buying a new construction home

Deciding if you should buy a new construction home isn’t black or white. New construction communities come with good and bad baggage. There are different construction companies that offer a variety of incentives for homebuyers. However, not all incentives are made equal! It’s important to research the home builders, their models, and what upgrades are available for your new property.

If you’re preparing to buy a new construction house with your family, consider these pros and cons to get more clarity on your decision.

Buy a New Construction Home: Pros

new construction homes

It’s not all bad, right?

Buying a new construction home comes with its perks. Now, remember that each home builder is different. We will cover – with broad strokes – the benefits of purchasing a house that was newly constructed in 2023.

1. Your Home is Brand New

One of the biggest perks of buying a new construction home is the fact that everything is brand new. There isn’t an ounce of ‘old’ material put into the property. Many buyers prefer brand-new appliances, walls, doors, and light fixtures. Homebuyers get all that and more when purchasing a new construction home.

Dealing with an old, outdated property is a major hassle. Not all homebuyers want to deal with repairs and fix up a house after buying it. Home renovations are expensive and time-consuming. For example, a broken air conditioner in your home can cost thousands of dollars to fix. A new build home helps homebuyers avoid renovations because everything is brand new.

2. Easy Home Inspection

Typically, new home builders offer buyers several opportunities to walk the property as it is being built. Some also include a home inspector that walks the property with you to ensure everything is up to code. Additionally, certain cities will send out inspectors throughout the process to also ensure a quality standard is met during the construction phase.

Because of this, home inspections for newer properties usually go very smoothly. Since everything is brand new, there usually isn’t much that is ‘off’. The process of purchasing a new place is relatively easy compared to buying an existing home on the market. You won’t have to negotiate over repairs before closing since there are none.

3. Warranties Included

“What if the new construction home is low quality and things break?”

Many real estate developers will offer a variety of warranties that cover you and your property after you close escrow. You can buy a new construction home with confidence when multiple warranties come with it. Of course, this varies per builder. Read through each warranty thoroughly so you understand what it covers.

For example, if your toilet leaks 6 months after moving in, there’s a chance that the warranty will cover that. Not bad, right? Water damage from a leak can be expensive, especially when flooring and drywall need to be replaced. For major, unforeseen repairs like water damage, included warranties are a huge benefit. Each warranty usually lasts for different time periods and is specific about repairs that are not covered.

4. Energy Efficient

buying a new construction house

Now that it’s 2023, most new construction home builders are getting on board with energy efficiency. It’s common to buy a new construction home that is equipped with energy-efficient features throughout the property. Included in your house purchase could be features such as:

  • Energy efficient thermostat
  • Solar panels
  • Double-pane windows with properly sealed frames

Saving energy helps your bottom line. For homebuyers that are scared of the expensive HOAs and property taxes that can accompany a new construction home purchase, the utilities cost savings will help offset that.

5. In-House Lender

When deciding if you should buy a new construction home or an existing one, timeline is important. Many people put an earnest money deposit down to reserve a lot that only has its foundation poured. Since the timeline can be months out until you can move into your new house, many new construction companies offer in-house lenders for buyers to use.

Most buyers prefer to use the in-house lender because of the incentives they offer. One of the most important is that they can sometimes lock in interest rates over a long period of time.

For example, if you expect to close on the house in 8 months from now, interest rates can dramatically increase from now to then. Some in-house lenders for new home builders will offer to lock in today’s mortgage interest rate in case it goes up by the time you close.

“What if the interest rate decreases by the time I buy my new construction home?”

Most lenders will offer to honor that lower interest rate at closing. It’s a safe way to lock in a good rate in case it increases. Unfortunately, some buyers get shafted if they put down a deposit for a new construction property and use their own lender. If interest rates go up, they may not be able to afford the home and could lose out on the entire thing.

If you’re already working with a lender, there’s a chance that they will also offer this same incentive! It’s worth asking before switching lenders off the bat when buying a new construction home.

6. No Bidding

For many new home-build opportunities, there is no bidding. This is the opposite of how it works when someone sells a property on the market. Homebuyers can show up and buy a new construction home on the spot by putting down a check that day. There is no bidding (in some communities) and all lots are first-come first-serve.

This enables home builders to sell each lot quickly because once the price is met, it is sold. Selling a house this fast benefits everyone involved. The builder and agents are happy with the quick transaction. And you – the homebuyer – get the available property of your choice without battling against other offers. Consider this benefit when wondering if I should buy a new construction home.

