Red Flags of New Construction Home Buying (Updated Jan-2024)

Buying a new construction home is a major financial commitment. Understanding the red flags of new construction home buying can help you to catch small issues before they turn into larger problems so that you can protect your investment. Here is a list of red flags you should look out for during the new construction home buying process.

The Builder

Your new construction home will only be as good as the builder or development company that built it. Red flags that may indicate a cause for concern include:

• Lack of experience - Home building is a complex process that is learned through experience. You want a builder with several years of experience that can be proven by a portfolio showing the types of homes they have previously built.
• Unable to show licenses and insurance - A trustworthy builder should be able to show you proof of their builder’s license, contractor registration, or general contractor license (depending on the state).  In addition they should be able to show general liability and worker’s compensation insurance.
• Poor or unverifiable reputation - You should be able to verify a builder’s reputation by searching for reviews online or proof of a history of satisfied customers.
• Multiple changes to the company name in a short period - This could indicate that the builder is hiding something or running away from a bad reputation.

Customer Service

The service you receive when you first inquire about a builder is likely to reflect the service you will receive throughout the construction process. Red flags related to poor customer service may include:

• Vague or dishonest communication - You want a builder who answers your questions clearly and is transparent in their communications so that you can feel confident in the way they will communicate with you if any issues arise during the building process.
• Consistently slow to respond to calls or emails - A builder should be professional in their communication, and this includes responding to calls or emails in a timely manner.

The Contract

A building contract is a legal document that protects you as the buyer, as well as the builder. It details the work to be completed, the timeline for completion, and the finances involved. Red flags related to building contracts include:

• Absence of a contract - If a builder refuses to provide or sign a contract, this is a sign that you should walk away immediately.
• Confusing or unclear language - A contract with confusing or unclear language can be misleading. Make sure you clarify and understand every detail included in your building contract before you sign it.
• Escalation clause - An escalation clause included in a contract increases the final price you will pay for the home if the cost of materials or labor increase during the building process. This has become more common in contracts as material cost have been very volatile. You should make sure the costs are clear and put a cap on the cost escalation that terminates the contract if it exceeds your threshold.
• Negotiations and changes to agreements not put in writing - All negotiations and changes to existing contracts should be put in writing and signed by you as the buyer, as well as the builder.
• A price that’s too good to be true - A price that is significantly lower than comparable new homes on the market could be a sign of low-quality materials or work.
• Being pressured to sign a contract quickly - A builder who pressures you into signing a contract quickly may be doing so to prevent you from having the time to compare them to other builders or to research their reputation.

The Construction Process

You should visit the construction site for your new home on a regular basis during the building process. Not only is it exciting to see the progress of your new home’s construction, but it’s also a useful way to check for any issues that need to be resolved. There is an extensive list of red flags you could look out for during the construction process. Here are just a few of them:

• Actual construction does not match plans - When you sign the building contract, you will be given a plan that provides exact details of how the house will be built. Take this plan with you when you visit the construction site and make sure that actual construction matches up with the plan. Deviations from the plan should be verified with you before they are executed and, if that’s not happening, this could be a sign that the builder is taking shortcuts and possibly compromising on the quality of your home. Note; There will always be some slight variations in dimensions and materials as different products could have issues with availability.
• Large cracks in the foundation - One of the most important things you can do is to inspect the foundation of your home once it is laid. Any large cracks are a major cause for concern and should be assessed by a professional.
• Drainage issues - Poor drainage around a home can cause serious damage to the building structure. Once the site has been graded, visit the home on a rainy day to check that water around the house is draining properly. Any drainage issues are a definite red flag, and should be resolved by the builder.
• Sticking doors or windows - Doors or windows that do not open and close easily can indicate an issue with the framing of the house or moisture causing the wood to swell.

NewHomesMate Is Here to Assist

Watching out for all of these red flags when you’re in the process of buying a new home can be very difficult, not to mention stressful! That’s why NewHomesMate’s local agents are here to assist. Our knowledgeable professionals are well-versed in the red flags of new construction home buying and can guide you through the entire process. They are here to make the home buying experience a hassle-free and successful experience for you.

Learn more about us and start searching for your new home with NewHomesMate today.