3 Pitfalls to Avoid When Buying New Construction in Minnesota

3 Pitfalls When Buying a New Construction Home and How to Avoid Them

Buying a new construction home in Minnesota is exciting—everything is fresh, customizable, and built just for you. But the process can also feel overwhelming, especially when builders present incentives, deadlines, and upgrade options that are hard to interpret.

At First Choice Realty Solutions, we’ve guided many Twin Cities buyers through new builds, and we consistently see the same costly mistakes. The good news? You can avoid them with the right strategy.

Below are the three biggest pitfalls when buying new construction—and how to protect yourself every step of the way.

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What You'll Learn in This Article:

• Builder rate incentives aren’t always the deal they appear to be.
• iBuyer convenience programs often cost you thousands in lost equity.
• Too many upgrades can create appraisal problems and out-of-pocket expenses.
• A local Minnesota realtor should be involved before you step into a model home.
• Smart planning leads to a smoother build, better financing, and a stronger long-term investment.

Builder Rate Incentives That May Cost You More Than You Expect

Builders frequently advertise attractive mortgage rate incentives if you use their preferred lender. But those incentives often come with fine print.

One of our clients was offered a 2% rate reduction, which sounded incredible. After reviewing the numbers, we discovered the “discount” was actually being added to their closing costs. In other words, they were paying for their own incentive.

What to do instead:
• Have a realtor review the incentive sheet and lender fees.
• Compare the builder’s lender with an outside lender—don’t assume the builder’s option is best.
• Look for hidden costs such as points, buydowns, or inflated fees.

A trusted advisor can help you determine if the incentive is truly saving you money.

The Hidden Cost of Using a Builder’s iBuyer Program

Many national builders partner with iBuyers who make quick cash offers so you can move forward with your new build. It sounds convenient—no showings, no prep, fast closing.

But the trade-off is real: iBuyer offers are typically far below market value, especially in the Twin Cities where demand remains strong in many suburbs.

Why this matters:
A lower sale price means less equity to put into your new home, which may impact your financing, down payment, or upgrade choices.

A better approach:
• Have an experienced Minnesota agent provide a realistic market valuation.
• Explore flexible buyer-friendly timelines such as rent-backs, extended closings, or pre-sale prep strategies.
• Allow competition to work in your favor—Minnesota homes often sell stronger with proper marketing.

You deserve the full market value of your home, not the convenience discount.

How Excessive Upgrades Can Lead to Appraisal Problems

Picking out design features is one of the best parts of building a home. But excessive upgrades can create financial risks—especially during the appraisal.

If your home doesn't appraise for the contract price (including upgrades), the lender may require you to pay the difference in cash.

Smart upgrade strategies:
• Invest in structural items first (windows, layout changes, ceiling height).
• Choose cosmetic upgrades you can’t easily change later (flooring, cabinets).
• Be cautious with ultra-custom features that may not hold value.
• Ask your realtor which upgrades are common in your price range and neighborhood.

Our team—including experienced agents like Scott Breuer—helps buyers choose upgrades that add value without jeopardizing financing.

Why Realtor Representation Matters from Day One

Minnesota builders often require your agent to be registered on your first visit. If not, you may be responsible for paying your agent’s commission out of pocket—or worse, you may have to navigate the entire process without representation.

A realtor protects your interests by:
• Reviewing contracts
• Monitoring construction timelines
• Helping manage inspections and walkthroughs
• Negotiating incentives and upgrades
• Avoiding unexpected closing costs

Always let your realtor know before visiting a model home, even casually.

New Construction in Minnesota

The Twin Cities new construction market—especially areas like Blaine, Ham Lake, Andover, Otsego, and Woodbury—moves quickly and varies by season.

Minnesota-specific factors to consider include:
• Winter building delays that can affect closing timelines
• Higher material costs during peak construction seasons
• Common appraisal challenges in fast-growing suburbs
• Builder competition that can create room for negotiation

Working with a local team ensures you understand what’s normal for our market and what a red flag looks like.

How We Can Help

Buying a new construction home is a major milestone—and you shouldn’t navigate it alone. The First Choice Realty Solutions team is here to walk with you from your first model-home tour to closing day.

If you’d like help reviewing a builder contract, comparing lender incentives, or planning a smart upgrade strategy, reach out anytime.
Your Minnesota new-construction journey starts with a conversation.