Real Estate Law
What to Know Before Buying New Construction
Written and reviewed by Andrew R. Schneidman, Esq. · Last reviewed
Before buying new construction, understand one thing: the builder's contract was written by the builder's attorneys, for the builder's benefit. It favors the builder on timelines, deposits, change orders, and warranties, and it deserves the same scrutiny you would give any six-figure or seven-figure business agreement.
Schneidman Law reviews new construction contracts for buyers across Middle Tennessee. Andrew R. Schneidman spent years as general counsel for a large construction and real estate development company, which means he has drafted and enforced these contracts from the builder's side and knows precisely where they bend in the buyer's favor and where they refuse to.
How is a new construction contract different from a resale contract?
A new construction contract is the builder's proprietary document, not a standard form, and it differs from a resale contract in four ways: larger non-refundable deposits, builder-controlled timelines, change order pricing set by the builder, and warranty terms that replace many traditional buyer protections.
In a resale deal, both sides typically start from a standard form and negotiate from the middle. In new construction, the builder hands you their document and the negotiation starts from their end of the field. Buyers assume the terms are fixed. Many are negotiable, especially deposit structure, delay remedies, and finish specifications, if someone asks before signing.
The specifications exhibit matters as much as the contract body. It defines exactly which finishes, fixtures, and materials you are buying. Vague specifications, such as builder-grade or comparable quality, give the builder pricing and substitution freedom that costs buyers real money.
Andrew’s take
Buyers spend weeks picking cabinets and countertops and a few minutes on the contract that governs everything else, including what happens if the builder misses the date or a finish is not what was promised. The paperwork deserves at least as much attention as the finish schedule.
What is a punch list?
A punch list is the written list of defects and unfinished items identified at the final walkthrough, such as paint touch-ups, misaligned doors, and missing hardware, that the builder agrees to complete after closing. The contract governs how and when punch list items get done.
The leverage question is timing. Once you close and the builder has full payment, punch list completion depends on the contract's follow-through obligations and the builder's reputation. Buyers protect themselves by documenting the walkthrough in writing and photos, attaching the signed punch list to the closing documents, and confirming the contract states a completion deadline for punch list work.
Do the walkthrough seriously. Run water, test every outlet, open every window, and check the systems, because items documented before closing carry contract weight that items discovered afterward do not.
What should you know about builder warranties?
Builder warranties are tiered by component: workmanship and materials coverage commonly runs 1 year, mechanical systems 2 years, and structural elements up to 10 years. The warranty document defines what counts as a defect, the claim procedure, and the deadlines, and those definitions control everything.
Read the exclusions and the claim procedure before signing, not when a problem appears. Warranties commonly require written notice within a set window, exclude cosmetic issues after closing, and make the builder's repair the exclusive remedy. Some builder contracts also route disputes into specific resolution procedures, and those clauses deserve attorney review because they define your options for the next decade.
Keep every warranty document, notice, and repair record in one file. Warranty rights are use-them-or-lose-them: a structural coverage period does you no good if the 1 year workmanship window on the symptom already lapsed unnoticed.
How do construction delays affect your contract?
Most builder contracts give the builder broad extension rights for weather, labor, and material delays while holding the buyer to firm deadlines. Review the delay clause for an outside completion date, buyer termination rights, and deposit treatment before you sign.
Delays cost buyers money in specific ways: extended rate locks, temporary housing, double moves, and storage. The negotiation goal is a defined outside date, meaning a final deadline after which the buyer exits with the deposit returned, plus notice obligations that keep the builder communicating. A builder who refuses any outside date is telling you something about their schedule confidence.
What deposits and payment schedules are common in new construction?
Production builders commonly collect a deposit of 3 to 5 percent at contract, plus separate deposits for upgrades and change orders. Custom builds run higher, with staged payments tied to construction milestones. The contract controls whether any of it comes back.
The critical review points are refundability and escrow. Confirm which deposits are refundable, under which contingencies, and whether funds sit in escrow or go straight into the builder's operating account. Upgrade deposits deserve special attention: buyers routinely put five figures into finishes before the foundation is poured, on terms buried in the change order paperwork.
Why have an attorney review the builder contract before signing?
Because the builder's contract is a one-sided document governing the largest purchase most buyers make, and the review happens once, before signature, when every term is still moveable. After signing, the document controls, and the builder wrote the document.
The review is fast and the fixes are targeted: deposit protection, an outside completion date, specification tightening, and warranty clarity. That is the whole Schneidman Law approach to real estate work, protection without drag. A contract review measured in days protects a build measured in years.
Frequently asked questions
Can you negotiate a new construction contract with a builder?+
Yes, within limits. Large production builders rarely rewrite their base contract but frequently concede on deposit structure, closing cost credits, upgrade pricing, and delay terms. Custom and small-volume builders negotiate more broadly. The buyers who get concessions are the ones who ask before signing.
Do you need an inspection on a brand new home?+
Yes. New construction gets independent inspections, ideally at pre-drywall and again before the final walkthrough. Municipal code inspections check minimum standards, not quality of workmanship. An independent inspector documents defects while the builder still owes you completion, which strengthens the punch list.
What happens if the builder misses the completion date?+
The contract's delay clause controls. Most builder contracts grant extensions for causes beyond the builder's control and set an outside date only if the buyer negotiated one. Buyers who secured an outside completion date exit with their deposit returned when construction passes that deadline.
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