New Home 101: The Basics of Newly Built Homes

A key advantage of new homes is that you get to choose features and finishing touches before your home is built, selecting your favorite colors, styles and materials in many important product categories.

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What types of choices do buyers of new homes focus on most? A 2013 survey by the National Association of Home Builders 2013 on “What Homebuyers Really Want” revealed the top two areas important to most homebuyers today: energy efficiency and storage. According to the survey, 94 percent of buyers want Energy Star-rated appliances and 91 percent want an Energy Star rating for the whole home — primarily for savings on utility bills, although the benefit to the environment was important, as well.

While a buyer of an existing home can replace appliances with more energy-efficient models, achieving an Energy Star-certified rating on a resale home as a whole is difficult and expensive. In contrast, new homes are designed and built from the onset to save energy, with energy-efficient windows and heating and air conditioning systems, more insulation, and better designed and built roofs and walls.

New homes typically offer better air filtration systems that increase indoor air quality and many builders use low VOC (volatile organic compounds) building materials that emit fewer fumes that can be harmful to the environment, people and pets. That’s especially important considerations for people with allergies or asthma. Technological improvements make a difference in both energy efficiency and air quality, and buyers of newly built homes also benefit from the simple fact that they’re living in a home that has never been occupied. No dogs or cats have been inside, no one has lit a fire in the fireplace, and no one has smoked indoors. 

Open floor plans, energy efficiency, indoor air quality, and personalize your home are some of the key reasons to buy new. The next question? Which type of builder is right for your new home. Let’s take a look. 

Custom or Production- Which Builder Is Right for You?

Residential builders are generally divided into two broad categories, production builders and custom builders, but even within each category, there’s a range of how much you can personalize your home. While many buyers assume that a production home is less expensive, you can build homes across a wide range of prices with either type of builder. So what’s the difference? 

A production builder typically builds multiple homes at the same time, based on a library of floor plans. Their buyers personalize their homes by selecting favorite choices from several options offered by the builder.

Custom builders may also offer a library of floor plans but can also build an entirely unique home based on a one-of-a-kind home design created by an architect in conjunction with the buyer. 

Custom builders typically build fewer homes per year than production builders do and many build individual homes for sale on individual lots all around town, land which they or the homebuyer can acquire. Many production builders build in larger, master-planned new home communities. But even here, there are exceptions. For example, some large master-planned communities will reserve an area or neighborhood for custom homes. In many such communities, buyers typically choose from a list of preferred custom builders and abide by some general standards set by the community for the exterior design of their home.

“When you’re looking at a home from a national builder, you’ll be choosing from a menu of floor plans and options,” says Paul Erhardt, senior vice president for homebuilding and development for WCI Communities. “If you want more customization, then you may want to work with a custom builder. With a production builder, though, you’re likely to find a lower cost and a quicker delivery than with a custom builder.”

While many custom builders construct only a handful of homes each year, production builders range in size from smaller local or regional builders to large national builders. D.R. Horton, the largest production builder in 2013, according to Professional Builder magazine, built nearly 20,000 homes in 2012, while small local production builders sometimes build as few as 30 homes per year. 

Even though custom homes are not automatically costlier than production homes, production builders do have the advantage of purchasing building materials in bulk and having full-time employees they can count on to keep up a steady pace of building. Larger production builders often construct many homes within a master-planned community, which means they can also save money on the cost of the land, since they buy land in volume, as well. 

Some companies offer a hybrid business model with both custom and production home services. 

“We used to be a custom builder, but now we’re building production homes in fourteen communities,” says Dale C. Adams, Jr., new home sales manager of JLS Design and Construction. “On the other hand, we also have an in-house architect and can do complete customization. We can even build something from a sketch on a napkin as a starting point. Our competitors are both total custom builders and production builders who offer only a few options for personalization.” 

Like custom builders, there are many types of production builders. Most offer the ability to select your favorite colors and styles in key product categories. Many production builders also offer a series of upgrades (think good-better-best) in categories such as appliances, cabinets, countertops and flooring. Other builders seek to simplify the process, as Lennar does with their “Everything’s Included” approach to upgrades. 

A smart question for a buyer seeking to find the right builder is to ask yourself how much time and energy you want to put into selecting details of your home. The good news is that there is a builder — and a level of design choice — that’s right for every buyer.

“If you want a completely custom home, the upside is that you have infinite choices,” says Kira Sterling, chief marketing officer at Toll Brothers. “And, at the same time, if you want a completely custom home, the downside is that you have infinite choices. The Toll approach is semi-custom, where you get a lot of choices but not an infinite number. Semi-custom is a happy compromise: in return for some limitations in choice, you’re getting a streamlined experience and a better price.” 

Design and Location

When you’re considering whether to work with a production builder or a custom builder for your new home, think about two important factors: 1) how much input you want to have in the design of your home and 2) where you want to live. 

