Buying a Newly Constructed Home
By FindLaw Staff | Legally reviewed by Chris Meyers, Esq. | Last reviewed November 25, 2021
This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.
The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area.
If you are in the market for buying a new home, there can be something attractive about new construction. You get to pick out the features you want, and the new place has that special new place kind of smell. It is a perk for some to know they are the first to live in the home.
However, with all the benefits of buying a new house, newly constructed homes can come with drawbacks as well. For example, these homes often are products of poor construction and have workmanship problems.
What follows are some ways to avoid some of the pitfalls that sometimes come with new construction.
Find a Seller Before You Find Your Home
With new construction projects, finding the right contractor and developer can make all the difference in the world. Unfortunately, many developers are just in it for the money. Some unethical operations will take your payments, throw together a house, give you the keys, and disappear.
These subpar homes might have serious problems that cannot be proactively addressed because the developer will vanish immediately after the sale. This is why you should always take your time in finding the right developer. After that, you can then go about looking at the homes that the developer has contracted and finding the one that is right for you.
Here are some ways that you can find the right developer for you:
- Try to work with a registered real estate developer. Many states require that a real estate developer hold a realtor's license.
- Understand what your lender (if you are taking out a mortgage) might require of a developer. Some lenders have specific requirements since the value of the home for which they are lending the money is the bank's investment, too.
- Get in touch with real estate agents that have worked in your chosen community for some time.
- Walk around the neighborhood that your developer has planned and built. Try to stop by some homes that are occupied and talk to the residents there about the developer.
- Visit or call the Better Business Bureau (BBB) that for the area that you are looking at. People that have become dissatisfied with their developers will often go to the BBB to make complaints.
- Go to City Hall or the local county planning department and speak with the staff of their dealings with the land developer. Developers, because of the nature of their business, will often deal with these people on a professional basis.
- Visit websites such as Homeowners Against Deficient Dwellings to see if anyone has voiced complaints against your developer online.
New Home Inspection
Before committing to buying a new house, you will want to make sure that you have an experienced and reputable home contractor or inspector walk through the home and do a thorough inspection. It is also a good idea to have the inspector walk through the unfinished home at a few key points in the construction process to ensure that the build quality is good:
- Near the beginning, when the foundation is poured;
- After the framing of the house is completed; and
- After the home has been finished.
At these points, the inspector should be able to view and inspect important portions of the home, like the electrical system, heating, plumbing, roofing, insulation, and the walls.
Avoid Extras and Add-ons Unless Necessary
Developers are great at getting you to view homes by setting low selling prices. However, you should be wary when viewing low priced houses. During the visit of model homes, for example, commissioned sales people will tempt you with appealing add-ons that increase the home's overall purchase price. These extras include things like granite countertops, skylights, hardwood floors made from expensive woods and more.
This is not to say that you should flat-out refuse any add-ons. If you are smart and willing to negotiate, you can get some extras and add-ons that may get you closer to the home of your dreams. Here are some tips to keep in mind as you consider add-ons to your home:
- Essentials first, fun stuff later - Just like ordering too much food at a restaurant, your eyes may get too big for your wallet when you start hearing about alluring add-ons like whirlpool baths and fiber optic light fixtures.
- Check the prices - Although it would be nice if each developer would charge the same amount for each extra, this is hardly ever the case. You should steer clear of developers when they are obviously overcharging for essential upgrades.
- Haggle - Many people are afraid of haggling about add-on prices with their developer. Don't be. You have every right to try to get concessions or price reductions from your developer.
- Fine print - Some home contracts contain fine print that allows the developer to put in add-ons that are not the same brand or quality as the displayed add-on. Instead, the builder will simply use a cheaper but functional equivalent (like putting in an off-brand washer/dryer instead of the name brand washer that was in the display house).
- Put everything in writing - Be sure to get everything that is promised in written form, especially when dealing with the commissioned salespeople. Get all meaningful promises concerning your home in writing before signing the contract.
New Home Warranties
There are stories of new homes that have started falling apart as soon as the new owners move in. From mold, mildew and termites to doors falling off of hinges, windows not opening and broken furnaces, there is always something that could go wrong when buying a new house.
Depending upon the reliability of your developer, you should consider purchasing a new home warranty. This step could protect you and your family from the massive costs you might incur if your home turns out to be a lemon.
The best option when it comes to new home warranties is to purchase one from a third-party insurance company. Most standard home warranties generally cover craftsmanship items for one year, some built-in electrics for two years, and structural soundness for 10 years.
However, if you trust your developer, you may wish to purchase a home warranty through the developer. In some states, home developers will offer an insured warranty to the new home buyer that will cover almost everything in the home for a length of time.
Try To Prevent Delays: Don't Close On a Home Too Early
When buying a new house, it is always wise not to close escrow on the home until the construction has been completed. If you close before the home is completed, you give the developer an opportunity to halt construction on your home.
However, there are occasions when not closing on a home before it is completed is not an option. In hot housing markets, for example, you may risk losing the home of your dreams if you do not close before construction completes.
Try to get clauses in the contract that will force the contractor to work diligently on your new home. In addition, get a clause in the contract gives you the option of either cancelling the contract or collecting damages from the contractor if the contractor does not deliver the completed home by a certain time.
Finally, if you are being forced to close escrow on your new home before it is fully finished, you could ask that the money necessary to complete the work on your home be taken out of the money you have paid and set aside. This money will be released to the contractor once the necessary work has been completed to your satisfaction. If the work is not completed, you may be allowed to take the money and hire your own contractor to finish the work.
If you have closed on a home and the developer has not delivered it by the agreed upon date, you could be able to sue the developer to collect for any expenses that have resulted because of the delay. These costs could include hotel stays, rent, laundry, restaurant bills and more.
Have Questions About Buying a Newly Constructed Home?
When you buy an existing home, you can walk through it and assess its condition and value with your own eyes (in addition to inspections). But if you're buying a newly constructed home, you're either looking at a brochure or checking out the display model first, which requires assurances that you'll actually get what you're paying for.
If you bought a home with construction defects, are in a contract dispute, or simply want to ensure that you are protecting yourself when purchasing a new home, get a legal evaluation from a local attorney today.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.
Contact a qualified real estate attorney to help guide you through the home buying process.