A practical guide to buying a new construction home, covering builder research, contract negotiation, upgrade selections, inspection stages, and warranty coverage.
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Builder Reputation Research
Check the builder's license, insurance, and complaint history
Search your state's contractor licensing board for active license status, insurance coverage, and filed complaints. Builders with 3+ unresolved complaints in the past 2 years are a red flag. Also check the Better Business Bureau — a B+ or higher rating with at least 50 reviews is a reasonable baseline.
Verify active contractor license on your state's licensing website
Search for complaints and lawsuits in public court records
Visit 2-3 communities the builder completed 3-5 years ago
New homes look great at closing, but quality shows after 3-5 years of settling, weather, and use. Drive through older communities and look at roof condition, siding integrity, and landscaping health. Knock on a few doors and ask homeowners about their experience with warranty claims.
Ask the builder for 5 recent buyer references and call all of them
The builder will provide their happiest customers. Ask each reference specifically about the punch list process, warranty responsiveness, and whether the home was delivered on time. If the builder refuses to provide references or gives fewer than 3, treat that as a disqualifying signal.
Research the builder's financial stability
A builder who goes bankrupt mid-construction leaves you with an unfinished house and limited legal recourse. For publicly traded builders, check annual reports. For private builders, ask how many homes they're currently building and how long they've been in business. Builders with 10+ years in business and 20+ homes/year are lower risk.
Model Home vs. Spec Home vs. Custom Build
Understand the differences between model, spec, and custom homes
Model homes are fully upgraded display units (often 15-25% above base price). Spec homes are pre-built with builder-selected finishes and available immediately. Custom builds let you choose everything from the floor plan to fixtures but take 8-14 months. Each type has different negotiation leverage.
Ask which features in the model home are upgrades vs. standard
Model homes are designed to sell — the hardwood floors, quartz countertops, and upgraded lighting you see may all be paid upgrades totaling $30,000-$80,000. Get a printed list separating standard features from upgrades with individual pricing before you fall in love with the model.
Request the base price and a complete upgrade price sheet
Ask which floor plans are available for your target lot
Compare the base price per square foot to resale homes in the area
New construction typically costs 10-20% more per square foot than resale homes in the same neighborhood. If the gap exceeds 25%, you're paying a significant premium. Calculate: base price (before upgrades) divided by total livable square footage for an accurate comparison.
Upgrade Selections
Prioritize structural upgrades that can't be added later
Structural upgrades (extra electrical outlets, plumbing rough-ins for future bathrooms, reinforced garage floors, attic insulation) cost 30-50% less during construction than as retrofits. Adding a bathroom rough-in costs $1,500-$3,000 during construction vs. $8,000-$15,000 after.
Add electrical outlets where you'll need them (home office, kitchen island)
Pre-wire for ethernet, surround sound, or security cameras
Skip cosmetic upgrades you can do cheaper after closing
Builder markups on cosmetic upgrades (backsplash, light fixtures, cabinet hardware) run 50-100% above retail. A $3,000 builder backsplash might cost $800-$1,200 to install independently after closing. Focus the builder upgrade budget on items embedded in walls, floors, and infrastructure.
Get the total upgrade cost in writing before signing
Upgrade costs accumulate quickly — $5,000 here, $8,000 there — and can add $40,000-$80,000 to the base price. Request a complete upgrade summary showing every selection and its cost. Compare the total to your approved mortgage amount before committing.
Negotiate for free upgrades rather than a lower base price
Builders protect base prices to maintain comparable sale values in the community. They're more willing to throw in $10,000-$20,000 in upgrades (appliances, flooring, countertops) than reduce the price by $10,000. Ask for upgrade credits rather than price cuts during negotiation.
Inspection Stages
Hire your own independent inspector at each stage
The builder's inspector works for the builder. Your inspector works for you. A pre-drywall inspection ($300-$500) catches framing, plumbing, and electrical issues before they're sealed behind walls. A final inspection ($400-$600) catches cosmetic and functional issues. Both are worth every dollar.
Schedule a pre-pour foundation inspection
Schedule a pre-drywall (framing) inspection
Attend the pre-drywall walk-through personally
The pre-drywall walk is your only chance to see the framing, wiring, plumbing, and insulation before it's hidden. Verify that outlets, switches, and fixtures are in the correct locations. Misplaced electrical boxes cost $200-$500 to relocate after drywall is up vs. $0 before.
Conduct a thorough final walk-through before closing
Bring a bright flashlight, a level, a phone charger (to test outlets), and a marble (to check floor levelness). Test every faucet, flush every toilet, open every window, and operate every appliance. Create a written punch list of every defect — most builders guarantee completion within 30 days of closing.
