Key takeaways
- Builder phases affect both price and experience. Early buyers typically get lower prices and better lot selection, while later ones pay more but move into a more complete neighborhood.
- Upgrades, lot type and home layout drive final price — not just the base model. Premium finishes add cost, but structural features like extra bathrooms, bedrooms and garage space contribute the most to long-term home value.
- A builder’s transparency and track record matter as much as the home itself. Buyers should research previous phases, ask about pricing changes and evaluate workmanship — ideally with a professional inspector — to ensure they’re choosing a reputable builder.
Having the right builder and team is a very important factor when choosing to buy or build a new construction home.
Understanding the process of building a new home and what affects pricing can help buyers know what they are investing in. Subdivisions of new homes are not built overnight, so knowing what to expect in a new construction neighborhood can help you navigate the buying process better.
What are builder phases?
For large-scale production home projects, builders don't raise a 200-home neighborhood all at once. Instead, homes are built in phases to meet demand.
"Builders will commonly release 10- to 15% of total homes in a phase to gauge demand without overcommitting themselves on labor and materials. It’s a game of chess with dirt pads," said Danny Niemela, vice president and CFO at ArDan Construction, a luxury home company in Scottsdale, Arizona.
What phase the builder is in when you enter the process is an important factor to consider when buying.
"Each phase typically sees a $5,000-to-$15,000 jump dependent on the market, which means buyers who pull the trigger early get to bank more equity right off the bat," Niemela said. "However, early buyers get less upgrades, and in most situations, amenities are nothing more than dirt lots and fancy pictures."
Builders tend to put batches of homes on the market at once with the goal of finding buyers for all of them close together. Having several homes built at once saves the construction team time and money because they are often able to manage the construction flow more efficiently.
Early buyers in the neighborhood will likely get the best monetary deal and lot, but you will also have to deal with ongoing construction longer.
"If there are delays, you could be staring at a construction trailer for up to 18 months and dodge-rolling half-ton trucks coming and going at 6 a.m. Basically, you save money initially, but you compensate with grace," Niemela said.
Later, buyers will enjoy a more complete neighborhood but could pay a higher base price. The choice of lots will also be more limited the later in the process. It is possible for the builder to discount the last few homes in a subdivision in order to move on to other projects quickly.
Understanding new construction pricing
The base price, or starting price, for a new construction home will include only the model and floor plan. If you want a certain countertop, cabinet color and floor material, then you will need to pay for an upgrade.
Production homes will have layouts and finishes to choose from. If you choose more premium finishes, you will pay more.
For semi-custom projects, the upgrade cost will be more, but the buyer gets more control on structural and design choices.
While having an appealing style in the home is important for resale, what adds the most value is space. More bedrooms, bathrooms and garage space add more value to the home over premium crown molding and cabinet knobs.
"The things that affect the value of the home: the bathrooms. If you have two-and-a-half baths versus two, that affects the value of your home greatly," said Ken Harthausen, president of NewDay USA Home's Builder Division based in Palm Beach, Florida. "If you have a game room, that affects the value of your home. If you have a garage, a two-car versus a one-car, that affects the value of your home."
Not all homesites lots are equal, so the pricing will vary. Premium lots are typically in cul-de-sacs, have a view like a waterfront property or are on a bigger piece of land. Lot choice is limited and depends on the phase of the development. The earlier you buy, the more choice you have.
"If you’re buying the first house in the subdivision, the builder’s going to try to sell you the best lot," Harthausen said.
If you are entering in the later phases, the premium lots might have been sold, but you could save on the lot price.
"You’re going to be able to buy a house at somewhat of a discount because he wants to get out of that subdivision," Harthausen said. "We’re not talking 20- or 30 grand. Maybe we’re talking $3,000 to $4,000. But you are not going to get the best lot. You’re getting the worst lots that are left."
Assessing builders' reputations
When assessing builders, you will want to look at more than just the price. Builders' reputations are important as well. Ask about how long they have been building and how many homes they have constructed.
"If he’s been in business for four, five, six years, he’s probably doing all right. He probably has a good reputation," Harthausen said.
You will want to ask about the future phases, ability to upgrade and the total inventory in the community.
"If they won’t give you straight answers on these topics, there’s smoke," Niemela said. "A competent Realtor knows how many permits are issued per phase, how long it took to sell through previous lot groups and what incentives are currently being offered versus what was available three months ago."
The builder will lay out their pricing for the phase you are buying in, but you should research what the prior phases were.
"Stay away from builders who aren’t transparent about their price increase or decrease from phase to phase," Niemela said. "If prices jump 4% in 30 days, you can live with that. But if prices jump 9% with no explanation, that’s a problem."
When looking at a builder's work in person, it could be hard to assess the craftsmanship.
"Hire an inspector for an hour. Let him come out and take a look at the quality of the construction," Harthausen said. "Look at the foundation. Look at the pouring of the cement in the driveway. Let him look at the trusses in the roof."
If the community is more established, you can talk to people who are living in the new homes.
"Ask them, ‘Hey, I’m thinking about buying here. How’s your experience been?’" Harthausen said.