Buying a new-construction home means contractual commitments. While the sales team at a project may understand the contracts very well, their job is not to look out for your interests. Since most of us do not buy homes and sign real estate contracts on a regular basis, theres a good argument to be made for having a knowledgeable attorney review a contract on your behalf. Construction project contracts are frequently "fill-in-the-blanks" because they involve many buyers and many homes. This can leave little room for negotiation, and as a result, less opportunity for questions and answers to clarify the contract. An attorney can help you be very clear about what you are committing to, whether or not they recommend changes in the contract. Their biggest value may be in explaining the contract to you, not necessarily re-negotiating it. If incentives, deals or specials on project homes compel you to sign quickly, ask for a clause making the contract contingent on review and approval by your attorney. Reputable builders should be OK with this, if you are prompt about arranging the review.

Nearly all buyers of new-construction homes — 88%, according to a nation-wide survey in 2013 — involved a real estate agent in the transaction. While it may not be required, if you are considering or buying a new-construction home, you should consider it. Most new-home construction projects — particularly large developments — have sales staff to assist in the transaction. They are knowledgeable about the project, the home models, and incentives. But in contrast to a real estate buyers agent, their job is the project, not you. Times have changed; builders expect real estate agents, and frequently the commission for an agent is built in to their pricing. Agents help guide buyers to realistic choices and help them in the complex purchase process. Building a relationship with an agent, and building their knowledge about a development, can also lead more people to the builders project. If you do have an agent, make sure they are contractually committed to represent you in the process. If you do not have an agent, look for a buyers agent or new-home cobroker to help.

You may run across the terms "production builder" and "custom builder." They sound complicated, but its pretty simple. Think about buying a dress or a suit. You can buy one "off the rack", or have a tailor measure and make for you. Production builders create a "rack" of homes; custom builders measure lots, learn buyer preferences, and make highly customized homes. Which you select depends on your budget and preferences: How much time do you have? Do you own a lot on which to build? How much design input would you like? Production builders frequently build multiple homes on multiple lots in the same place, so they generally combine the home and the lot in a package deal. If you already own a lot, a spot lot builder who constructs an off-the-rack model from plans on your lot, may be your only alternative to a custom builder. As with suits or dresses, quality and price vary for both production and custom builds. Take the time to evaluate both carefully in your local market.

The interest rate on a mortgage has a large impact on payments and costs. Available rates change all the time, based on government policies, financial conditions and more. In the weeks-to-months required for a home purchase, rates could go up (or down). So most lenders offer mortgage customers options for a guaranteed rate — the common term is rate lock. The availability of rate locks, and the factors that are involved in a lock, also vary with market conditions. Of course, the buyers financial profile will affect availability as well: What is your credit score? How solid is your credit history? What is the LTV ratio of the offer on the property? Where is the property located? Rate locks are usually available for: An accepted offer, on a specific property, For a given combination of interest rate and points, For a set period of time, Whether market rates go UP or DOWN. The last point is key. Accepting a rate lock could mean slightly higher-than-market costs if rates go down after you have locked. At some point in the home-buying process, you may be offered the option of a rate lock. Are mortgage rates changing rapidly? Trending up, or down? Are there factors about the transaction, or construction schedules, that might matter? Deciding whether to lock or to stick with market conditions and "float" is a judgement call. Get advice, read and research, and then make the best decision for your situation.

Home mortgages are for completed homes, not construction projects. But construction projects may become completed homes, so there is a loan structure designed to cover construction, and convert to a mortgage at the appropriate point. These are commonly called "construction perm" loans. Loan terms during construction are frequently based on variable rates, and provide scheduled cash disbursements — "draws" — to match the stages of construction. When the home is legally complete-enough to qualify for a Certificate of Occupancy (CO), the loan is converted to a mortgage. Construction perm loans have the advantage of a single application and closing, and dealing with a single lender. If you are considering a construction perm loan, compare interest-rate trends to your construction schedule. Assume construction delays. Evaluate if a rate-lock on the mortgage stage looks advantageous. In addition, weigh the short-term cost of the construction-perm arrangement against your mortgage rate and its long-term costs.

