What Types of Newly Built Homes Can You Buy?

Your role in the construction and design of a newly built home can be wide ranging. It might involve purchasing an open spot of land and overseeing the entire home construction project; or it could be buying a home in a neighborhood planned and constructed by a builder with limited options. There are three major categories of newly built homes:

• Custom. If you can afford the time and money to custom build your home, you can have a say in just about every aspect of the planning and construction. You could start by buying an empty lot and hiring a builder and architect. Then, you would consult with the builder and contractors on the size of the structure—as long as local officials approve it—as well as the exterior and interior details. However, this often comes at a higher cost.
• Semi-custom. With a semi-custom home, you’re likely buying into a higher-end neighborhood owned by a developer and will have some leeway on what the home will look like. Your choices will be more limited than a complete custom build, but you would have more say than if you were buying a production home.
• Spec or production. If you’d like a newly built home but don’t want to spend the time and money to buy and help design a custom or semi-custom dwelling, one that’s almost pre-built might be best. You can likely choose among a few colors of paint, types of add-ons and design models.

6 Steps for Buying a New Construction Home

Buying a newly built home is similar to the process of purchasing a previously owned property, but there are important differences. Here are the six most significant steps when purchasing new construction.

1. Get Pre-Approved

A common step for prospective home buyers is to secure preapproval from at least one lender. Mortgage preapproval represents what a lender is willing to offer you based on financial circumstances and specific terms, including your credit, employment, income, assets and/or tax returns.

After you receive your preapproval letter, you are not limited to that one lending option. You are still able to obtain a loan from a different lender if you find a more favorable option.

Although builders may offer their own lender to finance your home, but it’s always a good idea to shop around.

2. Hire a Real Estate Agent

If you’re not sure if you want a new construction home and are still considering previously-owned homes, or if you just prefer to have a representative looking out for your interests, hire a Realtor. You’ll want to double-check that the builder will pay the fee for the buyer’s agent; they most likely will.

A real estate agent is most valuable when you’re looking to buy production or semi-custom homes, where you’ll be negotiating with a sales representative from a builder. You might want to skip this step if you’re working on a custom home, although an agent with new build construction experience could assist with negotiations on financial details, timelines and other contractual issues.

3. Know Your Timeline

The more custom your home is, the less likely of a reliable timeline of completion. That creates a ripple effect if you’re trying to sell your current home and need to figure out where to live between that sale and the new home completion. You’ll need to work with the builder, your Realtor and lender to determine how to manage the situation because you can’t close on the home loan until you are able to move in.

4. Research Builders and Neighborhoods

Builders can range from locally-owned operations to major national corporations, and there are plenty of ways to find out about their track record, including online reviews and Better Business Bureau ratings. What’s more, it’s a good idea to drive around the neighborhoods that most interest you, look at the amenities, talk to current homeowners and review the homeowner’s association rules and costs.

5. Negotiate and Review Your Options

Before you settle on a final sale price, you’ll need to review your options. For custom and semi-custom homes, you’re going to have waves of interior and exterior items to consider, from the type of roof and siding to the size and design of the kitchen. The choices for production homes are much more limited but will still affect the final price.

6. Schedule Inspections

The builder will conduct inspections throughout the building process, but you’ll want your own independent inspector to be sure everything is built as promised, safe and in good working order. Also, be sure to review your new home warranties so you know what it covers and for how long.