Buying New Construction: What's Different
The short answer
- Have a real estate attorney review the builder's contract — it is written to protect the builder, not you
- In California, read the DRE public report and ask about Mello-Roos and supplemental tax bills before you sign
Go deeper · tap a topic
Why this matters
Walking through a model home is exciting, but buying new construction is a different process from buying a resale home. The contracts are different, the negotiation dynamics are different, and the timeline is different. Buyers who expect the same experience they would have with a resale home can make costly mistakes.
The Builder Contract vs. a Standard Purchase Agreement
When you buy a resale home in California, you typically use the California Association of REALTORS purchase agreement, a widely used form that is relatively balanced between buyer and seller. When you buy from a builder, you sign the builder's contract, a long document written by the builder's attorneys to protect the builder. These contracts typically give the builder the right to make material substitutions, change the floor plan slightly, extend the closing date, and keep your deposit under a wider range of circumstances than a standard contract would allow. In a California subdivision, the builder must also give you the Department of Real Estate public report before you are committed to buy, and you sign that you received it; read it, because it covers the HOA, its budget, and other material disclosures. Have a real estate attorney review the builder's contract before you sign. Many buyers skip this step because they assume a big-name builder's contract is fair, but it is written to protect the builder, and an attorney can flag clauses you should negotiate or at least understand.
The Design Center and Upgrade Process
After signing the contract, you will visit the builder's design center to select finishes — countertops, flooring, cabinets, fixtures, paint colors, and more. Upgrades are a meaningful source of builder profit. The base price typically includes builder-grade materials, and upgrades are often priced well above what the same work might cost later, so get quotes from outside contractors for the bigger items. Some upgrades are worth doing through the builder because they are structural or would be disruptive to install later — things like electrical rough-ins for future fixtures, plumbing for a wet bar, or upgraded insulation. Cosmetic upgrades like flooring, light fixtures, and hardware are often cheaper to do yourself after closing.
Construction Timelines and What to Expect
Depending on the market and the builder's backlog, a home that has not been started can take many months from contract to closing; ask the builder for its current estimate in writing. During this time, request regular updates and visit the site at key milestones: after the foundation is poured, after framing is complete, and before drywall goes up. The pre-drywall walk-through is critical because it is your last chance to see the electrical, plumbing, and HVAC systems before they are hidden behind walls. Take photos of everything at this stage. Construction delays are common — weather, material shortages, subcontractor scheduling, and permitting can all push your closing date. Build at least a 30-day buffer into your planning, and do not give notice on your current lease until the builder confirms a firm closing date.
Hire Your Own Inspector — Twice
City inspections during construction are pass-fail checks against minimum code at set stages. They do not judge workmanship, and they can miss things like a bath fan venting into the attic, poorly installed roof flashing, or an unsealed window. Hire your own independent home inspector — California does not license general home inspectors, so ask about certification, new-construction experience, and insurance — for a pre-drywall inspection, while framing, wiring, and plumbing are still visible, and again for a final inspection before closing. Ask the builder in advance when outside inspectors are allowed on site. Turn the final report into a written punch list and have the builder fix every item before you close — once you own the home, getting cosmetic items addressed gets much harder.
Read the Builder Warranty Before You Sign
Most builders offer a tiered warranty: a short period for workmanship, a longer one for systems like plumbing, electrical, and HVAC, and a longer structural term. In California, the Right to Repair Act (often called SB 800) also sets building performance standards for new homes, requires at least a one-year written warranty on fit-and-finish items like cabinets, flooring, countertops, and paint, and sets a repair process you must follow with the builder before filing a defect lawsuit. The details matter more than the headline. The fit-and-finish window is when you report nail pops, drywall cracks, and paint issues, and many owners notice them too late, so walk the house and list them early. The structural coverage often comes from a third-party warranty company, and its definition of a structural defect can be narrow. Read the warranty and the builder's claims process before you sign the contract.
Deposits and Earnest Money
Builder deposits are often larger than resale deposits, and some builders require additional deposits at milestones — for example, when you complete your design center selections. Understanding when and under what circumstances you can get your deposit back is critical, because many builder contracts have narrower refund provisions than a standard purchase agreement. If the builder cancels, you usually get your deposit back. If you cancel for a reason the contract does not cover, you may forfeit some or all of it; in California, if you plan to live in the home, the amount a seller can keep under a liquidated damages clause is generally limited to 3% of the price unless the seller shows a higher amount is reasonable, so ask how any extra deposits for upgrades would be handled if you cancel. Read the deposit provisions carefully, ask whether your money goes to escrow, and negotiate before signing.
Delays, Substitutions, and the Community Around You
Builder contracts usually let the builder push back closing without penalty. A long delay can outlast your rate lock, your lease, and the documents your lender verified, so ask your lender what happens to your lock if closing slips, and try to negotiate the right to cancel with your deposit back if the builder misses the projected date by a set number of days. Builders can offer incentives for using their affiliated lender or title company, but they generally cannot require you to use them; get a Loan Estimate from at least one outside lender and compare the total cost. Many contracts also allow materials of "equal or comparable quality" to be swapped in without your sign-off. Photograph the model home, get the brands and models you were promised in writing, and check them at your pre-drywall and final walk-throughs. Finally, look past your lot. Ask for the community master plan, the HOA budget, and whether the community has Mello-Roos or other special taxes, which are common in newer California developments and add to your annual bill. HOA dues can start low while the builder controls the HOA and rise once owners take on the real cost of common areas. Your first property tax bills may be based on the land only; expect supplemental bills once the finished home is assessed.
Everything to remember
- Have a real estate attorney review the builder's contract — it is written to protect the builder, not you
- In California, read the DRE public report and ask about Mello-Roos and supplemental tax bills before you sign
- Structural and pre-wire upgrades are best done through the builder; cosmetic upgrades are often cheaper after closing
- Build a 30-day buffer into your timeline and do not terminate your lease until the builder confirms a firm closing date
- Builders can reward you for using their lender but generally cannot require it — compare an outside Loan Estimate
- Hire your own inspector before drywall and again before closing — city inspections check minimum code, not workmanship
Was this about you?
Finding a home: 1 of 11 read