Buying a new construction? 5 Costly Mistakes to Avoid

Home buyers can only feel the heat these days, with The inventory of existing homes has reached an all-time low at the end of 2021. This limited stock, combined with high demand, sent home prices soaring. If you can not find a suitable resale or just want to start a new one, new construction can be an attractive option.

Brand new homes offer improved energy efficiency, amenities and layouts that are more in line with the modern lifestyle, as well as the ability to adapt spaces that you do not get with a resale. But if you are not careful, costs and expectations can get out of hand.

The good news is that following these tips for buying new homes can save you money – and hassle. Here are five costly mistakes to avoid when buying a new home.

1. Do not assume that you can not negotiate with the manufacturer

The top myth that new home buyers tend to believe is that builders will not negotiate the price with them. But that’s not true, says Kerron Stokes, Realtor with Resource Group at RE / MAX Leaders in the Denver subway area.

“You can negotiate price, batch lines, loan charges and more,” says Stokes. “A builder may say no at first, but keep pushing. “If you do not ask, you do not know the answer.”

Hiring a real estate agent who specializes in new construction can give you extra confidence in negotiating with builders. Also, hiring a dealer costs you nothing as a buyer. Manufacturers usually pay the agent’s commission from their marketing budgets, says Stokes.

2. Make sure you have a budget for items that are not included with the manufacturer

The new constructions are white slabs. For example, many new homes do not come with landscaped yards; you win this big ticket after you move in. And if you buy in a development that has a homeowners association, you may have a limited window to put grass or plant trees, which can cost thousands of dollars.

Carefully read your contract and HOA rules so that you can anticipate and budget for these expenses as soon as possible. Nothing rains in a new homeowner’s parade like receiving an HOA reprimand pointing to something you failed to do. Even if your home is not finished for months or more, get estimates for the items you will need to pay for and set aside money specifically for these projects.

Note that new homes often do not have basic features such as window coverings, toilet paper holders and towel hangers or even lamps sometimes. Clarify what is and what is not typical with your new home so that there are no surprises once you move.

3. Do not choose a lender without shopping first

Many large manufacturers have in-house mortgages or preferred companies with which they work. These may or may not offer competitive prices and terms. Unless you shop for mortgage rates, you will have no basis for comparison.

Chyrise Harris is a prime example. He had pre-approved with an outside lender and wanted to stay with this company to buy a new home in the Stapleton neighborhood of Denver. But the manufacturer’s preferred lender won over her business with a better customer experience.

“Knowledge is power, but if you do not have something to compare your experience with, then you do not know if you are getting the best service,” says Harris.

When internal and external lenders compete for your business, you get more leverage to negotiate loan costs or interest rates, says Stokes, who was Harris’ real estate agent.

For example, Stokes advises that you look carefully before accepting the incentives offered by a manufacturer’s lender – they do not always save you money. If a builder’s lender says, ‘We’ll give you $ 15,000 incentive if you choose us,’ but an outside lender charges less than a quarter of a percentage point over the life of the loan, that $ 15,000 incentive may disappear. “It will be more expensive in the long run.” “You want to evaluate your loan throughout the construction process.”

4. Make sure you understand the manufacturer’s warranties and schedules

When buying a new home, there are two types manufacturer guarantees you will hear about: tacit and explicit.

Tacit guarantees cover potential construction defects that affect the habitability, viability and safety of a new home, based on local building codes and standards, says David Jaffe, vice president for construction responsibility and legal research at the National Association of Home Builders. . Implicit warranties tend to be vague and usually have a 10-year liability period for manufacturers, he adds.

Some manufacturers offer an explicit warranty, which has a more precise wording about what is covered and cut-off times for various parts of a new construction. “An explicit warranty clarifies the problems and solutions for which a manufacturer is responsible, as well as the warranty period and a dispute resolution mechanism,” says Jaffe. “Builders live and die based on their reputation, so they do not want to get into long, long legal battles. this type of guarantee provides more specific terms. “

Manufacturers sometimes ask buyers to waive their rights under an implied warranty when an express warranty is offered, so it is important to read all warranties carefully. Hiring a real estate agent or lawyer to look at them, as well as the purchase contract, can help you avoid rogue builders, says Jaffe.

Manufacturer warranties are not a general guarantee for all types of defects or problems with a new home. The following is a list of items that Jaffe says manufacturers’ warranties do not usually cover:

  • Products covered by the manufacturer’s warranty (such as appliances)
  • Damage caused by ordinary wear
  • Defects caused by lack of maintenance or neglect by the homeowner
  • Defects in items installed by homeowners or contractors other than the manufacturer
  • Damage caused by natural disasters

In addition to reading the fine print of a manufacturer’s warranty, make sure you understand their timeline for completing your new home. Exact times will vary by manufacturer, especially given the epic supply chain problems that have plagued the industry since the pandemic began. Make sure the builder sets a detailed schedule for you so you can follow it – and keep it.

5. Avoid upgrades that will not increase the value of the home

One last mistake to avoid: Do not get carried away with the adjustment. The options and add-ons can seem limitless when you walk into a manufacturer’s showroom. But before you start an upgrade spree, it is wise to think about which ones will enhance the value of the home and not just make it look more beautiful, Stokes advises.

“There is always a cost associated with upgrades, and some will help you realize the value more than others,” says Stokes. For example, upgrading to quartz countertops from laminate or from linoleum to hardwood or tile flooring is a safe investment. But if you choose the top level of cabinets that cost an extra $ 10,000, you are unlikely to regain that value when reselling, he warns.

Another thing to consider is the cost difference between a manufacturer upgrade versus hiring your own contractor to do the job later. Harris, the buyer of Denver, had the choice to include an air conditioner in her new home. He saved $ 1,000 by installing the unit after moving it instead of adding it to its construction tab, he says.


Buying a new home offers many benefits. But there are many pitfalls, so buyers should pay close attention to each step and seek the help of a specialist when necessary. Examine everything carefully pros and cons of new construction before you sign on the dotted line for your glamorous new home.

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