Newly Built Houses: Pros and Cons of Buying (2023)

How to reduce costs and risks when buying a new house.

There's something inherently appealing about a brand new house—you get to pick out the countertops, drapes, and appliances, and have everything designed just the way you want it. There won't be a creepy ancient basement. And new houses often come with more space and better appliances, require less immediate fix-up work, and are more energy-efficient than older ones—and all at a competitive price.

But there's a downside, too. Often, the advantages of new houses are overshadowed by problems such as shoddy construction and lengthy construction delays—or worse, construction stoppages if the developer runs out of money. Here are some suggestions on how to avoid problems.

Choose the Developer, Then the House

The absolute top factor in buying a new house is not what you buy (that is, the particular model), but rather who you buy it from. A responsible builder understands that its company has a reputation to protect, and thus constructs homes that live up to the promises and remains available should issues arise. More than a few builders, however, take customers' money, throw together a house that starts falling apart on day one, and then stop returning phone calls.

(Video) Pros and Cons of Buying New Construction Homes

The lesson is, don't buy a house, buy its builder. To check out a builder, contact:

  • Owners who already live in the development you're considering, if possible. If the development is run by a homeowners' association (HOA), talk to association members and the board of directors. If nothing has been built yet, talk to owners in a recently completed development by the same builder.
  • County planning or building department staff who deal with local developers. For the best results, ask your questions positively. "Do Brady and Jones finish their projects on time, with few complaints?" will probably be answered candidly, but "Is it true Brady and Jones is a real schlock outfit?" might make the person clam up.
  • Real estate agents who've worked in the area for some time. Agents won't usually deal directly with new house sales, but they may have handled the resale of houses built by developers and may know their reputations.
  • The state or local licensing or consumer protection agency that oversees contractors. Ask whether any complaints have been filed against the developer. Your local Better Business Bureau (BBB) is also a resource for relevant information.
  • Other homeowners, via homeowner-run websites such as (Homeowners for Better Building).

Have the House Inspected During and After Construction

Hire an experienced contractor or home inspector to visit the house you're buying at various phases during construction to evaluate the quality of the work. When a house is being worked on, it's easy to see whether construction standards are high or not—for example, the wiring can be checked before it's been covered over by wallboard.

Also, you yourself should visit your home site regularly during construction and take a final walk-through to catch last minute finishing defects or deficiencies.

Ask the builder to allow your inspector or contractor to give the home a once-over at least these three times during construction:

(Video) Pros and Cons of Buying New Construction Homes

  • when the foundation is poured,
  • when the framing is completed, and
  • when the home is finished.

Have the inspector examine various systems as they are completed, including the walls, roof, plumbing, electrical, and insulation systems.

If the home is finished when you buy it, hire a home inspector to give it a thorough examination. Really. Plenty of stories exist of homeowners who lit their first fire only to discover that the chimney was sealed over, drew a bath that sent a flood of water through the ceiling to the floor below, and so on. And these are just the obvious problems that appear within the warranty period. Other problems, like improperly applied stucco, might only become visible years later, after moisture has accumulated and the stucco starts falling off the walls.

For information on hiring an inspector, see Home Inspections: A Crucial Step.

Be Wary of Optional Add-Ons to the House Plan

Many developers advertise houses at comparatively low prices to get people to come out and have a look. Once there, commissioned salespeople show models loaded with expensive extras such as a spa, fireplace, granite countertops, and giant bathrooms. If you become seriously interested, the advertised price will rise as you decide that certain extras are essential or irresistible.