Test all appliances, HVAC, and water heater
Check paint, caulking, grout, and trim in every room
Get the punch list completion guarantee in writing
A punch list of 30-80 items is normal for new construction. The builder should commit to a completion timeline (typically 30-60 days) in writing before you close. Do not close until the builder signs a punch list acknowledgment with specific deadlines for each category of repair.
Warranty Coverage
Review the builder's warranty structure and duration
Standard new construction warranties cover workmanship and materials for 1-2 years, mechanical systems (HVAC, plumbing, electrical) for 2-5 years, and structural defects for 10 years. Get the warranty document before closing and read every section — not all builders offer the same terms.
Note the coverage period for each category (workmanship, mechanical, structural)
Identify how to file warranty claims and the response time guarantee
Ask whether the warranty is backed by a third-party insurer
A third-party-backed warranty (through companies that specialize in builder warranties) survives even if the builder goes out of business. A builder-only warranty dies with the company. Third-party backing costs the builder $300-$800 per home and is a strong indicator of builder quality.
Schedule an 11-month warranty walk-through
Most workmanship warranties expire at 12 months. Schedule a professional inspection ($300-$500) at the 11-month mark to identify every defect before the warranty expires. Common 11-month finds include drywall cracks from settling ($200-$800 to repair), caulk shrinkage, and nail pops.
Closing Timeline and Contract
Hire a real estate attorney to review the builder's contract
Builder contracts are written by the builder's attorneys and favor the builder. A real estate attorney review costs $500-$1,500 and typically identifies 5-10 clauses worth negotiating. Key areas: escalation clauses (builder raises prices mid-build), delay penalties, and dispute resolution terms.
Negotiate a delay penalty clause if construction runs late
New construction delays of 2-6 months are common. A delay penalty clause credits you $50-$150/day after the guaranteed completion date. Without this clause, you have no recourse if the builder misses the deadline by 3 months and you're paying for temporary housing at $2,000/month.
Lock your mortgage rate strategically based on the build timeline
Standard rate locks last 30-60 days, but new construction takes 6-14 months. Extended rate locks (120-360 days) cost 0.25-1.0% of the loan amount upfront. On a $400,000 mortgage, a 6-month lock costs $1,000-$4,000. Compare this cost against the risk of rates rising 0.5-1% over the build period.
Confirm the earnest money deposit terms and refund conditions
Builder earnest deposits range from $5,000-$30,000 and are often non-refundable after a short contingency window (7-14 days). Understand exactly when your deposit becomes non-refundable and under what conditions (financing fall-through, appraisal shortfall) you can recover it.
Frequently Asked Questions
Should I use my own real estate agent when buying new construction?
Using your own buyer's agent costs you nothing (the builder pays the commission) and provides representation during the contract, upgrade selection, and inspection process. Builder sales representatives work for the builder's interests, not yours — they're trained to maximize the builder's profit through upgrade pricing and contract terms favorable to the builder. Register your agent on your very first visit to the sales office; most builders will not pay a buyer's agent commission if the agent wasn't present during your initial registration.
What inspections do I need for a new construction home?
Schedule three inspections: a pre-drywall inspection ($200-$300) after framing, plumbing, electrical, and HVAC are installed but before walls are closed; a final inspection ($350-$500) before closing; and an 11-month warranty walkthrough before the builder's 1-year workmanship warranty expires. The pre-drywall inspection is the most valuable because it catches framing errors, missing insulation, improperly routed HVAC ducts, and plumbing issues that become invisible and expensive once drywall is installed.
How negotiable are builder prices and upgrades?
Base prices are generally less negotiable (0-3% in most markets), but builders often have significant margin in their upgrade pricing — countertops, flooring, and appliance packages are typically marked up 30-50% over retail cost. Instead of negotiating the base price down, ask for free or discounted upgrades, closing cost credits (2-3% of the purchase price), or lot premium reductions. Builders are most motivated to negotiate at the end of a quarter (March, June, September, December) when they need to hit sales targets, or on the last remaining homes in a phase.
How long does it take to build a new construction home?
A production builder (tract home) takes 6-10 months from contract to completion, while a semi-custom home averages 10-14 months and a fully custom home runs 12-24 months. Material delays (cabinets, windows, specialty fixtures) are the most common cause of timeline extensions — ask the builder to specify lead times for your selected finishes in the contract. Weather, permit delays, and subcontractor scheduling issues can add 1-3 months to any new build, so plan for flexibility in your current living situation.