Just like buying a new car, purchasing a newly built home comes with the benefit of owning property in pristine condition. But there are drawbacks to new construction too, and it’s important to consider them as well. Here are the advantages — and disadvantages — of buying new construction.

The term “new construction” can include single-family, multi-family, condominium or townhome properties, according to Jen Horner, a real estate agent with RE/MAX Masters in Salt Lake City, Utah. It also encompasses “planned new construction,” in which a buyer might be part of the design and decision-making process.

“New construction appeals to seasoned homeowners and first-time buyers alike, and is a particularly good option during a heavy seller’s market like we have today,” Horner says. “New development has more flexible timing, is low maintenance, and no one else has lived in it.”

The pros of new construction

Pro: Brand new

One of the biggest benefits of freshly built homes is that everything is brand-spanking-new. You will be the first person to live there, the first person to use the appliances, flip the light switches, all of it. Everything in the home will be in perfectly pristine condition — and it’s unlikely you’ll have to make costly repairs anytime soon.

Pro: Customizable

With some new-construction homes, you can choose everything from appliances to paint colors, tailoring the home to suit your needs and preferences. “Many of our Utah buyers find that established homes in their price range require significant updates and renovations to get them aligned with their expectations,” Horner says. “New-construction homes are desirable because you can customize as you see fit.”

Plus, in competitive markets like we have today, it can be hard to find a home that suits all your needs. Building a new home can help you get just what you want without waiting for it to come on the market — or worse, losing it to a higher bidder.

Pro: Energy efficient

Many new-construction homes use the latest energy-efficient building materials, which means you could save money on energy costs over time.

Pro: Low maintenance

New construction can lend you peace of mind, since there are no immediate projects that need doing. “Everything is turnkey, so no fixing up needed,” says Chuck Meier, senior vice president and mortgage sales director at Sunrise Banks in Minneapolis.

The cons of new construction

Con: Longer timeline

If you have a short window to move into a new home, building or buying new construction might not be for you. “One of the biggest disadvantages is time to completion,” Meier says — especially if you’re designing it yourself. It could take three to nine months to get into a newly built home, he says.

Con: Higher cost

There are also a variety of cost considerations to keep in mind when purchasing a new-construction home. To begin with, the median sale price of a new home as of 2022 is a steep $423,300, according to the U.S. Census Bureau and Department of Housing and Urban Development. The average sales price is even higher at $496,900. This is due to the use of new materials, builder scarcity, market growth and home value increases, Horner notes.

Newly constructed homes tend to be more expensive not just in list price but in price per square foot as well. What’s more, many builders include a clause that allows them to increase the purchase price if their material costs go up, Meier says. And it’s not unusual to go over-budget. “Cost overruns happen quite frequently through unforeseen costs or changes made during construction,” he adds.

You’ll also want to be aware of features not included in the purchase price. “These hidden or future costs may require thousands of dollars more for things like a fence, sod or finishing the basement,” Horner explains. “Many of these property elements are included with established homes but not with new construction.”

Con: Decision fatigue

Unless you’re an experienced interior designer, it’s easy to get overwhelmed by all the choices out there, from tile and flooring to paint colors and light fixtures. Allowing yourself to get paralyzed by the options can slow down the process. In addition, while you may get to make selections on finishes, colors, appliances and designs, the “included” options are typically limited. “There are limitations to the customizations that can be done without increasing price,” Horner says.

Con: Limited negotiating power

Don’t expect to haggle or talk the builder down when you’re shopping for new construction.  “The developer or builder is usually the seller of new construction and will want to ensure the project is profitable,” Horner says. “Rarely will they decrease the list pricing, and every upgrade will cost you, particularly in markets like we have today. Buyers of new construction should have their own real estate agent representation.”

Con: Off-gassing

Sometimes referred to as “new house smell,” new homes often have a distinct scent, similar to that of a new car. This is due to the many building materials that are used, which emit chemicals called VOCs (volatile organic compounds). VOCs can be off-gassed by new flooring, carpeting, wood cabinetry and even fresh paint. The CDC associates them with a variety of health issues and has set recommended VOC exposure limits; luckily though, these potentially harmful emissions reduce over time and eventually disappear.

How to finance a new-construction home

If you’re purchasing a new-construction home from a developer, you can obtain a mortgage that meets your needs from the lender of your choice. However, Meier notes that you may need to look into a longer rate-lock period, since building timelines can be delayed.

On the other hand, if you own a plot of land and are completing the build yourself (or hiring a builder to work for you), you’ll need to obtain a construction loan. “The buyer will incur the interest payments on the loan throughout the process, and the mortgage company will control the draw process,” Meier explains. Construction loans can be much more involved and nuanced than traditional mortgages, so it’s important to engage the expertise of an experienced lender if going this route.

What to ask your builder

If you’re building a home from scratch, finding a builder you trust is the first step toward a smooth project. Here are some questions to ask before you hire one:

  • What warranties do you offer? “Are they giving you options around protecting internal issues, short-term full structure warranty, as well as a longer-term exterior warranty?” Horner asks. These warranties help cover you, as the buyer, should anything need repair for a set amount of time.
  • Can you share references of past clients? Horner suggests asking for a minimum of three references. “The quality and reputation of the builder is key,” she says, adding that having a trusted real estate agent in your corner can help as well.
  • How is your credit? This might seem like an odd or invasive question, but Meier notes that a good credit score and ability to get funding can impact how quickly a builder can get supplies and workers to ensure your project is completed well and on time.

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