You might buy a used car or go thrifting to save money or find unavailable items. As with other purchases, you can buy a brand-new or pre-owned home.
But buying a house isn’t as simple as choosing between new or used jeans. It’s a key moment in your life, so it’s worth doing your research to get the best-case scenario for your dream home.
If you’re thinking about purchasing a newly built home, you’ll want to weigh the pros and cons.
In this article, we’ll lay out the major advantages and disadvantages of buying a new-construction home and how to decide if one is right for you.
What Are New-Construction Homes?
A new construction home is a newly built home that no one has ever lived in, and it’s distinct from existing or remodeled homes.
These homes can be single- or multi-family homes, condos, or townhomes.
While some benefits can make new-construction homes worth it, there are also cons that may not be obvious, especially to a first-time homebuyer of a new build.
10 Benefits of New-Construction Homes
1. More Customization
When your only options are the existing homes for sale, you might have to compromise on some of the features you want. This is especially true in a seller’s market when few homes are available for sale.
On the other hand, new-construction homes offer more customization. The following are three types of new-construction homes, each with different levels of personalization available:
- Tract homes are built in large quantities on large plots of land (tracts). Buyers can choose from a set of floor plans, but they don’t get much input on home design.
- Spec homes are built before having a buyer because the builder “speculates” they’ll be able to sell the homes later. Like tract homes, spec homes may have the same layout, but buyers can choose design elements like flooring and finishes.
- Custom homes are built according to the buyer’s wishes. The buyer works with the builder throughout the process to construct as unique a house as the buyer desires.
2. Energy-Efficient Materials
Builders use the most recent energy-efficient materials and practices when building new-construction homes, including vinyl windows, improved wall insulation, new door trim, and fresh sealants. These materials can save you hundreds of dollars a year in energy costs.
You might remodel or renovate an existing home to include energy-efficient upgrades, but starting with a house made of entirely energy-efficient materials will save you the most money.
3. Home Builder Warranties
Because a new-construction home is brand new, you can also expect less maintenance after the purchase. This will save you time and money compared to an existing home’s maintenance needs.
However, new systems may fail, and defects are always possible. Home insurance protects new and existing homes, but new-construction homes may also have a builder warranty for the first year or first few years.
Builder warranties cover failures of permanent home structures, like plumbing and electrical systems, and problems with the workmanship and materials.
Whether your home’s builder is required to provide a builder warranty depends on the state your home is built in.
4. Lower Home Insurance Premiums
Some home insurance providers, like OpenHouse Home Insurance, offer lower premiums to homeowners with new, up-to-date systems.
A new-construction home has the benefit of having:
- A new roof
- A new water heater
- A new HVAC system
- New plumbing
- Code-compliant structures
5. A (Really) Clean Slate
While a seller would hopefully do their best to clean an existing home before you purchase it, nothing beats the freshness of a newly constructed home.
With no other previous residents, your new-construction home has all the newest materials without any wear and tear or leftover grime.
6. No Need for Design Updates
Purchasing a new-construction home means buying the latest design trends. While existing homes may bear the design choices of long-gone homeowners, your newly built home won’t need updates anytime soon.
For example, kitchen remodeling is best done every 10 to 15 years. With a new build, you get to start that cycle from the beginning all the way down to your freshly painted cabinets.
7. Home Builder Financing Incentives
Your new home’s builder will likely stay rigid with the price, but it’s becoming increasingly common for them to offer other incentives.
The following are some typical deals you might expect from a new-construction home builder:
- The builder may pay your mortgage’s closing costs.
- The builder may offer design upgrades for free or at a reduced price.
- The builder may offer a temporary or permanent interest rate buydown, in which the builder pays for some of your interest during part or all of the mortgage.
Important: Keep in mind that the availability of builder incentives changes depending on whether there is a seller’s or buyer’s market. For example, the fewer new-construction houses on the market, the fewer incentives builders may offer.
8. Up-to-Code Construction
Just as builders use a modern style according to the latest trends, they also build new-construction homes according to the current local building codes.
Building codes enforce modern construction requirements to ensure your home is as safe as can be.
In contrast, an existing home—built before the most recent code update—may require extra costs to get up to code.
9. A Surprise Increase in Property Value
If your new-construction home is part of a housing development and you plan to live there for a long time, you may see a sizable increase in property value after the rest of the neighborhood is complete.
New construction increases property values because homebuyers seek community in favorable locations around other appealing homes.
10. Access to Community Amenities
As an added perk, many newly constructed housing developments have useful amenities like community gyms, swimming pools, tennis and basketball courts, and clubhouses. Access to these facilities is great for maintaining an active and social lifestyle, especially while raising a family.
Finding an existing development with these amenities may be more difficult.
9 Disadvantages of Buying a New-Construction Home
1. Longer Wait to Move In
In the US, new tract and spec houses take about seven to eight months to complete construction as part of larger housing developments.
For custom houses, the process can take over a year to fully incorporate your desires.
What’s more, issues with workers, supplies, and weather can delay the construction process.
This longer period before move-in can be problematic if you stay in temporary housing or have to move out of your house sooner than the construction completion date.
