How to Buy a New Construction Home

by | Dec 29, 2020 | Buying

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Many people have turned to newly constructed homes to get exactly what they want when buying a home. The demand for new construction homes has dramatically increased in recent years, becoming an easy alternative for home buyers who want a custom home without the stressful negotiation of a traditional or pre-built home purchase. And in some sellers markets, buying a new home can be a great alternative to ever decreasing inventory or buyer competition for pre-existing homes. 

Unlike a traditional home sale, the seller is the actual builder, so there is no emotional connection with the home. Builders price their homes for their technical value rather than the emotional attachment most sellers have. And you can save a good bit of cash in the process. Also, there’s something undeniably satisfying about being the first person to live in a brand new home.

Types of new construction homes

Pre-designed homes – You can find any type of pre-designed home (i.e. a condo, townhouse, or traditional home). These homes are typically built as a part of a greater development, so all of the houses in the neighborhood will be similar. You will often have the option to customize the finishings in your home. Some of this will be done when you move in. 

Custom homes – These homes are much more detail oriented. Everything in the house, from floor-plan to furnishings, is designed with you in mind. This could help you have your dream home, but it will come with a price.


Fast Facts on Buying New Construction Homes

  • Warranties – New construction homes often come with a warranty. While this isn’t required, most builders offer a one year mechanical warranty and a ten year structural warranty. The mechanical warranty is all-encompassing, covering things from a broken garage door remote to making sure appliances work. The structural warranty only covers the structural integrity of the house.
  • Not yet built – The house may not be built yet. Builders will frequently sell a new construction home before it’s completed. As the buyer, you’ll be able to walk through a model home, to get the feel for the building process and also what your house would look like.
  • Demand – New construction homes are increasingly popular in urban areas, especially in growing seller’s markets. Builders aren’t always able to keep up with demand
  • Mortgages – When thinking about mortgages, most home builders will have a preferred mortgage lender. Many builders will want you to use their lender, while others will require you to at least be pre-approved by their lender. Almost all new construction builders will offer incentives to use their preferred lender, such as concessions at closing, free upgrades, lower interest rates, or better appliances.
  • Earnest money –  Earnest money deposits are usually a higher percentage with new construction. In a previously-owned home, the deposit is around 1-2% of the sale, but in a new home the amount can be over 5%.

Top tips for buying a new construction home

  • Location – Like with all home-buying, location is key. Pinpoint an area where you would like to live and then look at new construction options in that area. 
  • Buyer’s agent – If you hire a real estate agent to represent you with a new construction home purchase, you won’t end up paying any more for the home. The builder will pay your buyer’s agent a 2-3% commission. If you don’t have an agent, the builder will simply keep this as profit. So we recommend hiring an agent. 
  • Due diligence – Do research on your builder. It’s a good idea to google them, read reviews, figure out how long they’ve been in business, ask to see previous homes they’ve built. Without a good builder for whom you’ve exercised due diligence, you can’t have a good house.
  • Weather concerns – If you’re living in a place like Denver, for example, that has regular, harsh hail storms, ask your builder about upgrading to high-impact shingles. You will be able to save on your home insurance with this upgrade.
  • Inspection – If your new home has a one year mechanical warranty, pay for a home inspection after ten months of living in the home. The cost of the inspection will be more than worth it, if you find a defect in the home you didn’t realize when you moved in, and your warranty will still cover it. 

Working with Trelora

When you decide to buy a new construction home, everything is stacked in the builder’s favor contractually, meaning your earnest money becomes non-refundable immediately, and the builder has all the flexibility when it comes to deadlines and the closing date. Buying a new construction home can be incredibly exciting. Be prepared and  know what matters to you. If you’re looking for a new construction home, Trelora can help you with our expert knowledge.  

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