(Video) New Build Homes - Pros and Cons

Buying extras lets you semi-custom design your home. But ask yourself what you really need and how much it will cost. Upgrades often add 5% to 20% to the cost of a new home. To get the most for your money, follow these steps:

  1. Take care of essentials first. Be practical, both for your own sake and for the sake of your home's resale value. A fenced yard (especially if you have children or pets), more electrical outlets, Internet wiring, and, in many areas, air conditioning are day-to-day necessities. A hot tub, wine cellar, and home theatre are probably not.
  2. Make sure prices are fair. Some developers are less ethical in pricing extras than others. Steer clear of those who deliberately use poor-quality materials in highly visible spots in their models, almost forcing you to upgrade to over-priced substitutes.
  3. Watch out for compromises on function or quality. Developers have found clever ways to make a house look good for a lower price—such as having windows that don't actually open or decorative beams made of styrofoam. Look for such compromises, and don't be wowed by looks alone. Ask questions like, "Is that real?" or "Does that work?"
  4. Negotiate. Ask for one free extra for every two you buy. For example, if you pay top dollar for good carpets and kitchen cabinets, ask the developer to throw in a better stove at no charge. And don't be afraid to ask for the right to buy and install extras on your own instead of paying high prices for the developer's.
  5. Read the fine print. Many new house contracts contain a clause saying that the model's features, such as carpets and appliances, are not necessarily the same brands you'll receive. You are guaranteed only the functional equivalent of what you see, which is typically different and costs the builder far less. Make a list of the precise features you're concerned about (with brands or makes and models) and include it in your contract. If one developer won't accommodate you, shop elsewhere.
  6. Get it in writing. When dealing with a developer's sales representative, get all promises as to what will be done, and when, in writing. Before you sign the purchase contract, make sure it includes every one of the agreed-on changes. If you've already signed the contract when you negotiate changes, write them down in a separate document and have the developer or the sales representative sign it. Don't rely on oral commitments, which are notoriously unreliable and almost impossible to enforce.

Get a New-Home Warranty

You've probably heard horror stories about new houses that begin to disintegrate soon after the buyer moves in—the roof leaks, the basement floods after the first big rain, or the doors won't close. This shouldn't be a problem if you buy from a reputable developer—but not all developers are reputable, and you might not be sure about yours.

Your best bet is to buy a house that comes with a new-house warranty from an independent insurance company as opposed to relying on a warranty that comes directly from the builder. Typically, new-home warranties cover workmanship and materials for one year; plumbing, electrical, heating, and air conditioning systems for two years; and major structural defects for ten years.

You can also buy a new-home warranty on your own, but you'll have to shop carefully to find one that covers major structural defects. (Don't just settle for the standard homeowners' warranty, which is really just a service contract for things like your appliances and furnace.)

(Video) PROS & CONS of New Construction Real Estate!! 🏠

Protect Yourself Against Construction and Related Delays

It's best not to close escrow on a new home until the work is completed. You don't want to leave the builder an opening to delay construction into the indefinite future.

Unfortunately, however, the standard form contract's closing date might force you to close on a home that isn't finished (or even started). You might be asked to sign a very one-sided purchase contract. You will be given numerous deadlines (to make deposits, agree to design changes, get loan approval, sell your present house, and close escrow), but the developer will have great leeway—sometimes up to a year from the target date—to deliver the house.

Do what you can to negotiate a fairer deal. Most important, you want to establish a reasonable date at which you can cancel the contract and get all of your money back if the developer doesn't deliver the house. Again, make sure it's in writing.

If you must close escrow because you need to move in, but significant and costly work remains, insist that the necessary funds be taken out of what you're paying the developer and placed in a trust account after escrow closes. Then ask for a written agreement stating that if the work is performed on time, the money will be released to the developer; but, if it isn't, the funds go to you to hire someone else to do the work. If the developer refuses, at least make a list of what needs to be done, assign a completion date to each, and have it signed by the developer.

(Video) Pros and cons of buying a NEW HOUSE VS OLD HOUSE

If the developer fails to make a good faith effort to do the work, you might be able to sue in small claims court for out-of-pocket losses, such as rent or hotel bills because you could not move in on time. See Everybody's Guide to Small Claims Court, by Ralph Warner (Nolo).

And for more advice on buying a new home, including special tips for buyers of newly constructed homes, see Nolo's Essential Guide to Buying Your First Home, by Ilona Bray, Ann O'Connell, and Marcia Stewart.


