9 New Construction Secrets

I spent six years working for national homebuilders before I switched teams. Now I represent buyers, and I’m about to blow up every trick I learned. What you don’t know could cost you tens of thousands of dollars.

People think they can just walk into the model home and ink the contract. Wrong. Builders have their own agenda, and most buyers completely miss it. They get derailed and end up spending way more than they budgeted. 

Today I’m breaking down 9 builder secrets most agents won’t tell you – because they don’t know. I’ve been on the inside, and I’m not here to play nice. I’m here to protect your wallet. Let’s go.

Builder SECRET #1: The “Threshold Rule” (Agent Representation)

Here is the Golden Rule: Do not cross the threshold of a model home without your agent.

If you wander in “just to look” and register your name, you have likely just waived your right to representation. Builders have a rule: if the agent isn’t with you on visit number one, the agent doesn’t exist.

Why does this matter? Because the site agent represents the builder. Their job is to get the highest price and best terms for the builder. You need someone in your corner who can say, “No, that’s not normal,” or “We need to fix this clause.”

And no, saying “I already have an agent” after you’ve signed in doesn’t cut it.

And no, they won’t give you the agent’s commission. That money just stays in the builder’s pocket. They love when you show up unrepresented because that’s when they upsell the heck out of you.

Here’s my rule for every client: Don’t go in alone. Go with an agent who knows the new-builder-shuffle. 

Builder SECRET #2: Size Matters (Builder Types)

Not all builders are the same. 

National giants treat you like a number – but they have systems and often own their own mortgage company, which we’ll talk about later. Mid-size builders are hit or miss depending on who works there. Small local builders? You deal with the owner directly, they care about reputation, but they might not have cash to wait for your financing. If they run out of money, your house sits unfinished.

Builder SECRET #3: Model Home Mind Games and the Design Center Markup

Model homes are a masterclass in buyer psychology. The model home is sexy. It’s designed to make you swoon. It also has $250,000 worth of upgrades in it.

Builders make about 18-20% profit on the house structure if they are lucky. But they make 50% profit on the options. That tile backsplash? They’re charging you double what it would cost to hire a contractor later.

My Advice: Spend your money on structural things you can’t change later – extra windows, the sunroom, the deeper basement. Skip the fancy drawer pulls and the upgraded carpet. Do that yourself later for half the price.

Options and upgrades aren’t the only places where there’s extra profit padded into the price.

Builder SECRET #4: Get into Their Pocket (Their Business Model)

In resales, what the seller paid doesn’t matter – only current market value matters. With builders, it’s different. Understanding their cost structure tells you exactly where they’ll negotiate.

The real money is made on the land. It costs the same to build the same house in Arlington Virginia as it does in say, Arlington Texas. Not all builders develop land though. Why? Because land development is a long, complicated process with a lot of risk, requiring deep pockets and a lot of expertise.

Some builders develop their own land, some buy finished lots. If they bought finished lots, someone else already made the land profit – but the builder still adds their full markup on top. Same house, two streets apart, $100,000 price difference. That’s why you need to know which type of builder you’re dealing with.

Builder SECRET #5: The First Lots are the Worst Lots

Builders release lots in large subdivisions in groups. They typically release the least desirable lots first. There are two reasons for this. 

First, buyer demand is usually strongest when the community first opens. They have been collecting names for many months from their signs and website marketing. At the grand opening, they have the most captive buyers ready to sign contracts.

Second, they can train the public to believe that prices only go up due to demand. This is how they trick people into buying the undesirable lots. 

So if you’re buying in Phase 1 of a new community, you’re likely overpaying for the worst location. Wait for Phase 2 or 3 when better lots release – unless you know how to negotiate the difference.

Builder SECRET #6: The “Price” Myth (Negotiation)

Everyone asks me: “Can we negotiate the price?” Short answer: No. Long answer: It’s complicated.

Builders hate lowering prices because it pisses off the neighbors who already bought last. If they sell a house to you for $10k less, they just devalued the whole neighborhood.

Instead, they “train the market.” They release the worst lots first, at the lowest prices, to create a frenzy. Then, they release the better lots at higher prices and say, “Look! Demand is up!” It’s engineered.

The Insider Tip: We don’t negotiate the price on the paper. We negotiate on everything else. Closing cost help, structural upgrades, or lot premiums. I recently got a client’s deposit lowered significantly because their cash was tied up in stocks. The answer is “no” until you ask the right way and multiple times.

Now, you might think the contract protects you during these negotiations. It doesn’t. Secret #7 is where buyers lose the most control.

Builder SECRET #7: The “Dictator” Contract

The standard real estate contracts we use in DC, Maryland and Virginia are fair to both sides. The Builder Contract is not. It is a dictatorship.

It’s 80 pages long and it protects them. Do you want to know the sneakiest part? You are not allowed to have a financing contingency. If rates spike between now and the time the home is built and you can’t afford it anymore? Too bad. They keep your deposit.

About that deposit – it is critical to know where it is held. Small builders sometimes use the deposit to fund construction. If that sounds risky – it is. If your deposit isn’t being held in escrow, we’re walking away.

You also will be banned via the contract from visiting the home while it is under construction. They call it trespassing. And if you try to sell while the builder is still selling, they may have a buy-back clause. And I promise you, they will not pay you more than you paid them.

We can’t change their contract. They (and their lawyers won’t let us.) But I can warn you where the landmines are so you don’t step on them.

Builder SECRET #8: The “Fake Money” (Lender Credits)

This is the biggest trick. The builder will offer you something exciting, like “$20,000 in Closing Costs!” Do you know what the catch is? You must use their lender.

Here’s the truth: That $20,000 isn’t free. Their lender might hike up the interest rate, then use the credit to buy it down…right back to market level. I call this Fake Money. You should always shop around for lenders. Their lender may be the best deal, but it’s still worth it to double check.

I just had a client sign a new construction contract. They were told the credit was $15,000. When they referred us to their lender, the lender sent an estimate showing a $30,000 credit. We didn’t say anything. When the builder wrote the contract to send for our review they said, “Oh good news, the credit is actually $20,000 now.” Then I sent them the loan estimate from their preferred lender. And that’s how my client got an extra $10,000…which they will need. Because wait until you hear who pays the closing costs. 

Builder SECRET #9: Surprise! You’re Paying All the Closing Costs

If you are buying in DC, Maryland or Virginia – listen up. We have “Transfer Taxes” and “Recordation Taxes.” Usually, the buyer and seller split these 50/50.

But in the last decade, builders started slipping a clause into contracts that says: “Buyer pays 100% of transfer and recordation taxes.”

They started doing this in lower-income areas, and when nobody sued them, they rolled it out everywhere. This will cost you thousands of extra dollars at the closing table. Their excuse? “Oh, use the lender credit to pay for it.” (See? I told you that money was fake!)

Builder reputation isn’t negotiable. I know the reputations of the builders in Montgomery County, Northern Virginia and DC. I know who delivers on time and who leaves you with a leaky basement. I also know which lots are worth the premiums and which are not.

I love new construction. But it is a massive financial commitment, and the sales team is trained to extract maximum profit from you. 

Before my clients even look at a model home, we build a game plan. We talk about the builder’s reputation, map out site selection strategy, and identify which contract clauses to push back on. Remember that $30,000 lender credit I mentioned? That’s the kind of thing we catch. If you’re looking at new construction in DC, Maryland, or Virginia, let’s talk before you sign anything.