Production builders vary in their level of customization, so you’ll need to research builders in your area to find out which ones allow you to modify everything including moving walls around and which ones stick to a menu of options for floors, appliances, counters, cabinets, and lighting. We spoke with several production builders to gather some examples of where they fall on the customization spectrum. 

“We do market research to develop our list of options, especially for the exterior,” says Angel Boales, a sales associate with Meritage Homes in Roanoke, Texas. “Production builders have moved away from a lot of customization because of the concern about being able to sell the home to another buyer if the deal falls through. We can build a $300,000 to $400,000 home and then buyers can add $15,000 to $20,000 in options, but it can be tough to sell it to another buyer if there’s a lot of personalization that doesn’t appeal to other buyers.” 

Across the spectrum of choices, there’s also a range in the number of floor plans and configurations such as optional rooms that builders offer. 

Dennis Webb, vice president of operations for Fulton Homes in Tempe, Arizona, says that Fulton offers twenty to thirty floor plans with different configurations, such as a powder room or full bath on the main level in different locations, so buyers can usually find what they want without having to modify a plan.

McCaffrey Homes, a Fresno, California builder, offers four distinct floor plans in each of its two communities. Each floor plan can be built in one of three architectural styles.

“Our floor plans are already approved with the local jurisdiction, so we can’t do structural changes, but we have thousands of selections and options for our buyers and hundreds of finishes they can choose,” says Karen McCaffrey, vice president of McCaffrey Homes. “For buyers, this simplifies the process and their decision making. We have a trained staff that can help them make the decisions they do need to make.” 

Even custom builders often start with a portfolio of floor plans and then allow buyers to modify those plans. Other custom builders work with an in-house architect or with an architect chosen by the buyer. 

“We have a portfolio of two hundred floor plans created by the best architects around the country,” says Paul Schumacher, founder of Schumacher Homes, a company that provides build-on-your-lot services to buyers. “Very few people or even architects have the expertise to design a house from a sketch on a napkin. We use our floor plans as a starting point and then buyers can change anything inside or out.” 

You also have the option to buy floor plans from a website such as SouthernLiving.com as a starting point and then go to a custom builder who will make changes to the plans to meet your needs. Online-only services such as Floorplans.com or Southern Living allow you to purchase a home design and then built it yourself or take it to a custom builder. Even with a favorite plan in hand, however, nearly every buyer makes changes to the floor plan when they’re building a custom home, says Schumacher.

Infill Lot or Master-Planned Community?

Where you want to build your home will have as big an impact on your choice of whether to work with a production or custom builder as your desire for designing your own home. Large national and regional builders typically build most of their homes in communities with at least a dozen homes and sometimes hundreds of homes. Smaller builders may use a smaller, unused parcel of land in an already-developed neighborhood on which to build one or a handful of homes. This is called “infill” development. In some cases, never-developed land may be used; in others, an older home has been torn down to make room for a new home. An infill lot or several infill lots also can be created when a homeowner with extensive property decides to subdivide the land and sell some to a builder. Other infill developments can have as much as twenty acres and accommodate dozens of houses. 

Master-planned communities come in a range of sizes, some with houses built by a single builder and others with several builders constructing houses in different neighborhoods within the community, often grouped by price range. Some planned communities may consist solely of single-family homes, while others include townhomes, condominiums, one-level attached villas, and several sizes of single-family homes within one development. 

In addition to varied product types, master-planned communities have different land configurations. Some communities offer one-half to one-acre lots, while others, particularly in areas with high land costs, are designed with “zero-lot” lines that maximize the number of homes that can be built on the land. Some buyers prefer a larger lot, while others love the low-maintenance aspect of having a smaller outdoor space to landscape and sustain. Residents of highrise condominiums trade outdoor space for a lifestyle close to urban amenities, though some highrises do offer outdoor access in common areas such as a pool or deck.

One advantage of a master-planned community is that the developer will typically design the land plan to include amenities such as open green space, walking trails, or recreational amenities such as a clubhouse, swimming pool, and fitness center. Depending upon the community’s size, you may find public schools within the neighborhood or even a town center or retail site.

Most planned communities require residents to belong to a homeowners’ association (HOA) which assesses dues and sets out community rules all residents must follow. HOAs are typically managed by a committee of homeowners, and their goal is to protect and increase the property values of all owners.

Building on Private Land

You can also choose to build your new home on private land, whether it’s land you already own or that you intend to purchase. Not all builders will build on your land, but some specialize in working with clients who have purchased or inherited land or who prefer to find their own lot rather than buy within a new home community.

Many custom builders can help buyers find land or recommend a Realtor to help. In most cases you’ll need to decide if you want to work with a custom builder or a builder who specializes in “build-on-your-own-lot” homes, often referred to by an acronym as a BOYL home. 

“There is no ‘typical’ when it comes to custom homes,” says Jim Rill, owner of Rill Architects in Bethesda, Maryland. “Some custom homebuyers have a lot already and some are looking for land; some need to finance the job and some are paying all cash. Most of my clients are looking for land and want to know about the custom home process and budget before they buy land.” 