Is buying a new construction home a good investment? ›

New construction homes are a good strategy for investors looking for growth. Investing in new and emerging markets can increase your property's appreciation rate and build equity faster. Appreciation is never a guarantee so make sure you perform a competitive market analysis before buying.

Is it better to build or buy a house 2022? ›

Is it cheaper to build or buy a house? As a rule of thumb, it's cheaper to buy a house than to build one. Building a new home costs $34,000 more, on average, than purchasing an existing home. The median cost of new construction was $449,000 in May 2022.

Is it better to buy a new house or old house? ›

Paying more upfront may be worth it for the lower maintenance and utility costs these homes incur over time – but if high upfront costs won't work in your financial situation, you may be better suited for an older house, as they usually require less money upfront and will allow you to stagger home maintenance costs ...

How long will new build houses last? ›

This is largely debated within the construction industry as it is really dependant on the materials that are used, the quality of the workmanship and the maintenance that is required and followed through on. On average, the generally expected and acceptable lifespan of a home should last at least 60 years.

Do new builds lose value? ›

How Much Do New Builds Lose in Value? New build houses have been known to lose value by over 7%. However, the extent of the loss in value does not represent the entire picture. As well as the loss in value, you need to take into account that you may have lost out on a price increase if you had purchased an old home.

Is 2022 a good time to build a home? ›

Barring any unforeseen calamities, 2022 could be a good year for homebuilders and buyers. However, the effects of inflation, new COVID variants, or other market disruptions could change everything.

What month in 2022 Should I buy a house? ›

Fall and early winter. A new analysis suggests that “buyers who close on their home in October will get the best deal compared to the spring buying season.” During the first full month of fall, buyers can expect to pay a 3.3% premium.

Will it be cheaper to buy a house in 2022? ›

Los Angeles Housing Market Forecast 2022 & 2023

According to some analysts, home prices in Los Angeles are unlikely to drop, but the rate of increase will moderate. In other words, prices will continue to rise, albeit at a slower rate than in the preceding two years.

Are new builds good quality? ›

Data from Energy Performance Certificates shows over 80% of new homes have the highest A or B ratings. That compares to just 2.2% of existing properties.

Why are new builds so noisy? ›

Lack of clarity around Building Regulations

Excessive noise transmission between flats and apartment buildings is one of the main causes, where insulation and soundproofing materials will either have been installed poorly or, in some cases, left out entirely.

Is a house worth more after its built? ›

Quality of build and appearance

A well built and maintained home is going to be worth much more than a poorly built and maintained home, all things being equal. If you are building or renovating a home, there are a number of assets that might help.

Why are new builds more expensive? ›

Thirdly, recent years have seen a massive increase in construction costs, both in terms of material and labour, and it may be that prices for new builds are being marked higher simply because the developers need to sell at higher prices in order to remain profitable.

What adds the most value to a new home? ›

Projects That Boost Your Home's Value
  • Remodel the kitchen. Updates to the kitchen pay off. ...
  • Upgrade the appliances. ...
  • Boost the bathrooms. ...
  • Remodel the attic or basement. ...
  • Get decked out. ...
  • Boost curb appeal. ...
  • Improve energy efficiency.

Do new build houses increase in value? ›

The short answer is yes. From the data we have we can say that new builds appreciate at the same rate as all other properties. However, when we purchase a new build we have paid a premium, meaning the actual value can be 0-10% below the price at which you purchased it.

Is new build better than old build? ›

Whether or not you decide to go for a new build home is completely up to you. Ultimately, while new build homes may offer many advantages such as new appliances, being more energy efficient and the lack of chain, the extra costs involved and lack of space could put many people off them.

How long do new builds crack for? ›

Generally, it will take around nine months to one year for your new home to dry out. Small cracks in the walls and gaps in joinery are both common signs of shrinkage. This happens when timbers and other materials contract as they dry out.

