A builder contract is not a resale purchase agreement with a few new-construction clauses tacked on — it is a fundamentally different document, drafted by the builder's attorneys, that governs deposits, price changes, construction delays, and warranty terms over a process that can take months or longer. This guide walks through what is typically inside a builder contract, section by section, and highlights the clauses buyers most often overlook before signing. It is general information, not legal advice, and is not a substitute for review by a licensed real estate attorney in your state.
Why Builder Contracts Are Different
A resale contract is usually a short, standardized state form negotiated between two private parties, often with a home inspection contingency and a relatively fixed closing date. A builder contract is the opposite on nearly every dimension: it is typically a long, custom document written entirely by the builder's legal team, offered on a take-it-or-leave-it basis, covering a home that does not exist yet and won't for months.
Because the home is being built rather than transferred as-is, builder contracts have to address things a resale contract never touches — deposit schedules tied to construction milestones, change order procedures, timeline extensions for delays, and a warranty structure that only begins once the home is complete. Buyers who assume a builder contract works like the resale agreement they signed on a previous home are often caught off guard by how differently — and how one-sidedly — these terms are written. Before you tour a model home, it helps to understand how the new construction process differs from buying resale in Pennsylvania specifically.
The other major difference is leverage. In a resale transaction, both sides typically have roughly comparable negotiating power and both are represented by agents accustomed to give-and-take. In a builder transaction, the builder has drafted the document, sets the sales process, and — especially in a hot community — may have little incentive to negotiate contract language at all. That imbalance is exactly why understanding the document before you sign matters more, not less, than it would with a resale deal.
What's Typically in a Builder Contract
Most builder contracts are organized around a similar set of sections, even though the specific language varies by builder and state: the purchase price and included features, the deposit schedule, financing contingencies, construction timeline and delay provisions, change order procedures, a pre-closing walkthrough and punch list process, warranty terms, and default or cancellation rights for both parties. Some also include arbitration clauses, HOA disclosures, and community development fee obligations that would be unusual in a resale contract.
Because these documents are long and dense, it is easy to skim past the sections that matter most. The table below summarizes common contract elements and what is worth checking in each one before you sign. If you want a second set of eyes on pricing and contract terms before your first sales appointment, Reaixo's new construction team can walk through what to expect.
| Contract Section | What to Check |
|---|---|
| Purchase price & included items | Whether the price is truly all-in or excludes lot premiums, structural options, and fees |
| Deposit schedule | Total deposit amount, timing of each payment, and whether any portion is non-refundable |
| Financing contingency | Deadline to secure a mortgage commitment and what happens if financing falls through |
| Construction timeline | Whether there is a firm outside completion date and what delays are considered excusable |
| Change order process | How changes are priced, documented, and whether a deadline exists to request them |
| Warranty terms | Coverage periods for workmanship, systems, and structural components, and how claims are filed |
| Default & cancellation | What triggers default for either party and what happens to the deposit in each case |
| Contract Element | New Construction | Resale |
|---|---|---|
| Who drafts the contract | Builder's attorneys, largely non-negotiable | Standardized state form, negotiated between parties |
| Home condition at signing | Not yet built or partially built | Existing, inspectable condition |
| Inspection contingency | Often limited to pre-drywall and final walkthrough | Full home inspection contingency, buyer's choice of inspector |
| Price changes after signing | Possible via change orders and lot premium adjustments | Generally fixed once under contract |
| Timeline | Construction-dependent, often with builder-favorable extensions | Fixed closing date, narrower delay provisions |
| Warranty | New home limited warranty, builder-defined terms | Typically none beyond seller disclosures, unless purchased separately |
Deposit and Earnest Money
Builder deposits are usually structured differently from the single earnest money deposit common in resale transactions. Instead of one deposit held by a title company until closing, builder contracts often call for an initial deposit at signing, followed by additional deposits at defined construction milestones — such as foundation completion, framing, or drywall — plus separate payments for design center selections and upgrades. By the time a home is complete, a buyer may have paid several deposit installments totaling a meaningful percentage of the purchase price.
Refundability is the single most important thing to confirm about any builder deposit. Contracts typically distinguish between deposits tied to a financing contingency, which may be refundable if a buyer cannot obtain a mortgage commitment despite a good-faith effort, and deposits that become non-refundable once a certain milestone passes or once design center selections are finalized. Ask the builder to walk through, in writing, exactly what portion of your total deposit is refundable at each stage of the process — not just at signing.
Change Orders and Extras
A change order is the formal mechanism for modifying anything after the base contract is signed — whether that's upgrading flooring, adding a structural option like a finished basement, or adjusting a layout detail at the design center. Each change order should document the specific change, its cost, any impact to the construction timeline, and both parties' signatures. Verbal agreements with a sales rep or on-site superintendent are not enforceable and should never be relied on in place of a signed change order.
Cost and timing both matter here. Changes requested early, before the relevant phase of construction begins, are typically far cheaper than the same change requested after that work is already complete, since later changes can require demolition and rework in addition to the new labor and materials. Many builders also set hard deadlines — sometimes tied to the design center appointment or a specific construction milestone — after which no further changes are accepted at all, regardless of cost. Confirm those deadlines early so you are not caught off guard mid-build.
