Contracts & Agreements

What Should I Check Before Signing a New Construction Contract?

Q: What should I check before signing a new construction contract?

Check deposit forfeiture terms, arbitration clause, warranty coverage, closing deadlines, material substitution rights, inspection provisions, and cancellation options. Review every addendum. Have the contract reviewed by an attorney or contract review service before signing.

Quick Answer

Review the deposit forfeiture terms, arbitration clause, warranty coverage, closing deadlines, material substitution rights, inspection provisions, and cancellation options. Do not sign without understanding every key provision.

The Short Answer

Before signing a new construction purchase agreement, you should understand every major provision that affects your rights and money. Here is what to check.

Financial Provisions

Earnest money amount and payment schedule. Deposit forfeiture conditions — what triggers forfeiture and can you get any portion back? Closing penalties — are there daily fees for late closing? Price escalation — can the builder raise the price after signing? Closing cost estimates and any builder credits.

Legal Provisions

Mandatory arbitration — are you waiving your right to a jury trial? Class action waiver — are you giving up the right to join group legal actions? Habitability waiver — are you waiving the implied warranty? Limitation of liability — is your potential recovery capped? Indemnification — are you holding the builder harmless?

Construction Provisions

Construction timeline — is there a guaranteed completion date? Material substitution — can the builder swap materials without your approval? Change order process — what are the fees and restrictions? Inspection rights — can you hire an independent inspector? Punch list process — what are the limitations?

Warranty Provisions

Warranty tiers and durations (workmanship, systems, structural). Warranty exclusions — what is not covered? Warranty claim process — what are the deadlines and requirements? Third-party warranty — does a separate warranty company provide structural coverage?

Cancellation Provisions

Under what conditions can you cancel? What do you lose if you cancel? Under what conditions can the builder cancel? Is there a rescission period? Are there financing or inspection contingencies?