Buying New Construction: What to Know Before You Sign
A builder's contract is written by the builder. Here is what to negotiate, what to inspect, and what the warranty actually covers.
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New construction trades one set of risks for another. You avoid a forty-year-old furnace; you accept construction quality you cannot see, a contract drafted for the builder's protection, and a delivery date that may move.
The contract is not the resale contract you are used to
- Deposits are often larger and may be non-refundable after a design deadline
- Delivery dates are frequently estimates with generous builder extensions
- Arbitration clauses are common and limit your options in a dispute
- The builder may require you to use their affiliated lender or title company to receive incentives
- Base price rarely reflects the home you actually want
Upgrades: where margin lives
Design center pricing typically carries substantial markup. The rule of thumb is to take the builder's price on anything structural — anything that must happen while walls are open — and consider doing cosmetic finishes afterward. Moving a wall, adding a window, rough-in plumbing for a future bathroom, extra electrical, and structural bump-outs are worth paying the builder for. Flooring, lighting fixtures, backsplash, and closet systems usually are not.
Inspect anyway — twice
Independent inspections routinely find missing insulation, improperly installed flashing, unstrapped water heaters, and open electrical junctions in newly built homes. Municipal inspections check code compliance, not workmanship. Schedule a pre-drywall inspection while framing, wiring, and plumbing are still visible, and a final inspection before closing.
Understand the warranty structure
| Period | What it usually covers |
|---|---|
| 1 year | Workmanship and materials — trim, drywall, paint, fixtures |
| 2 years | Systems — electrical, plumbing, HVAC distribution |
| 10 years | Major structural defects only, often narrowly defined |
Keep a running punch list from day one and submit items in writing well before the one-year mark, when the broadest coverage expires.
Negotiating with a builder
Builders resist price cuts because a recorded lower sale price affects the appraised value of every remaining home in the community. They are far more willing to offer closing cost credits, rate buydowns through an affiliated lender, or included upgrades. Ask for those instead.
Frequently asked questions
Do I need my own agent for new construction?
You may bring one, and the builder's sales representative works for the builder. If you plan to use an agent, register them on your first visit — many builders will not pay a commission if you tour alone first.
What happens if construction is delayed?
Read the delay provisions carefully. Most contracts permit substantial extensions without penalty, and your rate lock may expire in the meantime. Ask about extended rate lock options.
Editorial note. This article is educational and is not legal advice. Real estate contracts, disclosure requirements, and landlord-tenant rules differ by state and locality. Consult a licensed attorney about your situation.
