New Construction Terms, Explained

Builder contracts, design-center upgrades, incentives, warranties and new-construction costs explained.

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Builder Incentive
A builder incentive is a discount, upgrade, or credit — such as covering closing costs or offering a rate buydown — offered by a new-construction builder to encourage a buyer to purchase.
Design Center
A design center is where new-construction buyers select finishes and upgrades — flooring, cabinets, countertops, fixtures — for their home before it's built.
Builder Warranty
A builder warranty covers defects in materials or workmanship on a new home for a set period after closing, typically with shorter coverage on systems like HVAC and longer coverage on structural issues.
Punch List
A punch list is a list of minor items — touch-ups, fixes, or incomplete details — identified during a final walk-through that a builder agrees to complete before or shortly after closing.
Spec Home
A spec ("speculative") home is a new-construction house a builder starts and finishes without a confirmed buyer, choosing the floor plan and finishes based on what the builder expects will sell.
Certificate of Occupancy
A certificate of occupancy is a document issued by a local government confirming a newly built or renovated property meets building codes and is legally safe to live in.

All 18 terms

  • An allowance is a set dollar credit a builder or seller offers toward a specific item — most commonly flooring or carpet — instead of installing a particular product themselves, letting the buyer choose and pay any difference for their own preferred finish.

  • Builder IncentiveIntermediate

    A builder incentive is a discount, upgrade, or credit — such as covering closing costs or offering a rate buydown — offered by a new-construction builder to encourage a buyer to purchase.

  • Builder WarrantyIntermediate

    A builder warranty covers defects in materials or workmanship on a new home for a set period after closing, typically with shorter coverage on systems like HVAC and longer coverage on structural issues.

  • A builder's preferred (or affiliated) lender is a mortgage lender the builder recommends or owns a stake in, often tied to incentives for using them.

  • A certificate of occupancy is a document issued by a local government confirming a newly built or renovated property meets building codes and is legally safe to live in.

  • Change OrderIntermediate

    A change order is a formal, signed modification to a construction contract that adjusts the scope of work, cost, or timeline after the original agreement was signed.

  • A construction-to-permanent loan finances the building of a custom home in stages as work is completed, then automatically converts into a standard mortgage once construction finishes.

  • Design CenterIntermediate

    A design center is where new-construction buyers select finishes and upgrades — flooring, cabinets, countertops, fixtures — for their home before it's built.

  • A development application (DA) is a formal request submitted to a local planning authority — standard terminology in Australia and New Zealand — for approval to build, subdivide, or otherwise develop a property.

  • An engrossment fee is a charge, typically from a closing attorney, for preparing the final, formally executed ("engrossed") version of legal documents or the deed ready for signature at closing.

  • Floor rise charges are an additional per-floor cost, common in Indian apartment pricing, added to a unit's base price for each floor above ground level — reflecting the premium buyers pay for higher floors.

  • IFMS is a refundable, interest-free deposit collected upfront by a developer in India to fund a building's future maintenance until the resident welfare association or management body takes over ongoing upkeep.

  • Model HomeIntermediate

    A model home is a fully built and furnished example home a builder uses to showcase available floor plans, finishes, and upgrade options to prospective buyers.

  • PLC charges are an additional cost, common in Indian real estate, added to a unit's base price for a preferred location within a development — such as a corner unit, park- or pool-facing view, or a specific floor.

  • Punch ListIntermediate

    A punch list is a list of minor items — touch-ups, fixes, or incomplete details — identified during a final walk-through that a builder agrees to complete before or shortly after closing.

  • Setback requirements are local zoning rules specifying the minimum distance a structure must be built from property lines, streets, or other structures.

  • Spec HomeIntermediate

    A spec ("speculative") home is a new-construction house a builder starts and finishes without a confirmed buyer, choosing the floor plan and finishes based on what the builder expects will sell.

  • Total contract price is the full, final amount owed on a new-construction or builder contract — the base price plus every selected lot premium, design-center upgrade, and change order — as opposed to the base price alone.

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Definitions are provided for general educational purposes and are not financial, legal, tax, or real estate advice. Rules vary by transaction and location - verify important decisions with qualified professionals.