Do you regret buying new construction? ›

Sixty-six percent of buyers of new-construction homes say they feel some form of regret about the process. Twenty-six percent wish they had purchased an existing home instead, according to a new survey conducted by Clever Real Estate.

How much less should you offer on a new build? ›

Latest analysis shows that buyers of new build homes are currently negotiating a typical discount of around 14% from the asking price.

Is buying a new build stressful? ›

If you have never bought a house before, having first time buyer anxiety is natural. With so much to learn, and the issue of fees to consider, it is no surprise why house buying can be stressful. Yet, having a good awareness of the costs and various stages involved will do a lot to reduce any home buying jitters.

Should I wait till 2023 to build a house? ›

5 Reasons why 2023 is a good time to build your forever home. As stability returns (Less Price Increases & More Product Availability) to the housing market in 2023 it will greatly improve the homebuilding experience without the rapid price increases and supply chain issues that have been normal over the past two years.

Is it smart to buy a house in 2022? ›

Our guide for When Should I Buy A Home says yes – December 2022 is a good time to buy. Here's why first-time buyers should jump back into the market: Mortgage rates made the largest one-month drop since 14 years ago. There are fewer homes available to purchase in most U.S. markets.

Should I wait until spring 2022 to buy a house? ›

The mortgage interest rate is declining, housing prices are stable, and buyers have leverage over sellers. Fannie Mae released a nationwide housing survey for November 2022 that reveals only 16 percent of respondents believe it is a good time to buy a house in 2022, unchanged from October's survey.

What is the cheapest month to buy a house? ›

Winter is usually the cheapest time of year to purchase a home. Sellers are often motivated, which automatically translates into an advantage to you. Most people suspend their listings from around Thanksgiving to the New Year because they assume buyers are scarce.

Will house prices start to fall 2022? ›

Interest rate predictions

This could in turn push average mortgage rates upwards of 8% (while still historically low, that is more than double the 1.6% rate recorded at the end of 2021) Based on this data, Capital Economics has forecast house prices to rise throughout 2022, before falling by 5% in 2023.

Why is it so hard to buy a house in 2022? ›

It's still a seller's market, and bidding wars are having a big impact. It's been a brutal year for homebuyers. A combination of surging demand and a persistent shortage of inventory has heightened competition and led to double-digit price growth.

Do new builds crack? ›

Many of the materials used to build a home (such as mortar, plaster and concrete) contain a lot of water when they are built-in and can shrink as they dry out. This may lead to some minor cracks in walls and floors as your new home fully dries out over several months after you move in.

Why do people not like new builds? ›

Some of the reported reasons why buyers avoid new homes:

Lack of outdoor space, Not enough space in small rooms. Small windows - not enough natural light. Inflexibility of spaces for communal and private living or for future changes in the household.

Can you put a TV on the wall in a new build? ›

Mounting TV's Onto Walls In New Builds

For each type you require different types of fixings. I recommend Corefix fixings for drylined walls and fixing direct into a studs or using wall anchors for drylined walls. Consider installing plywood behind wall for heavy TV's on stud walls.

Why are new builds so cold? ›

But thousands of buyers are finding that their expensive new homes are cold and draughty with heating bills far higher than expected. The culprit? The finger of blame is pointing towards builders rushing to meet targets, lax standards and poor inspection, with badly installed dry lining at the heart of the issue.

Should you pay asking price for a new build? ›

Always negotiate a new-build house price

Just because a new-build property is new, it doesn't mean the asking price is non-negotiable. You can make an offer in the same way you would if you were buying an older property. Of course, it's up to the developer if they wish to accept a lower offer or politely decline it.

