How Deposits Work on a New Development

Buying a home before it's built usually means paying in stages. A typical condominium asks for ten percent when you sign the contract, another ten when the building tops out, and the balance at closing. Townhomes and houses often ask for less up front.

In most states your deposit is held in escrow by a third party — an attorney or title company — not spent on construction. Ask to see the escrow agreement, and ask what happens to your deposit if the building is delayed beyond the date in your contract.

Finally, ask whether the developer offers a rate buy-down or closing-cost credit. On many new buildings, especially before launch, they do.