15 Dangers of Buying New Construction That You Should Know About

There are plenty of benefits to purchasing new construction. For one thing, you may get to customize your home to your specifications. And you're pretty much guaranteed a living space in pristine condition. But there's a downside to buying new construction you should know about, too. These factors might really end up being an issue.

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Building materials are in short supply these days, driving the price of new construction upward. And labor shortages are compounding the problem, making it costlier to build a home from the ground up.

ALSO READ: Is This the Answer for Companies Facing a Labor Shortage?

You should generally expect to spend more on a new construction home than on an existing property. But that won't always mean more space or better upgrades. Rather, you're paying for the fact that your home has never been lived in.

If you want to upgrade any home features in a new construction property, you generally have to use your existing builder -- and your builder may not be willing to negotiate. The result? Higher costs for you.

ALSO READ: 6 Home Upgrades That Could Reduce Home Insurance Costs

When you buy an existing home, your mortgage lender might let you make a 5% or 10% down payment. When you buy new construction, you'll usually need to put down at least 20% of your home's purchase price.

It's common for new construction homes to come with contracts allowing a builder to pass higher costs onto buyers in what's known as an escalation clause. Considering construction costs are rising, your home contract might include a hefty escalation clause.

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In the course of building a home, things rarely go off as planned. As such, you may end up facing extensive construction delays -- and having to secure temporary housing as a result.

Some new construction builders do a poor job of updating buyers on the progress of their homes. That can make for a stressful situation and make it difficult to secure temporary housing if that need arises.

ALSO READ: 3 Important Ways to Vet a Builder Before Buying New Construction

It's common to get a one-year builder's warranty when you buy new construction. That warranty protects you in the event of poor workmanship. But if your builder goes out of business after finishing your home, that warranty won't do you much good.

New construction homes tend to be subject to higher assessments than existing homes -- even comparable ones. If you buy new construction, you could end up facing a very expensive property tax bill.

ALSO READ: How to Calculate Property Taxes

The property tax estimate you get when you enter into a new construction contract could end up being way off. Don't be shocked if your actual bill is much higher than the amount you're initially presented with.

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It's not unusual for new construction to consist of builder-grade materials -- materials that are acceptable but not the highest in quality. And if you want to upgrade any of those materials, you should expect to pay up to do so.

The one-year builder's warranty we just talked about it? Once it runs out, you're out of luck in the event that anything goes wrong with your home. Granted, that risk exists when you buy an existing home, but at least then you're generally not spending as much to purchase it.

ALSO READ: 3 Reasons Home Warranties May Not Be Worth the Money

Because new construction tends to be more expensive than existing homes, it's more difficult to purchase a newly built property with cash. As such, you might have to take out a large mortgage -- and that could mean facing expensive closing costs to finalize that home loan.

ALSO READ: Buying a Home? Prepare to Pay This Much in Closing Costs

Many buyers hesitate to purchase the most expensive home in town. If there are few new construction homes in your area, you may actually have trouble selling your property down the line.

Some new construction properties are part of a development that includes a homeowners association. HOA rules can, at times, be restrictive, so it's important to know what you're signing up for before putting your name on a contract.

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There are many things to be gained from purchasing a newly built home that no one has lived in before. Just make sure you understand the risks and drawbacks before going this route.

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