Buying New Construction: What to Know Before You Sign

The Appeal of New Construction

Everything is new. Your roof, HVAC, water heater, appliances — nothing is worn out. The floor plan is modern. You get to pick finishes and colors. No bidding war, no deferred maintenance.

But new construction has its own set of rules, timelines, and potential pitfalls. Here is what you need to know.

Builder Contracts Favor the Builder

Builder purchase agreements are not the same as resale contracts. They are written by the builder's attorneys to protect the builder. Common differences:

• No standard contingencies: Many builder contracts do not include inspection, appraisal, or financing contingencies. You have to negotiate these in. - Arbitration clauses: Disputes go to arbitration, not court. You give up the right to sue. - Change order policies: Changing anything after signing (flooring, cabinets, paint) costs money — and the builder sets the price. - Delays: Most contracts give the builder broad rights to delay without penalty. Your closing date can slip by months.

Have a real estate attorney review the builder contract before you sign. Best $500 you will spend.

The Two Types of New Construction Loans

New construction on a lot you own: You need a construction-to-permanent loan. You pay interest only during construction (typically 9–12 months), then it converts to a standard mortgage.

Buying from a production builder (DR Horton, Lennar, Pulte, local builders): You make a deposit and get a standard mortgage when the home is complete. No construction loan needed.

If the builder has their own mortgage company, they will push you to use it. You can shop elsewhere, but the builder may offer incentives (rate buydowns, closing cost credits) for using their lender. Compare both options.

The Timeline Is Never Accurate

Builders are optimistic. A 6-month build often takes 8–10 months. A 4-month build takes 6. Supply chain issues, labor shortages, weather, and permit delays all add time.

Plan for delays: - Do not give notice on your rental until the home is complete (or keep a month-to-month lease) - Negotiate a rate lock extension clause with your lender (some offer 60–90 day lock periods) - Have a backup plan for temporary housing

Upgrades: Where the Builder Makes Profit

The base price of a new construction home is intentionally low. The upgrades (better flooring, nicer cabinets, granite counters, upgraded appliances) are where the builder makes significant margin.

Smart upgrade strategy: - Get quotes for upgrades from the builder — but also check what your local contractor charges for the same work after closing - Focus on structural upgrades that are hard to change later (higher ceilings, additional windows, floor plan changes) - Defer cosmetic upgrades (paint, light fixtures, flooring) to after closing — you can often get better quality for less money

The Final Walkthrough Is Different

New construction walkthroughs are called "punch lists" or "orientation walks." You walk the home with a builder rep and note everything that is incomplete or needs fixing.

• Be thorough. Bring the sales sheet and check off every detail. - Run all appliances, flush all toilets, test every outlet. - Check for paint drips, uneven drywall, gaps in trim. - Look for incomplete landscaping or grading issues.

The builder will typically fix punch list items within 30 days after closing. Get everything in writing.

New Home Warranties

New construction comes with warranties that resale homes do not: - 1-year warranty: Workmanship and materials (cabinets, trim, paint, flooring) - 2-year warranty: Mechanical systems (plumbing, electrical, HVAC) - 10-year warranty: Structural defects (foundation, load-bearing walls)

File warranty claims promptly. Small problems today can be big problems after the warranty expires.

The Bottom Line

New construction offers a clean slate. But go in with eyes open: builder contracts need an attorney review, timelines always slip, and upgrade costs add up fast. Do your math and keep a cushion for delays.