HomebuyingHow to Buy a New Construction Home: A Guide

How to Buy a New Construction Home: A Guide

The U.S. housing market has seen unprecedented momentum since mid-2020. Historically low interest rates and housing shortages have driven up prices in key local markets, including AustinBoise, and Miami. With supply chain challenges being a hurdle, new construction homes weren’t available all of the time since COVID-19 first hit the nation. As such, the prices of used homes went higher than expected.

However, new construction is beginning to pick up again as developers respond to higher-than-ever housing demand. If you’re considering purchasing a new construction home, keep reading for tips and strategies on how to get the most out of your money.

Construction workers standing on scaffold thermally insulating house facade with glass wool.

What is a New Construction Home?

As the name implies, a new construction home is built from the ground up. The homebuyer will generally choose the spot of land, and then the home builder will begin construction. Below are three main categories of new construction homes.

Custom New Construction

These homes are the most expensive type of new construction that you can purchase, for the most part. They also come with the longest process. You, as the homebuyer, will have a say in almost everything. Typically, the process begins with finding an empty lot and a home builder. Then the builder will consult with you on your options, and the process moves on from there.

Semi-Custom New Construction

Semi-custom new construction homes are somewhat customizable, but not to the degree of a custom home. There is a range of options for layout and finish provided for buyers to choose from. You’ll generally find these homes in high-end neighborhoods, with a builder responsible for all homes in a given area.

Built-to-Spec or Production New Construction

These are also referred to as “pre-built new construction homes” or “tract homes.” They’re the cookie-cutter houses that you see in some suburban neighborhoods that aren’t as expensive as semi-custom construction neighborhoods. Usually, buyers would have a set of floorplans to choose from, but tract homes are very limited in the options available. However, these homes take the least amount of time and are usually less expensive per square foot, making them the most affordable option for homebuyers.

How to Buy New Construction

If you’re looking to purchase a new construction home, the process will be similar for all three categories, with the first two requiring more decisions for you to make. Follow the step-by-step guide below to shop for and purchase a new construction home.

1. Find a Buyer’s Agent and Get Pre-Approved

While this may seem like two separate steps, they should happen simultaneously. Finding an agent that can help you along the new construction process is key to getting through it without blowing the bank. A good real estate agent can provide options for both land and builders. While working with your agent, find a lender and get pre-approved. Knowing your budget is crucial when buying new construction, as prices can vary significantly from area to area, as well as from home to home.

2. Research, Research, Research

Most likely, your agent will give you more than one builder to choose from. As such, you should carefully research every one of them. Getting background on a builder is a great way to ensure that you’re getting what you want out of the home you’re building. Don’t focus on the cheapest rates available. Focus on the builder’s reputation. They should be acclaimed as a new construction home builder. Additionally, look into the homes they’ve built in the past. Their past projects are equivalent to an artist’s portfolio. Know what they’re good at, and look for their signature. Most builders have one, and it shines through in their home design.

3. Choose a Style That Suits You

Your home is going to be your own, so choosing a style that suits you is crucial. Make sure it’s something you can live in for years to come. The look matters, but remember to think about other aspects, especially things involving the future. Will it be big enough if your family grows? Will it be too big if your family stays the same size? Just like when shopping for an existing home, it’s important to know where you plan to be in the years to come. The property you end up with will likely be the place you call home for the foreseeable future.

4. Choose the Standard Items

Every builder will have a list of standard items and choices that need to be made for your home. These choices include paint color, flooring, cabinets, fixtures, and appliances. Standard options are normally the cheapest, as they save the builder money on costs while the home is being built.

5. Pick Your Upgrades

If you can’t find things you like among the standard options, it’s time to start asking about upgrades. Of course, these will come at a premium, but they open up the design possibilities. Keep in mind that you should evaluate every custom and upgraded option based on your financial situation. Not all upgrades will increase the value of your home, but they will undoubtedly increase the cost. Consider waiting for the home to be finished and hiring outside vendors for upgrades. It may save you money in the long run.

6. Make Living Arrangements

There’s a chance that you’ll have a limbo period between your current home and your new one. If that’s the case, make sure that you have plans for your living situation should your new home not be ready for you. Don’t get caught without a plan, as it can add unnecessary anxiety to your life.

7. Have the Home Inspected

It feels like this should go without being said, but we’re going to really stress it. Even new construction homes need to be inspected. This can save heartache in the long run. No one wants to jump the gun and move into a home that’s not livable due to a mistake a professional can easily catch during a home inspection. Thankfully, if you followed the first steps and found an agent familiar with new construction, they’ll be able to provide information for an inspector for new construction homes.

8. Review Your Warranty Documents and Sign

New construction homes come with warranties, and understanding what those warranties mean can make a big difference in your life. There are two types of warranties offered on new construction homes by builders, both detailed below.

  • Express Warranty: A warranty that clearly defines any problems that a builder will be responsible for addressing and resolving. The length is explicitly defined and has no room for interpretation.
  • Implied Warranty: These warranties cover issues that affect livability, habitability, and safety. These are up to interpretation, and they have a standard 10-year liability period unless otherwise specified.

9. Time to Move In!

Congratulations! The arduous process of purchasing a new construction home is over, and your new home is ready for you. It’s a longer process than buying an existing home, but it’s often worth the wait. The process of buying a new construction home can take as little as six months but may take much longer, depending on the circumstances.

The Pros of Buying New Construction Homes

New construction homes are particularly appealing because of all of the pros that they come with, of course. Simply the term “new” alone is appealing for most people. Below we’ve listed out some advantages of buying new construction.

  • New construction is the best way to get your dream home. Not only can you pick many of the aspects of the home itself, but a lot of the time, you can also choose an area you love, as well.
  • New homes mean new tech. New construction often comes with up-to-date technology, meaning that you’re ready to have a fully functioning smart home without any renovations or modifications.
  • There’s far less maintenance in a new home, and there are almost no surprises. This means that you’re saving money that you may otherwise be dumping into home repairs with an existing house.

The Cons of Buying New Construction

Like with anything else, there are disadvantages associated with buying a new construction home.

  • You’re going to be paying more. At this point, new construction will undoubtedly cost more than an existing home. The cost for materials is still high, and you’re paying for the labor involved with building the home itself.
  • Your budget may change drastically depending on the market. We all saw the prices of construction materials rise during the pandemic. It’s possible that could happen again.
  • The move-in date isn’t guaranteed. While most homes can be built in six months, issues involving labor shortage, supply chain disruption, and even weather conditions could delay the progress.

Is Buying a New Home Right For You?

New construction will always be tempting if you’re looking to purchase a home. It allows you to take part in creating where you’ll be living for decades to come. That being said, it isn’t for everyone. It can be pretty costly and take a long time. Remember to weigh your options, and review your budget.