New Construction: What to Know Before You Buy

FULL DISCLOSURE up-front: No loan officer who is not in a “preferred lender” relationship with a builder can compete with new construction. Builders mark-up the sales price of their homes so that they can entice buyers with a rebate (which can be used to buy down the rate or cover some closing costs) in exchange for using their preferred lender.

They do this on each of their properties so as each one sells it becomes a “comp” for all that follow. Comps, short for “comparable property”, are how appraisers determine the value of a property, so this strategy pretty much guarantees that the appraisal will come in at value despite price mark-ups.

Trust you are paying for your own rebate by paying more for the home than you would if it were a resale home.

Buying a new construction home is not like buying a new car where you can expect to roll off the lot with no issues for years to come. There are many things that can be problematic in dealing with new home construction, especially coming out of our recent pandemic-fueled skilled labor shortage and materials backlog.

This article from a Realtor Magazine, published by the National Association of Realtors, outlines the high percentage of home inspection failures on new construction homes, and what failed. Realtors make commissions whether you buy new construction or a resale home, so they have no reason to misrepresent the numbers. 


CyFy Home Inspections in Arizona does an exceptional job of sharing the horror stores they’ve found while inspecting new construction. They also explain how many builders limit access inspectors have to the homes – not allowing them to inspect attics or roofs, for example. Watch the video content on their YouTube or TikTok to get a good idea of what a home inspector may encounter.

Now, of course resale homes can also have issues, but knowing someone else “kicked the tires” and lived in the home before you provides some peace of mind that major issues have been addressed. Plus, home inspectors get unfettered access in resale homes.

Two additional complications to consider when purchasing new construction are lack of a precise closing date and complicated purchase contract.

There is always a “targeted” closing date, but construction can and does hit delays due to weather, material delivery issues, permit inspection backlog, and / or labor shortages, among other things. If you’re transitioning from a home you’re selling to this new home, you may find yourself between homes and needing to find alternate accommodations while waiting on construction to be completed.

When purchasing a resale home there is a standard state-specific contract that all parties sign. This contract is very clear to understand, even to the most novice of home-buyers. Builders create their own purchase contracts that are often more difficult to understand, with ambiguous deadlines and some items rarely addressed at all. There is never a firm closing date listed for the reasons outlined in the previous paragraph.

There are many reasons a new construction home might be the right choice for you and your family. Home inventory is well below demand right now, so its entirely possible that new construction is your only option. Use the information I’ve provided here to go in knowing the potential pain points and have a plan in place to deal with them.

Always have an experienced, knowledgable realtor representing you and NEVER waive a home inspection. Ever.

Tammy Metzger

Residential Mortgage Loan Originator. Dog Mom. Knowledge Seeker. Voracious Reader. Solo. Outdoors enthusiast. Genre Film Lover.

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