What questions should I ask a new home builder? ›

20 Important Questions To Ask A Custom Home Builder
  • How long have you been building custom homes? ...
  • Do you have a portfolio of the finished custom homes you've built? ...
  • How customizable is my custom home? ...
  • Can you help me pick out the perfect homesite?
Jan 12, 2021

Is it harder to get a mortgage on a new build? ›

Yes it can be harder to get a mortgage on a new build. But it will depend on the lender's lending criteria for new build mortgages. If you're buying a new build it's a good idea to speak to a fee-free mortgage broker. They know which lenders will be best suited to you and find you the best deal too.

Will my house be worth more in 5 years? ›

How much will property prices rise in 5 years? Based on historical averages of 3.5% of home value growth per year, property prices will rise a total of about 18 to 20% in 5 years.

How much do new builds go up in value? ›

Similarly, new build prices have inflated by 10.6% more than existing stock in Redbridge, London; 9.3% more in Oldham, Greater Manchester; and 9.1% more in Merthyr Tydfil in Wales. If you compare new build prices with existing stock in the past decade, it's a similar story.

What brings down house value? ›

Changes in the real estate market can lower the value of your home. Natural disasters and climate change can lower your property value because the property is a greater risk to purchase. Foreclosures in your neighborhood can also drive down property value.

What adds the most value to a home 2022? ›

Top Home Improvements That Add Value in 2022
  1. Garage Door Replacement. A new garage door updates the look of the home and adds to curb appeal. ...
  2. Manufactured Stone Veneer Installation. ...
  3. Minor Mid-Range Kitchen Remodel. ...
  4. Fiber-Cement Siding Installation. ...
  5. Vinyl Window Installation.

Do pools increase home value? ›

The experts are a split on how much a pool can contribute to a home's value. One HouseLogic study suggests an increase of 7 percent, at most, under ideal conditions, while HGTV reports that the average in-ground pool can up your property's value by 5 to 8 percent.

How much profit should you make on a new construction? ›

Each stage of a new home construction project will have different profit margins, but on average, most home builders will earn between 10%-20% gross profit. Some stages will be physically larger, but less profitable, while others may seem unusually expensive.

Can you negotiate price on a new construction home? ›

Yes, you can negotiate on new construction homes - you're far better off negotiating for 'things' than for money off the purchase price. Even negotiating closing costs is easier than negotiating the purchase price because builders want the final price as high as possible for future appraisals in the neighborhood.

What are the benefits of buying a new build? ›

Buying new comes with a number of specific advantages, including:
  • Choice. The earlier you register your interest in a new residential development, the more likely you are to find exactly the right home. ...
  • 10-year warranty. ...
  • No seller chain. ...
  • More certainty. ...
  • Energy efficiency. ...
  • Further information.

Are new build houses better? ›

Whether or not you decide to go for a new build home is completely up to you. Ultimately, while new build homes may offer many advantages such as new appliances, being more energy efficient and the lack of chain, the extra costs involved and lack of space could put many people off them.

What type of construction is most profitable? ›

17 Construction Business Ideas for a Profitable Venture
  • Exterior Remodeling.
  • Basement Remodeling.
  • Painting Business.
  • Cement Manufacturing.
  • Concrete Supply Business.
  • Plumbing Business.
  • Pool Service Business.
  • Paving Business.

Is it cheaper to build up or out on new construction? ›

Building up is always the least expensive option for increasing your home's square-footage because it requires less material and labor.

What is a reasonable builders margin? ›

From experience, some residential construction projects can have a builder's margin between 15% to 30%. If a builder charges a small margin, it doesn't mean this is a good thing.

What upgrades to avoid in new construction? ›

New Construction Upgrades to Avoid
  • Appliances. If appliances aren't included with the house, you may be better off buying them yourself. ...
  • Lighting. Another new construction upgrade to avoid is lighting. ...
  • Cabinet hardware. ...
  • Kitchen backsplash. ...
  • Outdoor space. ...
  • Crown molding.
Mar 16, 2022

What extras to ask for when buying a new build house? ›

Another common extra developers offer for buyers of new-builds is free furnishings, appliances and other fixtures and fittings. They can be tempting, not to mention ultra-convenient as someone else is doing the work for you.


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