If the home you envision is in a remote location, perhaps high atop a ridge or surrounded by dense woods and many acres of undeveloped land, a few words of advice: Before you buy that rustic and beautiful land, work with a builder to determine if the site is already buildabl — and, if not, what the feasibility and cost will be to extend electricity, water, and natural gas.

Many remote and pristine regions are buildable if you’re willing to dig a well for water, install a septic tank, and utilize a propane tank in areas that can’t be reached with natural gas lines. If you’re considering this option, this article can help.

If you have buildable land already, start your search online to find builders who work in your area and build homes similar to the style you want to create. Working with a build-on-your-own (BOYL) lot plan can be less complicated than a custom home, but some buyers want a completely custom home that’s 100 percent what the owner wants and can afford, says Rill.

“Build-on-your-own-lot builders are similar to custom home builders, but they have plans that they’ve built before which can save time,” he added. “They’re not designed for an individual, but they’re designed for the local market based on research into what buyers want. While the buyers can customize these plans, the house is being built without the ongoing assistance of an architect. The architects hired by these builders design the plans and then go on to other projects.”

Most custom homebuyers are as interested in the interior design elements of their home as they are in the architecture. Building a custom home offers you the opportunity of choosing every element from something as tiny as the hinges on your doors to larger features such as your kitchen cabinets. While a production builder will offer several styles of cabinets, a custom builder may be willing to use any cabinet you desire or may have a skilled cabinetmaker who can design and build them from scratch.

Custom builders offer a range of design services; some have an in-house interior designer and a design center, while others leave it up to the buyers to decide if they want to work with their own privately hired interior designer or make all their design choices independently.

Selecting a Custom Builder? Here’s What to Consider

If you’ve decided that a custom builder is the best fit for you, once you have a pool of custom builder candidates, it’s time to tour one or more homes built by each one.

“Most builders have a model or at least a partially constructed home that they’re building for a current customer,” says Paul Schumacher of Schumacher Homes. “Frankly, if a builder tells you they don’t have anything for you to see but floor plans, then they’re not really a legitimate builder. You need to see the finished product in person.”  

Of course, every builder says they build a quality product, but you need to see a home and inspect it to really know whether a builder does quality work, says Schumacher. A builder should show you one or more homes that represent their standards so you can hold them accountable to build a home that meets those standards for you, he says.

“That’s why we show you the finished product and a partially finished home so you can see what’s being done inside the walls,” says Schumacher.  

“Get a complete list of included features that shows you everything the builder will do, such as all the sticks and bricks, the brand names, and materials that will be used in the kitchens and baths,” he continued. “You need to know if a builder is doing poured walls or block walls in the basement, putting twenty-five- or thirty-year shingles on the roof, and things like that in every category. Then, you can compare one builder to another to see which ones are doing quality work.” 

Choosing a builder is not just about looking at the builder’s work. You also need to interview your builder candidates to determine who you can best establish a working relationship with over the next year.

“As part of the interview process, you should have two or three builders come out to your land with you and talk about what you want to build, how to position it on the land, where the utilities, garage, and driveway could go,” Schumacher says. “This is an extremely important meeting because at the end of it the buyers should feel peace of mind that they understand what can be built on their land. You can see what kind of expertise a builder has when he’s discussing with you the issues that need to be addressed.”

If you prefer to have a unique home designed for you, you can start with either a builder or an architect.

“Some people say it’s better to hire a builder first and then an architect, but I think it’s more logical to hire an architect first to do the planning and to be more in control of some of your costs,” Jim Rill says. “You need to have some imagery and an idea of what you want in terms of size and style before you can begin to estimate what your home might cost. You have to understand that something a production builder can do for $100 per square foot can cost more than double from a custom builder because production builders can do it for less because they’re building a hundred of those houses.”

Buying a custom home is different from financing a production home.

“Although some custom homebuyers pay cash, if you want to finance it you’ll need a construction loan,” says Rill. “Get a bank involved as early as possible, especially during the study period when you’re looking at a piece of land. I introduce prospective clients to several lenders with experience doing construction loans.”

“If you want to build a custom home, make sure you do your research before you spend any money,” he added. “Interview builders and architects and give yourself time to back out until you truly understand what it will take to build the home you want. Get competitive bids from several builders. Architects can use 3D depictions to walk you through the home design, so be sure you’re satisfied with the design before construction begins. Change orders after construction starts can be expensive and cause delays.” 

Whether you choose a completely custom design, start with an existing floor plan and modify it, or decide on a floor plan that you can personalize, the end result will be the same: a new, never-lived-in home that reflects your individuality and the way you and your family want to live.

For more expert advice on buying and building a home, check out the free eBook download of New Home 101: Your Guide to Buying and Building a New Home at NewHomeSource.com.