New Home 101: The Basics of Newly Built Homes, Part 1

So you've made the choice to buy a new home. What's next? Let's talk custom vs. production builders and design options.

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.

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 personalizing 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 home 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 productions 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 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 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.

This article is the first part of a two-part series discussing the basics of newly built homes. For part two, click here.

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

Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades. You can find her on Google+.

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