New Construction: The Good, the Bad, and the Ugly

Many people jump at the opportunity to purchase new construction. New construction can be wonderful since it offers buyers the chance to custom design their homes. However, new construction also comes with so many challenges that buyers might want to think twice before jumping into a purchase agreement.

First, let’s define the term “new construction.” While new construction can refer to any brand new home that has not previously been occupied, for the purposes of this discussion, new construction refers to a property that is, for the most part, being built from the ground up. Some buyers enter into new construction agreements at a point at which all the builder can show for their potential home is an empty plot of land. In other cases, the house in question might already be standing and have a completed exterior, but the entire interior is one giant blank slate. If you are in a position to purchase new construction, then consider the following factors before making what will be possibly be the most important financial decision of your life.

The good

There are many benefits to buying new construction. First of all, as a buyer, you get a unique say in the internal (and sometimes external) construction of the home. In some cases, you have the ability to choose the number of bedrooms and bathrooms within the allotted space. Even with a more structured framework, you get the opportunity to incorporate your specific tastes into the home’s design.

Perhaps you’re a fan of hardwood and have always wanted it for your living room; or maybe you think a certain type of tile would be perfect for your master bathroom. With new construction, not only do you get to choose the materials for your home, you get to select the colors that best suit your taste.

The kitchen is one of the most pivotal rooms in a home, and with new construction, you have the ability to choose your layout, cabinetry, countertops, and appliances. If you’re a self-proclaimed chef, then you might want to choose high end appliances, including a double oven and a cook top with added burners. If you’re a wine aficionado, then why not have a custom wine fridge built into your kitchen?

Only with new construction do you get the opportunity to fill every nook and cranny of your home with a little piece of your own personal style. On top of that, new construction offers the benefit of repair-free living for at least a number of years; you won’t have to spend much out of pocket because things in your brand new home are less likely to break. Furthermore, most new construction homes come with a warranty that protects the buyer against things such as leaks and mechanical breakdowns.

The bad

New construction often comes with hidden costs. Unfortunately, most contracts don’t adequately spell out the details of what components are included in the construction. Many buyers of new construction are shocked to learn down the line that anything considered a design-based element of the home is not actually included. Standard home features such as ceiling fans, light fixtures, bathroom mirrors, and window treatments are generally not included in the purchase price of the home. Even mundane yet necessary items like bathroom towel bars and toilet paper holders may be excluded. The end result is a new element of added expenses that a buyer of new construction must bear.

On top of this, many builders offer only the cheapest option possible for many aspects of the home. From lackluster flooring to sandpaper carpet to appliances that might seem to have fallen off the back of a truck, many builders are notorious for skimping on quality, thereby forcing the purchaser to upgrade key aspects of the home at an additional cost. Buyers should therefore be wary any time a builder indicates that various “choices” are available for an item in question, as anything above the bare minimum is usually only available at the buyer’s sole expense.

A buyer is usually shown a finished home or unit before entering into an agreement to purchase new construction. This is where some of the deception originates, as buyers will often be led to believe that everything in front of their eyes is included in the purchase price of the property. If new construction is an option for you, then ask as many questions as possible during your initial walk-through and try to get the answers in writing. Otherwise, you might be disappointed when your builder tells you a month later that the gleaming granite countertops that you saw in the model home are considered an upgrade from the included laminate standard.

The ugly delays

Delays are usually inevitable in any new construction project. So before you sign that builder’s contract, consider the implications that a significant delay in closing could have on your lifestyle. “Significant” can mean anywhere from a couple of weeks to a couple of seasons depending on the nature of the delay. In some cases, an overextended or poorly-organized builder can set you back a number of months. In other situations, an extended streak of bad weather might be the culprit. Since new construction homes often involve custom cabinetry and countertops, design-related delays often occur when a key item takes longer to arrive than initially expected. Finally, let’s not forget about individual city and township bureaucracies’ impact on the progress of any new home. From withholding permits to postponing key inspections, all it takes is a little dose of local government power to slow the progress of new construction.

Before you embark on your new construction journey, consider the following: What happens if your closing is delayed? Will you have a place to live in the interim? Will you have to bear the cost of storing your belongings while you move to a temporary residence? These are all questions that you are likely to be faced with should you choose to purchase new construction. So the more prepared you are for the inevitable, the less anxious you’ll be when these hypothetical ponderings become your reality.

Fortunately, you can do a few things protect yourself against the ugly delays that are often synonymous with the words “new construction.” First, you can get some references. Talk to other people in the same area or development who have used the builder and management company that will be constructing your home. Ask them about their experiences. Were there many hidden surprises? To what extent were their closings delayed? These are questions that need to be asked prior to signing on the dotted line.

Next, be sure to examine that purchase contract. When it comes to new construction, the contract to purchase the home is always going to be written in the builder’s favor. While a good attorney should do his part to protect you, make sure to avoid escalation clauses (which allow the builder to pass a certain percentage of any increased costs on to you) and unreasonable allowances for delays (under no circumstances should your builder be allowed to deliver your home more than six months after the estimated closing date without penalty).