Forewarned is forearmed, so take some steps to protect yourself and to make the process a more pleasant experience with a happy ending.

Consider Hiring an Agent

You don’t have to use a real estate agent to buy new construction, but you can. And you’ll likely encounter a sales agent when you visit a model home or meet with a home builder, someone who’s been hired by the builder to sell properties in that community. You don’t want to be outmatched if you’re not personally experienced in real estate and you’re proceeding without an agent of your own. Keep in mind that the builder is paying their agent’s salary and that the agent probably earns a commission from each property they sell. They might not be looking out for your best interests as a result. Taking this step shouldn’t cost you anything, because the seller—in this case, the builder—usually pays the buyer’s agent’s commission.

Use the Right Lender

Builders often recommend their own preferred mortgage lenders for a variety of reasons. It reduces their costs and helps keep the business—and the profits from that business—in-house. It also helps keep both parties informed of the transaction’s progress.  In fact, builders sometimes offer special deals and discounts if you use their preferred lender. They might even offer money off your home’s sale price. But don’t jump in with both feet quite yet. Research the lender’s reputation, ratings, and customer service quality first.

Consider alternate sources to find a lender. Your own bank or credit union might offer you very attractive rates and terms based on your banking history with that institution. Your agent might recommend lenders that can help as well. Get multiple quotes. It’s generally advisable to get quotes from at least three to five lenders. In fact, Freddie Mac indicates that getting five quotes can save you an average of $3,000. Research and interview your lender. Find a banker or mortgage broker you can trust and with whom you feel comfortable doing business. Dig into their background and reviews, too. Look beyond interest rates. They’re not everything, and they don’t tell the whole story. You should also consider the fees each lender is quoting you, as well as the terms, prepayment penalties, and other facets of their loan estimates.

The savings that your builder’s lender nets you might not actually be the best deal when you consider other offers that are on the table. Use our mortgage loan calculator to get a sense of what your payment should be, according to the interest rate and terms you’re offered.

You might want to talk to a real estate lawyer before you sign a purchase contract. Standard purchase agreements don’t necessarily contain language to protect the buyer. You’ll want to inquire about certain areas of your contract:

Contingencies and your cancellation rights: Are you allowed a home inspection? Under what conditions can you cancel the contract? Make sure you understand your liability and commitments. Health risks: Find out whether the materials used by the builder contain chemicals that are hazardous to your health. This is a valid concern, and other buyers may have gone to court over it if your contract contains a warning about health issues. Timing: When will construction begin, and when is it expected to wrap up? In what situations might there be a delay? What happens when and if a delay does occur? Ask about including a per diem payment in case your construction goes beyond its deadline. Warranties: Most builders will provide some sort of warranty for their work. Make sure you understand what your builder’s warranty covers and for how long the policy lasts.

Verify Options and Upgrade Prices

The profit margin is highest on upgrades for many builders. You’ll want to get the details in writing if you’re thinking of upgrading any of the materials or features in a home you’re building or buying:

Cost: Make sure you understand exactly what each upgrade costs per unit, as well as what your total upgrade costs will be and how they’ll influence your final sales price.Liability: Get the details on the builder’s cancellation policy. How much time do you have to cancel an upgrade? Will you be held liable for items the builder can’t return to a vendor if you change your mind?Timing: What’s the timeline for deciding on your upgrades and materials? Some contracts give the builder the right to choose your upgrades if you don’t submit your request within a certain period of time.

Talk with your mortgage lender to find out whether they’ll finance all of the options or upgrades you’ve selected. You’ll be required to pay for the extras out of pocket if your lender won’t finance 100% of your choices. You should also consider which upgrades you could purchase and install yourself after your sale closes.

Check the Builder’s Reputation

Word typically spreads quickly when a buyer has a bad experience with a builder. Check online reviews, and look at public records to find out whether there are any previous or pending lawsuits against the builder, then talk to the neighbors, too. Did they experience any problems if they bought from the same builder? You should also scrutinize the construction quality of surrounding homes. Is the builder consistently building identical or larger homes in the area, or is construction lagging with homes shrinking in size? Finally, find out whether the builder sells to investors. Some builders require that all of their homes be owner-occupied, but others eagerly sell as much inventory to investors as profit margins will allow.

Ask About Incentives

Most builders offer a wide array of incentives as a way to sell properties or finish out their communities. Ask what incentives you might be able to leverage in your home purchase. These could save you significant cash or get you free upgrades on your property. Some of the most common incentives include:

Free or discounted upgradesClosing cost contributionsPrice discountsGreen or energy-efficient featuresAssistance with your existing home saleFree points or interest rate buy-downs

Hire a Home Inspector 

It’s easy to believe that new construction will be without flaws, but that’s far from the truth. Always get a home inspection when you buy—whether the home is brand new or centuries old. A home inspection offers a third-party assessment of your home’s systems and structure, and it can help ensure that your home is safe, hazard-free, and a good investment. An inspection will run you from $300 up to about $1,000 as of 2021, depending on the size of the home and the extent of the inspection, from the basic details to every bell and whistle. Go back to your builder if the inspection reveals any issues or problems, and ask them to make repairs before you close on the home. They might be willing to lower the sales price instead if they refuse.