2. Higher Overall Cost
New-construction homes are inherently more expensive than existing homes because of factors like builder scarcity and new materials. These new homes often have a high list price and price per square foot.
Add to the high price additional expenses for features you wouldn’t necessarily need for an existing home, such as sod, fencing, and trees.
And, with an escalation clause in the real estate contract, builders can increase the agreed-upon price of the home if the cost of their materials goes up.
These additional costs and uncertainties make it difficult to calculate the final cost until your home is completely built.
3. Too Many Decisions
Especially with a custom home, the amount of decisions that come with a new home can be overwhelming.
To put that in perspective, think of all the categories of decisions alone: light fixtures, flooring, paint, cabinetry, appliances, and so on. And each category comes with dozens of other decisions about color, size, material, style, and more.
That can add up to hundreds of decisions, driving you into analysis paralysis if you struggle with indecision.
4. Less Negotiating Power
Builders are also the sellers of new-construction homes and want to ensure their efforts make a profit.
To make their rightful earnings, builders and developers are usually inflexible about the list price. With the builder’s feet planted firmly to the ground, you may not have much power to negotiate.
Always consider having a real estate agent to represent you and help increase your chances of getting the deal you want.
5. Off-Gassing
Off-gassing is the process of new materials releasing volatile organic compounds (VOCs) in a new-construction home. Materials used for flooring, cabinetry, paint, and other parts of the home can off-gas VOCs like formaldehyde, benzene, and tetrachloroethylene, among many others.
Exposure to VOCs in the house can lead to skin irritation, headaches, nausea, and other symptoms. Young children, older individuals, and people with respiratory problems are most vulnerable to VOC exposure.
While off-gassing does decrease over time, it can take several years before the VOCs completely disappear.
6. Less Mature Trees and Vegetation
Brand-new properties in a new neighborhood have skimpy, young saplings instead of grand, luscious trees and bushes. As we mentioned earlier, your new-construction home may not even have sod. For the first few years, the neighborhood may look bare.
Also, with less or no vegetation and trees, you may have to allot thousands of dollars for new landscaping.
7. Higher Property Taxes
New communities need funds to implement infrastructure like roads, electrical grids, and streetlights. These new-construction communities tax the new properties to secure funds for these necessary features.
As a result, yearly property taxes on new-construction homes are, on average, double what existing homes owe.
Make sure you speak with the developer to understand how much property tax you will owe after moving.
8. HOAs With More Rules
Homeowner associations (HOAs) in existing communities are limited to the rules that the associations created when they were organized. If an existing HOA wants to add a rule, its members usually have to vote.
On the other hand, one of the risks of buying in a new development is that most new HOAs can create as many rules as they want when they start. That might mean a more limited community experience for you and your family, including what you’re allowed to do with your property.
9. Potential Lack of Quality Workmanship
When you start buying a newly built home, you’re entrusting the builder with a down payment (not to mention months of your time) before the home is built.
And, as with any service, the quality of work can change significantly depending on the builder of your home. That can spell disaster if there are major problems with a new home you’ve invested time and money into.
A Note on New Construction Neighborhoods
As you can tell, some of these cons apply more to homes in newly built neighborhoods than those built on property in an existing neighborhood. If you choose to buy a new construction home, you’ll want to consider these differences when choosing a location.
What You Should Avoid in New Construction
As with any major life decision, buying a new-construction home will go more smoothly if you’re prepared. Follow these tips to help you dodge common problems:
- Hire a real estate agent to represent you. Have your realtor walk you through the process and review warranties, budgets, and decisions with you.
- Research the builders and neighborhoods* you’re considering. Make sure you choose a builder or development company that has a reliable reputation. Check reviews, find personal recommendations, and look for builders with experience. You’ll also want to research neighborhoods that catch your eye to see if they suit your lifestyle.
- Try to negotiate with your builder anyway. Although your negotiation power could weaken when the seller is the builder, that doesn’t mean you and your realtor shouldn’t try. Some builders may be willing to discuss options for price, loan fees, boundaries of the property, and more.
- Compare your builder’s preferred lender with others. Though your builder will incentivize you to choose their preferred lender, you should consider other offers before you agree to borrow from them. You may find that another lender has a better offer.
- Create a flexible timeline and budget. New construction comes with unforeseen delays and price changes. Preparing for these shifts will make for a happier experience.
- Think about the long term when making design decisions. Ensure the upgrades you pay for will add resale value if and when you sell your home. You should also consider how your house’s features will serve you and your children when you’re older.
Is It Better to Buy a New-Construction or Existing Home?
Whether you should buy a new-construction home depends on what you value most. One thing is for sure, though: Purchasing a house isn’t a decision to rush into, especially if you plan to stay in this house for a long time.
Consider the following factors when deciding if new construction is a good investment for you:
- Budget
- Financing options
- Desire for customization
- Timeline
- The location of the house
- The community of the house and its amenities
- The house’s resale value
Weigh the pros and cons of new-construction homes in this article and ask yourself which factors are most important to you. If you prefer a high level of customization, a new-construction home may be for you. If your budget is tighter, an established home may be best.