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Buying New Construction? Here’s One Move You Absolutely Must Do First

Two builders review blueprints inside an in-process new build home.

Image source: Getty Images

There are many reasons why today’s housing market is a frustrating one. There’s the fact that home values are up, mortgage rates are high, and inventory is scarce.

In April, there was a 3.5-month supply of homes for sale, according to the National Association of Realtors. It can take a six-month supply of available homes to meet buyer demand, and a lack of available homes is what’s been driving property values up.

If you’re tired of spinning your wheels to find the perfect home, you may be ready to consider building one yourself. Some new construction opportunities allow you to sign a contract that allows you to customize your home’s features to your liking. And while a newly built home might come at a higher cost — and lead to more expensive mortgage payments — the benefit is not having to make improvements or repairs when you first move in.

But if you’re going to buy new construction, there’s one important thing you need to do first. Take it from me — someone who bought new construction and had a truly awful experience.

Know what you’re getting yourself into

Years back, my husband and I sold our starter home and wanted to upsize. There was little inventory in our area, so we decided to work with a builder to create the house we’re still in today.

Before we signed that contract, I looked at photos of our builder’s work. I also took a tour of the home they’d completed on our street just a couple of months prior. I liked what I saw, and the price worked, so I moved forward. But I made a huge mistake.

One thing I didn’t do was ask people who had worked with our builder what their experience was like. Had I done so, I may have learned that while the work ultimately got done, our builder was hard to communicate with, inaccurate with timelines, and shady in terms of charging extra for upgrades.

Here are some of the major issues I had with the building process:

  • My home’s completion was delayed for about five months beyond its estimated date, forcing me to pay for temporary housing and storage.
  • My builder frequently blew off update requests, leaving me to scramble when it came to renewing my temporary month-to-month lease.
  • My builder up-charged me for items that were supposed to be included in my purchase contract, like granite countertops.

I suggest you read more about my experience to get a sense of the many things that can go wrong when building a home from the ground up.

Now, that doesn’t mean those things will happen to you. The best way to know, though, is to see what experiences other homeowners had with your buyer before signing a contract.

Do your research before buying new construction

If you have a good real estate lawyer, they can protect you from certain “gotchas” in a new construction contract. Our builder tried to sneak in an escalation clause allowing them to charge us up to 10% more of the price we initially agreed on in the event that their costs came in higher. My lawyer negotiated that out of our contract, potentially saving us up to $50,000. It’s important to find a great lawyer and have them review your contract with you.

But it’s not your lawyer’s job to vet your builder. That’s your job, and it’s something you should make sure to do before moving forward with a new build.

What I suggest is talking to at least three homeowners who have worked with your builder before, and in different developments if possible. Ask them questions that include:

  • Was the builder responsive and easy to communicate with?
  • Was the builder’s completion date accurate?
  • Was the builder honest?
  • Was the work up to your standards?

It’s common for people who do home improvements to ask for endorsements before signing on with a given contractor. Given that you’re talking about your entire home, it definitely pays to do the same with your builder.

Unfortunately, I only relied on my builder’s final product when deciding whether to work with them or not. Had I dug deeper, I would’ve potentially spared myself a world of aggravation and disappointment.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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