Key New-Home Contract Provisions Every Buyer Should Understand

Buying a newly built home is exciting—but the contract you sign is very different from a typical resale contract. New-construction purchase agreements are written by builders, for builders, and many of the provisions are standard across the industry.

That doesn’t mean they’re unfair—but it does mean buyers should understand what they’re agreeing to before they sign.

Below are the most common new-home contract provisions buyers should be aware of, why they exist, and what they mean in practice.

1. Estimated (Not Guaranteed) Completion Dates

Most new-home contracts include a target or estimated completion date, not a guaranteed move-in date.

What this means:

• Construction timelines can change due to weather, labor, materials, inspections, or permitting

• Builders usually reserve the right to extend the completion date without penalty

Why it’s standard:

Builders cannot control every variable in the construction process.

What buyers should do:

• Avoid scheduling hard move-out dates too early

• Understand the outer limits of allowed delays

• Ask how much notice you’ll receive before closing

2. Builder’s Right to Make Substitutions

Nearly all builder contracts allow for material and product substitutions.

What this means:

• Specific brands, finishes, or materials may be swapped for “equal or comparable” alternatives

• Supply chain disruptions are a common reason

Why it’s standard:

Builders need flexibility to keep projects moving.

What buyers should do:

• Focus on performance and quality standards, not just brand names

• Ask how substitutions are communicated and approved

• Confirm that substituted items meet energy and warranty requirements

3. Limited Buyer Cancellation Rights

New-construction contracts typically restrict when and how a buyer can cancel.

What this means:

• Earnest money may become non-refundable after certain milestones

• Cancellation rights are often tied to financing or appraisal outcomes

• Change of mind is usually not a valid reason to cancel without penalty

Why it’s standard:

Builders commit capital and construction resources once a contract is signed.

What buyers should do:

• Understand exactly when deposits become non-refundable

• Confirm financing and contingencies in writing

• Avoid making assumptions based on resale contract norms

4. Earnest Money and Deposit Structure

New homes often require larger or staged deposits.

What this means:

• Deposits may be due at contract signing, after design selections, or at construction milestones

• Funds are often held by the builder or escrow

Why it’s standard:

Deposits help offset builder risk during construction.

What buyers should do:

• Know the deposit schedule upfront

• Understand which portions are refundable vs. non-refundable

• Confirm how funds are protected or escrowed

5. Financing and Preferred Lender Provisions

Builders commonly encourage—or require—the use of a preferred lender to access incentives.

What this means:

• Closing cost credits or rate incentives may be tied to using the builder’s lender

• You can usually choose your own lender, but incentives may change

Why it’s standard:

Builders coordinate closely with preferred lenders to manage timelines and risk.

What buyers should do:

• Compare offers from multiple lenders

• Separate the value of incentives from the interest rate

• Confirm whether lender choice affects contract terms

6. Appraisal and Pricing Language

Builder contracts often limit buyer remedies if an appraisal comes in low.

What this means:

• The buyer may need to bring additional cash

• Builders are often not obligated to reduce price

• Cancellation rights may be limited

Why it’s standard:

Builders price homes based on community strategy, not individual appraisals.

What buyers should do:

• Ask how appraisal issues are typically handled

• Understand your options before signing

• Be cautious in rapidly rising or changing markets

7. Warranty Coverage (and Limitations)

New homes come with builder warranties—but they are structured carefully.

What this means:

• Coverage is tiered (e.g., workmanship, systems, structural)

• Certain items and conditions are excluded

• Warranty claims follow specific procedures and timelines

Why it’s standard:

Warranties are designed to address defects, not cosmetic preferences.

What buyers should do:

• Review warranty documents before closing

• Understand what’s covered—and for how long

• Keep records of inspections and communications

8. Dispute Resolution Clauses

Many builder contracts include mandatory mediation or arbitration.

What this means:

• Disputes may not go directly to court

• Arbitration may limit discovery or appeals

Why it’s standard:

Builders seek predictable, streamlined dispute resolution.

What buyers should do:

• Understand the process outlined in the contract

• Know where disputes must be resolved

• Factor this into risk tolerance

9. Change Orders and Upgrade Finality

Once selections are made, changes are often limited or prohibited.

What this means:

• Design selections may be final after a certain point

• Changes can be expensive or unavailable

Why it’s standard:

Construction sequencing requires predictability.

What buyers should do:

• Take time with selections

• Ask when choices become final

• Understand pricing for changes, if allowed

10. Final Walkthrough and Acceptance

New-construction contracts define how punch-list items are handled.

What this means:

• Minor items may be repaired after closing

• Closing is not always delayed for cosmetic issues

Why it’s standard:

Builders aim to deliver homes on schedule while addressing items efficiently.

What buyers should do:

• Conduct a thorough walkthrough

• Document issues clearly

• Understand post-closing repair timelines

The Bottom Line

Most new-home purchase contracts look similar because builders face similar risks. These provisions aren’t meant to trap buyers—but they do shift more responsibility to the buyer than a typical resale contract.

The key is not avoiding these provisions—it’s understanding them.

Buyers who read the contract carefully, ask informed questions, and set realistic expectations are far more likely to have a smooth experience and fewer surprises.