Addendum
A separate document attached to a purchase agreement that adds new terms, modifies existing terms, or overrides provisions in the main contract.
As-Is Clause
A contract provision stating that the home is sold in its current condition, with no obligation by the builder to make repairs or improvements. In new construction, this can limit your rights regarding defects found at or after closing.
Appraisal
An independent professional assessment of a home's market value, required by mortgage lenders to ensure the loan amount does not exceed the property's worth.
Blue Tape Walkthrough
A walkthrough where the buyer marks defects and unfinished items with blue painter's tape so the builder can easily identify and address each issue before closing.
Building Code
A set of regulations established by local or state government that sets minimum standards for the design and construction of buildings. All new construction must comply with applicable building codes.
Contract of Adhesion
A standardized contract drafted entirely by one party (the builder) that the other party (the buyer) can only accept or reject with no meaningful ability to negotiate the terms.
Contingency
A condition that must be met before the purchase agreement becomes binding or before closing can occur. Common contingencies include financing approval, home inspection, and appraisal.
Certificate of Occupancy
A document issued by the local building department confirming that a home meets building codes, zoning requirements, and safety standards, and is legally fit for people to live in.
Custom Home
A home designed and built specifically for one buyer, with the buyer choosing everything from the floor plan to the finishes. Custom homes offer maximum personalization but take longer and cost more.
Change Order
A formal document that modifies the original purchase agreement or construction plans — typically to add, remove, or change features, materials, or design elements. Change orders usually come with additional costs.
Construction Draw
A scheduled disbursement of funds from a construction loan at specific milestones during the building process. Common in custom home construction.
Class Action Waiver
A contract clause that prevents you from joining with other homeowners to file a group lawsuit (class action) against the builder. All legal claims must be pursued individually.
Closing Costs
Fees and expenses paid at closing on top of the home's purchase price. Typically 2-5% of the purchase price, including title insurance, loan fees, taxes, and insurance.
CDD (Community Development District)
A special-purpose government district in Florida (and some other states) that levies annual assessments on homeowners to finance infrastructure built for new communities — similar to California's Mello-Roos.
Construction Defect
Any flaw in a home's design, materials, or workmanship that reduces its value, compromises safety, or makes it unsuitable for its intended use. Defects range from minor cosmetic issues to major structural failures.
Design Center
A showroom where new construction buyers select their home's finishes, fixtures, and upgrades — such as countertops, flooring, cabinetry, and paint colors. Selections made here become part of your purchase agreement.
Deceptive Trade Practices
Actions by a business (including a builder) that are misleading, deceptive, or unfair to consumers. Most states have consumer protection statutes that prohibit deceptive trade practices and provide remedies for buyers.
Discount Points
Upfront fees paid to the mortgage lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%.
Discovery (Legal Process)
The pre-trial process in a lawsuit where each side can obtain evidence from the other — including documents, depositions, and interrogatories. Discovery is typically limited or unavailable in arbitration.
Deed
A legal document that transfers ownership of real property from one party (the builder) to another (you). The deed is recorded with the county to create a public record of your ownership.
Earnest Money
A deposit paid by the buyer when signing a purchase agreement to show they are serious about buying the home. In new construction, earnest money is typically held by the builder or a title company and applied to the purchase price at closing.
Express Warranty
A written warranty provided by the builder that explicitly states what is covered, for how long, and what the repair process requires. This is different from implied warranties that exist by law.
Escrow
A neutral third-party arrangement where funds and documents are held until all conditions of the sale are met. In new construction, escrow typically refers to where your earnest money is held and the closing process itself.
Extended Warranty
Additional warranty coverage that extends beyond the builder's standard warranty periods, often provided by a third-party warranty company for an additional cost.
Easement
A legal right allowing someone other than the property owner to use a portion of the property for a specific purpose — such as utility access, drainage, or shared driveway access.
Force Majeure
A contract clause that frees both parties from obligation when an extraordinary event beyond their control prevents one or both from fulfilling the contract. Common examples include natural disasters, pandemics, and government actions.
Final Walkthrough
The buyer's last opportunity to inspect the completed home before closing, verifying that the property is in the expected condition and that any agreed-upon repairs have been made.
HOA (Homeowners Association)
An organization that manages a residential community, maintains common areas, enforces community rules (CC&Rs), and collects fees from homeowners. In new construction, the builder creates and initially controls the HOA.
Home Warranty vs. Builder's Warranty
A home warranty (or home service contract) is a separate product you can purchase that covers repairs to home systems and appliances after the builder's warranty expires. It is different from the builder's warranty that comes with your new home.
Indemnification
A contract provision where one party agrees to compensate the other for certain losses, damages, or liabilities. In builder contracts, indemnification clauses typically require the buyer to hold the builder harmless from various claims.
Implied Warranty of Habitability
A legal principle in many states that says a newly built home must be safe, structurally sound, and fit for residential use — even if the written contract does not specifically say so.
Impact Fee
A one-time fee charged by local government to developers (and sometimes passed to buyers) to fund public infrastructure needed to support new development — such as roads, schools, parks, and utilities.
Liquidated Damages
A pre-agreed amount of money that one party pays the other as compensation if the contract is breached. In builder contracts, your earnest money deposit is usually designated as liquidated damages if you fail to close.
