Purchasing a new home in the same neighborhood. If I use the sellers preferred lender they will cover closing costs. My question is do other lenders cover these costs outside of being represented by the builder? Should I search different options/rates?
Any help will be greatly appreciated.

My experience the last time I used a builder's lender was that closing costs vary widely. In addition to their quote, I also got a quote from Jay at Ags Reward, and by the time the builder "covered" their lender's closing costs, it was pretty much a wash (meaning Jay's quote simply had less closing costs to begin with). I would have paid about the same OOP at closing regardless; however, Jay quoted me a lower interest rate than the builder's lender did. So, I went back to them, told them I could get a lower rate elsewhere, and they matched the rate Jay quoted me. In short, it's worth it to shop around. And I highly recommend Jay (I have since refinanced with him - it was super easy, and I got a fantastic rate on the refi). Lesson learned - lenders don't always offer you the best available rate that you qualify for.

Does it make sense that a lender and builder will give you something without collecting it somewhere else? Either the cost of the financing or the house (in most situations) are up charged to cover what they're "giving" you and probably more.

Thanks for the nice words TxTransplant!

And yes, you should always shop a builders lender. Some, like the in the above example, might at least come down to market while others will gladly take advantage of you if you allow them to. Not all preferred lenders are giving you a bad deal from the start but enough are they you need to at least price check elsewhere to find out.