You may see or hear the term "punch list" in the process of buying a new home. Heres what it means. When a project is nearly done — "substantially complete" — a pre-final inspection is customary. The list of final things to be done (or checked) is called the "punch list" in the US, and the "snag list" in some countries. These tasks include things like security-system activation and elevator permitting, as well as minor/final repairs such as fixing wall cracks, trim or windows. Organization by type-of-subcontractor is common; all carpentry items together, all electrical, all plumbing, and so on. Critically, completion of the punch list can be required before final payment. Calling sub-contractors back afterwards, on the homeowners nickel, is obviously less desirable. In short, assuming the contract allows it, do not close escrow until the punch list is complete, or until you are satisfied with how items have been addressed.

A builder can help make the home-purchase process easier and faster by making arrangements to have a lender on-hand who is already familiar with the project and/or models. The question the home buyer must answer for themselves is, is this "preferred lender" the best choice for them. The most effective way to do this is probably to obtain loan terms from other lenders. With multiple Loan Estimate forms in hand, you can easily compare apples-to-apples and see what advantages the preferred lender has to offer. In addition, you should be aware of current market conditions for transactions like yours. Compare all terms carefully; if in doubt, or if some aspect of a builders offer are only available with the preferred lender, ask for clarification in writing. Should you feel pressured toward one particular lender, ask for written confirmation that no parties are receiving monetary benefits from any other parties. That is illegal under RESPA (Real Estate Settlement Procedures Act) regulations! The desire to close quickly is natural, but make sure your long-term financial interest and home choices are not compromised for short-term speed. .

One of the more common incentives in new-home purchases is the "decorating allowance." This is an offer to upgrade some aspect of the home before closing, such as carpeting, flooring, or appliances. Since builders are buying such things "at scale" for multiple homes, the perceived value of the incentive may be higher than their actual cost. If you are considering a decorating allowance, ask these questions about the allowance offer: Is the allowance credited at closing, and can it be applied to your closing costs? What purchase terms must your accepted offer meet to qualify for the allowance? Check with the lender you have selected to make sure the terms the buyer is offering are allowed in your loan arrangement. At closing, make sure the allowance addendum is included on loan disclosures. And make the allowance/upgrade is valuable enough to you to tip the balance in such an important decision.

New-home builders frequently offer additional terms to help close sales quickly; these are usually called "incentives." Incentives are frequently used at critical times, like the end of a financial period, or for particular models or lots. Here are some of the most common: Cost-reduction incentives reduct short-term or up-front costs. For example, a builder might use a cash contribution to closing, or waiver of premiums on the lot, as cost-reduction incentives. Value-add incentives provide upgrades to the home being purchased. A decorating allowance to upgrade appliances, floors or fixtures is a common value-add. Value-to-buyer incentives are not necessarily connected to the house, but they are of value to the buyer. A trip to Hawaii, a car lease, or a big-screen television are all examples of this. Time-to-close incentives speed up the process. For example, if the builder has arrangements with a lender, with details of their project and models already in place, the buying process could be accelerated. While incentives can be emotionally tempting, try to evaluate them neutrally. Would you BUY the item or addition? What will it actually cost over time as part of the mortgage? Is the price fair or inflated? With lender arrangements, ensure that the terms are still fair compared to market terms. As a final check, get advice from your real estate agent or certified new-home cobroker.

The final walk-through is usually the last chance to see the house that you are intending to purchase in an open and empty state. This is an excellent opportunity to look over the property without obstructions. Use it to focus on potential problems and costs. Its a particularly good chance to assess the state of floors, walls, windows and ceilings without distraction. Examine them thoroughly for any indications of structural defects or painted-over problems. If any problems that were already flagged have not yet been addressed, this should be raised prior to closing. It is generally the sellers responsibility to fix them. Remember, once the deal has closed, you own the home and its problems.