Construction Timeline Clauses
The construction timeline clause governs when your home is expected to be finished and what happens if that date slips — which, in new construction, happens often enough that this clause deserves close attention. Many builder contracts define an estimated completion date rather than a firm one, paired with broad language excusing delays caused by weather, material or labor shortages, permitting, or other circumstances outside the builder's direct control. That language can be reasonable in principle but is sometimes written broadly enough to excuse almost any delay.
The more buyer-protective version of this clause includes an outside completion date — a hard deadline beyond which the buyer has the right to terminate the contract and recover their deposit if the home still is not complete. Not every builder contract includes one, and where it exists, the specific date and the list of excusable delay categories are both worth reading carefully rather than assuming they mirror what a sales rep described verbally.
Walkthrough and Punch List
Most builder contracts include one or more scheduled walkthroughs before closing, commonly a pre-drywall walkthrough — the last chance to see wiring, plumbing, and framing before walls are closed up — and a final walkthrough shortly before closing, used to generate a punch list of items the builder agrees to complete or correct. The contract language governing these walkthroughs determines how much leverage a buyer actually has: some contracts allow closing to proceed regardless of open punch list items, with completion promised afterward, while others tie a portion of funds or closing itself to punch list completion.
It's worth understanding, before your walkthrough, exactly what remedy you have if punch list items are not resolved by closing — whether that's a holdback of funds, a written completion guarantee with a deadline, or simply the builder's post-closing warranty process. Bringing a third-party inspector to the pre-drywall and final walkthroughs, even though the builder's superintendent will also be present, gives an independent set of eyes on work that will otherwise be invisible once walls and finishes are in place.
Warranty Provisions
New home warranties typically follow a tiered structure: a shorter initial period, often one year, covering workmanship and materials broadly; an intermediate period, often two years, covering specific systems like plumbing, electrical, and HVAC; and a longer period, often a decade or more, covering major structural components. This general structure is common across the industry, but exact coverage lengths, exclusions, and claims procedures vary by builder and by state, and should be read from the actual warranty document rather than assumed from general norms.
Pay particular attention to the exclusions section, which typically lists items not covered — such as normal settling, minor cosmetic issues, or damage from buyer-installed fixtures — and to the claims process itself, including how claims are submitted, what response time the builder commits to, and whether disputes are subject to mandatory arbitration rather than court. A warranty that looks generous in a sales brochure can be considerably narrower once you read the exclusions in the actual contract document.
Red Flags in Builder Contracts
Certain clauses in a builder contract deserve extra scrutiny because they tend to favor the builder more than a typical buyer would expect. A price escalation clause that allows the builder to raise the price after signing based on material cost increases, without a corresponding cap, shifts real financial risk onto the buyer. Similarly broad language excusing nearly any delay, deposit terms that make the entire deposit non-refundable immediately upon signing, and mandatory arbitration clauses that waive a buyer's right to sue are all common points worth flagging for negotiation or, at minimum, understanding fully before you sign.
Other things to watch for include vague "substantially similar" language around included features and finishes, which can let a builder substitute materials without recourse; one-sided default clauses that penalize a buyer heavily for delay but impose little on the builder; and lot premium or fee language that leaves final pricing open-ended until close to closing. None of these clauses are necessarily disqualifying on their own, but each is worth negotiating or at least budgeting around before you commit.
What to Ask Before Signing
Going into a builder's sales office with a specific list of questions — rather than relying on the sales presentation — is one of the most effective ways to avoid surprises later in the process. Ask for written answers wherever possible, since verbal assurances from a sales rep are not enforceable contract terms. It's also worth comparing what a builder tells you against how much room there typically is to negotiate; our guide on whether you can negotiate with a builder and our builder incentives guide both cover related ground worth reading before your first meeting.
- What is the full deposit schedule, and which portions are refundable versus non-refundable at each stage?
- Is there a firm outside completion date, and what happens to my deposit if the builder misses it?
- What specific circumstances count as an excusable delay under the construction timeline clause?
- How are change orders priced, documented, and what is the deadline to request them?
- What exactly is included in the base price versus what counts as an upgrade or structural option?
- What does the written limited warranty cover, for how long, and what is explicitly excluded?
- Is there a price escalation clause, and if so, is there a cap on how much the price can increase?
- Does the contract include mandatory arbitration, and what rights does that waive if a dispute arises?
- What is the process and remedy if punch list items from the final walkthrough are not completed by closing?
- Can I use my own attorney to review the contract before signing, and how much time do I have to do so?
There is no guarantee that asking these questions will change a builder's answers or contract terms, but getting clear, written responses before you sign gives you and your attorney the information needed to negotiate what can be negotiated and budget realistically for what can't. For help understanding closing-specific costs on top of the contract itself, see our overview of closing costs on new construction in Pennsylvania, and reach out to Reaixo's new construction team before you sign anything.