 1: Decide Which Type of New Construction

There are a few different types of new builds to choose from, with the biggest deciding factor being your desired level of customization. Let’s go over the different types now.

Spec Homes

A spec home is built the way the builder wants, and gives very little input to the buyer. The good thing about these are that you know exactly what you are buying so you don’t have to imagine the finished product or hope it looks as good as you want. They are also more readily available than customized homes. On the flip side, they are often built with cheaper materials and the lack of customization may deter many.

Tract Homes

When a builder or developer purchases a large tract of land and erects multiple houses or a subdivision, the houses are known as tract homes. Tract homes are often referred to as “cookie cutter” because they often look very similar and share floorplans. There is not much customization involved in these, but buyers can benefit from lower prices due to developers getting bulk pricing on materials and the land.

Semi-Custom Homes

This option is middle ground in terms of customization. These homes are often partially done at time of purchase, and from that point forward, you may have options on some of the elements in the home, such as countertops, fixtures, carpet colors, or cabinet finishes. This is a great middle ground to the two as you are not as pressed for every detail about the property, but you do get to add your own personal touches to the home prior to it being finished.

Custom Built

A custom built home is built specifically for the buyer. This option is best for those who want as much control over the process as possible and are detail oriented. While it is a great way to have a truly unique home, there are also some cons. Aside from price, there will be lots and lots of decision making, and some that are very time sensitive.

Step 2: Find a Buyers Agent

Buyers agents are not always required on new construction sales, but it is strongly advised that you work with one. Not only will they help you navigate the transaction, they will also work with your best interests in mind.

If you opt out of working with a buyers agent, you will likely be assisted by the sellers agent, meaning they will be working with the sellers best interests in mind. If you want someone to fight for you in the deal to get the best outcome possible, an experienced buyers agent is your best bet.

In addition, a buyers agent commission is typically paid from the proceeds of the seller at closing, meaning you are getting free representation.

Step 3: Neighborhood Research

Consider the locations and how convenient they will be for you and your family when considering land to place your new custom build on, or a neighborhood to purchase a tract home from.

Some important factors that many take into consideration before buying a home are:

Commute time to work and family

School District

Local Amenities (parks, trails, gyms)

Tax districts

Nearby Entertainment (restaurants, shopping, theaters)

When selecting where to place you and your family for the next several years, it’s important to do thorough research- and ask your agent for advise on the neighborhoods!

Step 4: Find a lender

Unless you are using cash to purchase the property, you will need a loan for the purchase. If the home was just completed, there are several loans you could choose from in most instances. If the home is still being built or not yet began, then you will likely be looking into getting a home construction loan.

Unlike a typical loan where the bank provides all of the money upon closing on the property, with home construction loans the lender will pay out the loan in increments called “draws” as the construction progresses. Once construction is complete, the loan will be transferred to a regular loan or a separate loan might be required.

While most lenders do have versions of a construction loan that will work, not all do. It is important to work with a lender who is experienced in new construction sales, as they will have more knowledge and advice throughout the process and will help you obtain the best financing available. The builder may have a list of preferred lenders, or you can ask your buyers agent for suggestions.

Step 5: Research Builders

When you are ready to have your custom home built, or view what is available in a brand new subdivision, it is important to know the reputation of the builder.

Look for reviews on sites like Angie’s List,, and Yelp. The term “you get what you pay for” often holds true even in the housing industry, so don’t hire the cheapest builder just on the hopes of everything being okay since the house will be new.

All builders will have to go through the process of inspections and permits, but it is still better to hire a experienced and professional builder.

If you are looking to buy a spec home or tract home, view some of the other properties the builder has erected. It could even be a good idea to stop by when you are driving through the neighborhood and ask homeowners their opinions on their home and the builder, as well as other things that could be important to you, such as the HOA.

Step 6: Get It In Writing

Once you have a loan ready, an agent working on your behalf, a desired location, and an ideal builder, it is time to submit an offer to purchase.

This is where your agent will be able to really excel. They will be able to help you determine the best price, if negotiations are likely to be accepted, and how to fill the offer in ways that benefit you as the buyer.

Speak with the builder about what will happen if issues occur along the way. Currently, the most likely issue you will face is material prices rising before the home is complete. If the price of wood slightly increases, the quantity the builder will need is so much that it could still result in a much smaller profit margin for the builder, or more likely, a higher price for the purchaser.

Step 7: Personalize It!

If you are buying a home not yet completed and you are going to add some personal touches to it, now is the time to pick which ones you would most prefer.

From choosing floorplans and styles to choosing paint colors and floor finishes, you might have several decisions to make depending on which new construction type you are purchasing.

It is important to plan for the future when choosing these touches. If you are considering the possibility of adding some new family members in the near or distant future, it might be a good idea to go ahead and choose a floorplan with an extra room that could be used as a nursery room, or perhaps scratch-resistant flooring if you are open to getting pets in the future.

Step 8: Plan Your Living Situation

Perhaps you have a home to sell prior to moving into your new construction. You could go ahead and get a loan for the build- but you will also be looking at paying two mortgages until yours is sold. You also could encounter issues when selling, such as the house not selling as fast as possible.

If you do decide to sell prior to your home being complete, you can often find an apartment with a lease that will be able to fit your schedule. It can take 6 months or more for a new home to be built, and timelines are not set in stone. Be in touch with your builder to see how construction is progressing and to get a good idea of when it should be finished, and considering asking your agent for advice regarding the ideal time to list your property for sale.

Step 9: Inspections and Warranties

Many soon-to-be new-build owners opt out of inspections, with the assumption that all should be well in a newly built home, but this is not always the case.

Inspections will help you uncover hidden issues with the house before you close on it, so you can have the builder address any concerns that arise.

Many builders also offer home warranties to buyers to give them peace of mind about the home. Review any available warranties and understand what they cover. A builder will often provide one of two warranties:

Implied warranties cover workmanship defects that will have a impact on the home’s livability, habitability, and safety. These warranties often have a 10-year liability period, and they tend to use vague language.

Express warranties clearly identify the issues the builder would be responsible for resolving if they occur. This type of warranty will state the length of the warranty and how the homeowner should dispute issues.

Step 10: Final Walkthrough

It is almost time to close on your property- construction is finished, inspections are completed, and warranties are signed. This is often the last step before closing on the property.

With that being said, this is your final chance to identify any issues with the property. Make sure there is no mess such as paint splatters, or tools left behind which could mean that the job is not complete. Once you take ownership and the builder is paid, unfortunately, they may not be as eager to serve your desires. This is the last opportunity to hold them to any agreements before you buy.

Step 11: Closing!

Alas, the process has come to an end, and it is time to sign the papers and take the keys back to your new home.

Your agent, lender, and closing attorney will all work in harmony to make this process as smooth as possible.

To learn more about New Construction Homes, such as what to expect, pros and cons, and more, check out this blog post.

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