Buyer Education
Builder Contract vs. Resale Contract
Builder contracts are written by the builder's legal team. Resale contracts use standardized forms developed by state real estate associations. These are not the same document — and the differences matter before you sign.
What a Builder Contract Is
A purchase agreement drafted by the homebuilder's legal team for use in new construction transactions. Builder contracts are written to protect the builder's interests across their entire sales operation. They are not neutral documents. They govern construction timelines, change orders, price adjustments, cancellation rights, inspection access, warranty obligations, and dispute resolution — all on terms the builder has chosen.
Unlike standard resale contracts, which use forms developed and periodically revised by state real estate associations with input from multiple parties, builder contracts are unilaterally drafted. The buyer is presented with the builder's document and asked to sign it. What is negotiable — and what is not — depends entirely on the builder.
Key Differences: Builder vs. Resale
| Contract Term | Builder Contract | Resale Contract |
|---|---|---|
| Who Drafts It | Builder's legal team. Written to protect builder across all transactions. | State or association standard form. Developed with input from multiple parties. |
| Closing Date | Typically a range or estimate subject to construction completion. Builder often has significant flexibility to extend without penalty. | Fixed date negotiated between buyer and seller. Extensions require mutual agreement. |
| Price Adjustments | Some builder contracts include materials cost escalation clauses that allow the purchase price to increase after signing under defined conditions. | Price fixed at contract. Changes require a written addendum agreed to by both parties. |
| Cancellation Rights | Builder cancellation rights are often broad. Buyer cancellation rights and refund eligibility for deposits depend on specific contract terms and timing. | Cancellation rights and contingencies more standardized. Earnest money terms more familiar to most buyers and agents. |
| Earnest Money / Deposits | Builders often require larger deposits and may require additional payments at design center or upgrade stages. Refund conditions are contract-specific. | Earnest money amount and refund conditions negotiated. Contingencies typically protect buyer's deposit. |
| Inspection Rights | Buyer's right to independent inspections — including pre-drywall — depends on contract language. Not always guaranteed without negotiation. | Inspection contingency is standard. Buyer typically has a defined window to inspect and respond. |
| Dispute Resolution | Many builder contracts require binding arbitration rather than litigation. This limits the buyer's legal options in the event of a dispute. | Dispute resolution terms vary but litigation is generally available unless otherwise agreed. |
| Warranty | Builder warranty terms, scope, and claim process are defined in the contract or a separate warranty document. Statutory warranties may also apply. | As-is after closing unless negotiated otherwise. Limited post-closing warranty exposure for seller. |
| What's Included | Base price may exclude items buyers assume are standard. Upgrades, lot premiums, and options are typically separate line items with separate pricing. | What's included in the sale is typically defined by what's visible in the home. Fixtures, appliances, and inclusions negotiated. |
Terms to Flag Before Signing
The following contract provisions warrant careful review before a buyer signs any builder purchase agreement:
- Price escalation clauses — Does the contract allow the builder to increase the purchase price after signing? Under what conditions? Is there a cap?
- Deposit refund conditions — Under what circumstances is the buyer's earnest money or upgrade deposit refundable? What triggers forfeiture?
- Closing date flexibility — How much time can the builder extend the closing without the buyer's consent? Is there a penalty for significant delays?
- Inspection access language — Does the contract explicitly grant the buyer the right to conduct independent inspections, including pre-drywall? What are the notice requirements?
- Binding arbitration clauses — Does the contract require arbitration for disputes? What does that mean for the buyer's options if something goes wrong?
- Change order process — How are buyer-requested or builder-initiated changes handled? Are change order prices fixed or estimated?
- Warranty scope and claim process — What is covered, for how long, and what does the buyer need to do to make a claim? What voids the warranty?
- Builder's cancellation rights — Under what circumstances can the builder cancel the contract? What does the buyer receive if the builder cancels?
What a Buyer's Agent Does With the Contract
An experienced new construction buyer's agent reviews the builder's contract before the buyer signs — not to provide legal advice, but to identify terms that are unusual, potentially unfavorable, or worth discussing with the builder or the buyer's attorney before commitment.
This includes flagging clauses the buyer may not have noticed, explaining what specific terms mean in practical terms, identifying which provisions may be negotiable given the builder's current inventory and market position, and ensuring the buyer's inspection rights are explicitly preserved in the contract language.
A buyer who signs a builder contract without independent review has accepted all of its terms as written. What is in the contract governs the transaction. What is not in the contract typically cannot be enforced later.
Should I Have an Attorney Review My Builder Contract?
Buyers should consider having a real estate attorney review their builder contract, particularly for provisions involving arbitration, price escalation, deposit forfeiture, and warranty limitations. A buyer's agent can identify issues and explain context, but legal advice on contract terms requires a licensed attorney.
Whether attorney review is standard practice varies by market. In some markets, attorney review of purchase contracts is routine. In others, it is less common. Buyers who are unfamiliar with contract terms or are making a significant financial commitment should consider professional legal review regardless of local norms.
Builder contracts are written for the builder.
Get someone in your corner before you sign.
This page is provided for general educational purposes only and does not constitute legal or brokerage advice. Contract terms, builder policies, and applicable laws vary by builder, community, market, and state. Buyers should seek appropriate professional guidance before signing any purchase agreement. New Home Hero connects buyers with licensed real estate professionals providing buyer representation in new construction transactions. New Home Hero is not affiliated with builders or developers. Agency relationships are established through written agreements between buyers and their selected real estate brokerage.