Buy a New Construction Home: Cons

buy a new construction home

There are two sides to every coin in the world of new construction homes. While the benefits are grand, there are cons to buying a newly built house. For homebuyers that have browsed reviews of builders, you can see for yourself.

Here, we will debunk myths while uncovering truths about buying a new construction home for you and your family. Comparing the pros and cons of new construction is eye-opening.

1. New Construction Delays

In real estate, there are always delays. New construction homes are not immune to that. Homebuyers can put down an earnest money deposit (EMD) for a new property before the construction starts. The home builder will give you an estimation of the construction timeframe. However, most new home builders don’t guarantee an exact date for the home to be completed.

These details will be spelled out in the contract you sign to purchase the house. It’s common to see a 6-12 month included grace period that the builder can deliver the home after the initial closing date. Delays are not fun!

Many homebuyers are stuck in tough situations because they expect to move in sooner. This is unfortunately the nature of purchasing a new construction home before it’s built. Many factors that cause the delays are out of the builder’s control, such as bad weather, supply chain delays, and shortage of materials.

2. Expensive Home Upgrades

Buying a new construction home is similar to purchasing a car. The initial base price of the model isn’t too expensive. However, once you start adding on the bells and whistles, the total cost increases dramatically. While these expensive addons aren’t hidden fees baked into the cost, they still sting.

When first touring a new construction real estate site, homebuyers walk through the model homes, which are completely decked out with upgrades. From here, it’s easy to instantly fall in love.

However, many new construction houses don’t come with the pristine finishes, sleek kitchen countertops, and swanky bathroom vanities that you see in the model home. When buying a new construction home, homebuyers must usually add these upgrades to their purchase.

Buyers can end up spending an additional $10,000 – $30,000 on home upgrades that they initially thought would come with the home. If the home is larger, you can spend +$50,000 on upgrades. That’s an expensive pill to swallow! Of course, it’s fun to customize and personalize your newly built house. Customizing is fun, but the unexpectedly high costs of the upgrades are not.

3. Limitation of Warranties

Although the home warranties that builders offer are nice, some policies are limited. At face value, homebuyers assume that everything is covered. FALSE!

Review each warranty in detail so that you know what you’re getting into. Not all repairs and renovations are covered under your warranty. Each policy is unique and covers specific items if they break or malfunction in specific ways. Know this going into it so that you’re not disappointed when you have to come out of pocket for a particular repair to your newly constructed property.

4. HOA Limitations

HOAs are not perfect or made equal. It’s common to see HOAs have strict fee policies in new construction communities. Of course, this is area-dependent.

Many HOAs within newly constructed residential areas don’t allow Airbnb or other short-term rental opportunities. HOA rules will trump the short-term rental laws that your area enforces. As a resident, you must abide by the HOA rules.

  • BONUS TIP: Get on the board of the HOA and become the change that you want to see in the world.

5. The Price is the Price (usually)

Many builders set the purchase price without any wiggle room. This is different from how homes are bought and sold on the market. If you lowball them, your offer could get immediately denied. This depends on the community and builder! As mentioned before, the benefit to this is that you can show up and purchase it on the spot if you are ok with the list price of the new construction home.

Is It Smart to Buy New Construction?

There are real estate markets where the values of traditional homes cost just as much as new construction properties. If this is the case, it’s smart to invest in new construction.

“With real estate, it’s all about getting your foot in the door.”

Getting your foot into the real estate world isn’t easy in expensive markets, like California. New construction properties are great opportunities for people to own real estate at a good price.

Resale Value of New Construction Homes

You can resell a new construction home and receive a good return back. The value of a new construction home doesn’t necessarily go down after you purchase it. Its worth is highly dependent on the area and location. Factors like the quality of the construction and upgrades also influence the resale value of a new construction home. Don’t be afraid to buy a newly built home because you think it won’t be worth much after you purchase it.

Should You Buy a New Construction Home?

should I buy a new construction home

Figuring out if you should buy a new construction home vs an existing one is a multilayered decision. Cost is a major prohibitor for homebuyers considering purchasing a new property. Estimate the total money you’ll spend on upgrades and add that into the cost of your home off the bat. This will help deter unforeseen expenses that can arise later.

Another helpful tip for purchasing a new home is to research the builder beforehand. Check out reviews online and see what other homeowners experienced. Get a feel for the quality of their products and determine if they are a good enough fit for you and your family. Don’t settle for poor quality when buying a new construction home, especially when you are the one customizing it