A brand-new home's maintenance and repair costs should be minimal; its construction materials, systems, and appliances should be up to the latest code and energy efficient; the floor plan and amenities should meet the needs of contemporary living, and the place should be move-in ready.
A brand new property also has an emotional appeal for buyers: No wear-and-tear and no dealing with someone else's taste or mistakes—or so the reasoning goes! Many homebuyers think purchasing a newly constructed home is wiser than purchasing a "used" one.
Many buyers don't realize that new homes often have numerous hidden costs. If you're purchasing new construction from a builder or real estate developer, you should spend your money wisely and don't incur any unpleasant surprises.
- Buying a newly constructed home requires almost as much attention to detail as buying a previously owned one.
- Inspect a new home carefully, as it can have hidden defects.
- When viewing model homes, understand what's standard and what constitutes an upgraded feature, which of course will cost you more.
- You should have your own real estate agent and research your own mortgage—don't assume the builder's terms are the best.
- It is inadvisable to turn down a home inspection, even if it costs you money.
Just like an older home, a brand-new home can contain several hidden or "latent" defects that could require expensive repairs. A weak slab could crack. The siding could fall off. The wood floors could warp. Your toilet could overflow. Electrical wiring could be done incorrectly. Heavy rains can reveal inadequate waterproofing or grading, leading to leaks or flooding. Any problem you might be afraid to find in an existing home can also appear in a brand-new one.
To protect yourself, research the builder's reputation and the subcontractors used before committing to a purchase. And always pay for a thorough inspection by an independent home inspector who is not affiliated with the builder.
In addition, find out what kind of warranty the home comes with and read it carefully before you commit to purchase. You may have to rely on that warranty if any latent defects pop up that your homeowners' insurance policy will not cover. Different aspects of the home may be covered for different lengths of time so make sure you're aware of those limitations—for instance, the HVAC system may be under warranty longer than bathroom fixtures. Report any problems to the builder as soon as you notice them.
It can be smart to arrange for two inspections at different times to make sure your new home is truly free of defects and in move-in shape—one after the home has been constructed but before all the finishes have been put in (problems can be easier to identify), and another just before you close and take possession.
Newly built homes often come in a standard or basic form and may not include everything you need or want. It is quite common for these properties to lack interior essentials such as some appliances and window coverings and exterior features like decks, fencing, and landscaping.
Each of these missing items can be an added expense. Before you make an offer, ask what is included in the home price, note what is missing, and do some research to figure out how much these items will cost. Make sure to factor these purchases into your budget. If you can't afford to pay for them out of pocket, getting the builder to pay your closing costs might free up the cash you need for blinds, sod, and a washer and dryer.
If that proves too expensive or time-consuming, look for a new home with all the essentials, or consider a property that is almost brand new and is just lived-in enough that the previous owner has installed all the missing necessities.
The showy model you will tour will typically have all the available upgrades the builder offers, from hardwood flooring and granite counter-tops to bay windows and oversize bathrooms. Seeing what you could have can lure you into spending significantly more than the base price initially attracted you to the property and the community. The price difference between the base model and the model with all the bells and whistles can be tens of thousands of dollars.
Also, if you buy the upgrades through the builder, you might pay an up-charge and have a more limited selection than doing the upgrades yourself. You also have to consider the future resale value. Make choices that will appeal to many buyers and won't result in your home being over-or under-improved for the area.
Some builders include upscale features in the standard model and factor them into the base price. Just make sure you know what you're looking at before you tour a home and fall in love with something you cannot afford—or feel ripped off because the standard model seems to fall short of the deluxe one.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
An Uncertain Future
In a new community, you may not know what you are buying into in the long run. What will your neighbors be like? What will be built on that vacant land next door? How reliable will the services be (like snow plowing, utilities, or garbage collection)? How will these unknowns affect your quality of life and your home's resale value? "New construction" is not necessarily a synonym for "low crime," "friendly neighbors," or "great neighborhood maintenance."
It's okay to take a chance on these unknowns. Just realize that you are taking a chance. Conditions can change in established neighborhoods, too, but at least those areas have a history and reputation that could give you a better idea of what life will be like in your new home, compared to a brand new development.
Lack of Representation
You should not just walk into the sales office unarmed when you buy a new home, even though it can seem like a simple one-stop-shop operation. The builder's sales agent represents the builder—and not you. Any financing the builder may have arranged will not necessarily be the best or lowest cost available. Do your research and familiarize yourself with the different mortgage types available and the interest rates available for lenders in your area.
Then, based on your research, get your real estate agent and your lender to make sure you get the best price on the home and the lowest interest rate and fees on your mortgage.
Should I Buy a New House?
A newly constructed home can be appealing for a lot of reasons including no wear-and-tear from previous owners, move-in readiness, and possibly upgraded kitchen and bathroom features. However, newly built homes can be more expensive, with pricey upgrades or fixtures, and new homes can still have issues, like faulty wiring.
What Are Some of the Costs of a Newly Built Home?
When you purchase a newly constructed home, you often have to pay more for upscale features and amenities.
Do I Need a Home Inspection If I Buy New Construction?
Yes. You should always get a home inspector to look any house you buy— old or new.
The Bottom Line
Don't make any assumptions about what you'll be getting if you buy a new home. It can be more expensive and come with many more uncertainties than you bargained for.
However, if you prepare for the experience, you'll know how to watch out for your best interests and spend your money wisely.