Lot Premium
An additional charge added to the base price of a home for a more desirable lot location — such as a corner lot, cul-de-sac lot, lot with a view, or lot backing to green space.
Merger Clause
A provision stating that the written contract is the complete and final agreement between the parties, and that any prior verbal promises, discussions, or written communications are not part of the deal.
Mandatory Arbitration
A contract clause that requires disputes to be resolved through a private arbitrator instead of a court. The buyer gives up the right to a jury trial and, in most cases, the right to appeal.
Mediation vs. Arbitration vs. Litigation
Three different ways to resolve disputes. Mediation is a facilitated negotiation. Arbitration is a private decision by a neutral third party. Litigation is a lawsuit in court.
Mello-Roos
A special tax district in California that levies additional property taxes on homeowners to fund public infrastructure and services — such as roads, schools, and utilities — in new development areas.
Manufacturer's Warranty
A warranty from the company that made a specific product installed in your home — such as an appliance, HVAC system, water heater, or roofing material. Separate from the builder's warranty.
Mechanic's Lien
A legal claim filed against a property by a contractor, subcontractor, or material supplier who was not paid for work done or materials provided. In new construction, this can affect the buyer if the builder did not pay their subcontractors.
Punch List
A list of items that need to be fixed, finished, or corrected in a newly built home, created during a walkthrough before or shortly after closing.
Pre-Drywall Inspection
A home inspection conducted after framing, plumbing, electrical, and HVAC rough-ins are complete but before drywall is installed, allowing the inspector to see systems that will be hidden behind walls.
Production Builder
A large homebuilding company that constructs hundreds or thousands of homes per year using standardized floor plans, processes, and contracts. Examples include D.R. Horton, Lennar, and PulteGroup.
Property Tax Proration
The division of property taxes between the buyer and seller based on the closing date. Each party pays their share of the annual tax based on how many days they owned the property during the tax period.
Plat Map
A detailed map showing the layout of a subdivision or community — including lot boundaries, streets, easements, setbacks, common areas, and public infrastructure. Filed with the local government as a public record.
Rescission Period
A limited window of time after signing a contract during which you can cancel without penalty. Most new construction purchase agreements do not include one unless required by state law.
Right to Repair
A state law that requires homeowners to notify the builder of construction defects and give them an opportunity to inspect and repair before filing a lawsuit.
Rate Lock
An agreement with your lender that guarantees a specific interest rate for a set period of time, protecting you from rate increases during the time between loan application and closing.
Rough-In
The construction phase where the basic framework of plumbing, electrical, and HVAC systems is installed inside the walls before drywall goes up. This is when the pre-drywall inspection should happen.
Specific Performance
A legal remedy where a court orders a party to fulfill their obligations under the contract rather than just paying money damages. In real estate, this could mean a court ordering the builder to complete and sell the home as agreed.
Severability Clause
A provision stating that if any part of the contract is found to be unenforceable or invalid, the rest of the contract remains in effect.
Spec Home
A home built by the builder without a specific buyer, based on plans and finishes the builder expects will sell. Spec homes are typically complete or near-complete when purchased.
Semi-Custom Home
A home that falls between a tract home and a full custom home, offering some ability to modify the floor plan and choose from a wider range of finishes than a standard production home.
Statute of Limitations
A law that sets the maximum time after an event within which a legal claim can be filed. For construction defects, the clock typically starts when the defect is discovered or should have been discovered.
Statute of Repose
A law that sets an absolute deadline for filing construction defect claims, measured from when construction was completed — regardless of when the defect was discovered. Typically 6 to 12 years.
Special Assessment
A one-time charge levied by an HOA on homeowners to cover unexpected expenses that are not covered by regular dues — such as major repairs, legal costs, or reserve fund shortfalls.
Structural Warranty
A warranty that covers major structural components of the home — foundation, load-bearing walls, roof framing, and floor systems. Typically the longest warranty offered by builders (10 years).
Setback
The minimum distance a home must be from the property line, street, or other boundary. Setbacks are established by local zoning codes and determine where on the lot the home can be built.
Time Is of the Essence
A contract provision stating that deadlines in the agreement are strict and that failure to meet them is a material breach. Missing a deadline can give the other party the right to cancel the contract or claim damages.
Tract Home
A home built as part of a planned community or subdivision using one of a limited number of standardized floor plans. Most homes sold by national builders are tract homes.
Title Insurance
An insurance policy that protects the buyer (and lender) from financial loss if a problem with the property's title is discovered after closing — such as outstanding liens, ownership disputes, or recording errors.
Title Search
A review of public records to verify that the property has a clear title — meaning the seller has the legal right to sell it and there are no outstanding liens, disputes, or other claims against the property.
Workmanship Warranty
A warranty covering the quality of construction work — paint, caulking, drywall, doors, windows, and other finishes. Typically the shortest warranty period (1 year).
Warranty Exclusion
A specific item, condition, or type of damage that the builder's warranty does not cover. Warranty exclusion lists in builder contracts can be extensive.
Warranty Claim
A formal request to the builder to repair a defect or issue covered by the builder's warranty. Most builders have a specific process for submitting and tracking warranty claims.
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