Buying a Newly Constructed Home

If you have been in the market for buying a new home, there may be something very attractive about newly constructed homes. You get to pick out the features you want, while new homes are sometimes priced lower than comparable pre-existing homes. However, with all the benefits of buying a new house, these newly constructed homes often come with drawbacks as well. For example, these homes often are marred by poor construction and workmanship problems. What follows are some ways that you may be able to avoid some of the pitfalls that come with new construction.

Find a Seller Before You Find Your Home

Often times, at least with new construction projects, finding the right contractor and developer can make all the difference in the world. Unfortunately, many developers are just in it for the money. They will take your payments, throw together a house, give you the keys, and disappear. These homes often have serious problems that cannot be addressed because the developer has vanished after the sale. This is why you should always take your time in finding the right developer to buy from. After that, you can then go about looking at the homes that the developer has contracted and finding the one that is right for you.

Here are some ways that you can find the right developer for you:

  • Get in touch with real estate agents that have worked in your chosen community for some time
  • Walk around the neighborhood that your developer has planned and built. Try to stop by some homes that are occupied and talk to the residents there about the developer. 
  • Visit or call the Better Business Bureau (BBB) that controls in the area that you are looking at. People that have become dissatisfied with their developers will often go to the BBB to make complaints.
  • Go to City Hall or the local county planning department and speak with the staff of their dealings with the land developer. Developers, because of the nature of their business, will often deal with these people on a professional basis. 
  • Visit websites such as Homeowners Against Deficient Dwellings to see if anyone has voiced complaints against your developer online.

New Home Inspection

Before committing to buying a new house, you will want to make sure that you have an experienced and reputable home contractor or inspector walk through the home and do a thorough inspection. If you are looking at a house that is currently being constructed, it is also a good idea to have the inspector walk through the unfinished home at a few key points in the construction process to ensure that the build quality is good:

  • Near the beginning, when the foundation is poured;
  • After the framing of the house is completed; and
  • After the home has been finished.

At these points, the inspector should be able to view and inspect important portions of the home, like the electrical system, heating, plumbing, roofing, insulation, and the walls.

Avoid Extras and Add-ons Unless Necessary

Developers are great at getting you to view homes by setting low selling prices. However, you should be wary when viewing low priced houses, because during the visit commissioned sales people often tempt you with appealing add-ons that will increase the purchase price of the home. These extras include things like granite countertops, skylights, hardwood floors made from expensive woods and more. 

However, this is not to say that you should flat-out refuse any add-ons. If you are smart and willing to negotiate, you can get some extras and add-ons that may get you closer to the home of your dreams. Here are some tips to keep in mind as you consider add-on to your home:

  • Essentials first, fun stuff later - Just like ordering too much food at a restaurant, your eyes may get too big for your wallet when you start hearing about alluring add-ons like whirlpool baths and fiber optic light fixtures.
  • Check the prices - Although it would be nice if each developer would charge the same amount for each extra, this is hardly ever the case. You should steer clear of developers when they are obviously overcharging for essential upgrades. 
  • Haggle - Many people are afraid of haggling about add-on prices with their developer. Don't be. You have every right to try to get concessions or price reductions from your developer.
  • Fine print - Some home contracts contain fine print that allows the developer to put in add-ons that are not the same brand or quality as the displayed add-on, just the functional equivalent (like putting in an off-brand washer/dryer instead of the name brand washer that was in the display house). 
  • Put everything in writing - Be sure to get everything that is promised in written form, especially when dealing with the commissioned salespeople. Get all meaningful promises concerning your home in writing before signing the contract. 

New Home Warranties

There are stories of new homes that have started falling apart as soon as the new owners move in. From mold, mildew and termites to doors falling off of hinges, windows not opening and broken furnaces, there is always something that may go wrong when buying a new house. Depending upon the reliability of your developer, you may wish to purchase a new home warranty to protect yourself from the massive costs you may incur if your home turns out to be a lemon.

The best option when it comes to new home warranties is to purchase one from a third-party insurance company. Most standard home warranties generally cover craftsmanship items for one year, some built-in electrics for two years, and structural soundness for ten years.

However, if you trust your developer, you may wish to purchase a home warranty through the developer. In some states, home developers will offer an insured warranty to the new home buyer that will cover almost everything in the home for a length of time. 

Try to Prevent Delays: Don't Close on a Home Too Early

When buying a new house, it is always wise not to close escrow on the home until the construction has been completed. If you close before the home is completed, you give the developer an opportunity to halt construction on your home.

However, there may be occasions where not closing on a home before it is completed is not an option. In hot housing markets, for example, you may risk losing the home of your dreams if you do not close before construction completes. Try to get clauses in the contract that will force the contractor to work diligently on your new home. In addition, get a clause in the contract that will give you the option of either cancelling the contract or collecting damages from the contractor if the contractor does not deliver the completed home by a certain time.

Finally, if you are being forced to close escrow on your new home before it is fully finished, you may insist that the money necessary to complete the work on your home be taken out of the money you have paid and set aside. This money will be released to the contractor once the necessary work has been completed to your satisfaction. If the work is not completed, you may be allowed to take the money and hire your own contractor to finish the work.

If you have closed on a home and the developer has not delivered it by the agreed upon date, you may be able to sue the developer to collect for any expenses that have resulted because of the delay. These costs could include hotel stays, rent, laundry, restaurant bills and more.

Have Questions About Buying a Newly Constructed Home? Get a Free Legal Evaluation

When you buy an existing home, you can walk through it and assess its condition and value with your own eyes (in addition to inspections). But if you're buying a newly constructed home, you're either looking at a brochure or checking out the display model first, which requires assurances that you'll actually get what you're paying for. A real estate attorney will be able to help you better assess the value (and any potential pitfalls) of a newly built home before you buy. Get a free legal evaluation from a local attorney today.

Next Steps

Contact a qualified real estate attorney to help guide you through the home buying process.

Help Me Find a Do-It-Yourself Solution