By: T.R. Smith Esq,
There is a lot to love about buying a brand-new home. Everything is new, you may be able to customize finishes, and there is an excitement that comes with being the first owner. However, many buyers are surprised to learn that purchasing a new construction home is very different from buying an existing home. Unlike the standard Florida REALTOR®/Florida Bar contract commonly used for resale homes, most builders require buyers to sign the builder’s own contract. These contracts are drafted by the builder’s attorneys to protect the builder’s interests, not the buyer’s. Understanding what is contained in the contract before signing will help avoid surprises leading up to closing.
Here are some of the most important issues to consider.
Your Deposit May Be Nonrefundable
One of the biggest misconceptions buyers have is that they can change their minds if circumstances change. In most new construction contracts, that simply is not the case. Builders often require substantial deposits and in many cases those deposits are nonrefundable except in very limited circumstances. Unlike resale contracts that provide financing, inspection, or other contingencies allowing a buyer to cancel and recover their deposit, builder contracts frequently contain far fewer opportunities to terminate without financial consequences. If a buyer loses financing, decides they no longer want the home, or experiences a change in personal circumstances, they may forfeit tens of thousands of dollars. Before signing, buyers should understand exactly when their deposit becomes nonrefundable and under what circumstances, if any, they are entitled to receive it back.
The Builder Has Up to Two Years to Complete Construction
Many buyers assume the estimated completion date in the contract is a firm deadline. In reality, most Florida new construction contracts give the builder significant flexibility if construction is delayed by labor shortages, material availability, weather, permitting delays, governmental actions, or other circumstances beyond the builder’s control. Florida law also provides builders with substantial protection. In many cases, builders have up to two years to substantially complete construction before a buyer may have the right to terminate the contract based on delay. That means a home expected to be finished in several months could ultimately take much longer without automatically giving the buyer the right to cancel. If your move depends on a specific timeline, such as selling your current home, relocating for work, or enrolling children in school, understanding these provisions is critical.
Your Remedies Are Often Very Limited
One of the biggest surprises for buyers is how limited their legal remedies can be. Many builder contracts state that if the builder defaults, the buyer’s sole remedy is simply the return of the deposit. Even if the buyer has incurred moving expenses, temporary housing costs, or other damages, the contract may prevent recovery of those losses. There are also very limited instances in which the builder will be considered in default. At the same time, if the buyer defaults, the builder often has broader remedies, including retaining the buyer’s deposit and pursuing other contractual rights and damages. This imbalance is one reason it is important to understand the contract before signing rather than after a dispute arises.
Limited Inspection Rights
When purchasing an existing or resale home, buyers commonly have an inspection period that allows them to hire inspectors and cancel the contract if they are dissatisfied with the property’s condition. Builder contracts frequently limit those rights. Instead of broad inspection rights, buyers may only be allowed limited access during construction or inspections at specific stages designated by the builder. Some contracts prohibit buyers from bringing contractors or inspectors onto the property without advance approval. Although local building officials conduct code inspections, those inspections are not intended to identify every construction issue or cosmetic concern. Many buyers still benefit from hiring an independent inspector, particularly before closing if the contract allows it.
Understand Your Punch List Rights
A punch list is a list of unfinished items or minor defects identified before closing. Many buyers assume every item on their punch list must be completed before closing. Builder contracts often provide otherwise. The builder may have the right to complete punch list items after closing within a specified period. Buyers should also understand what qualifies as a punch list item. Minor cosmetic issues may be addressed, while concerns involving design choices, upgrades, or features not included in the contract generally are not. Keeping detailed notes and photographs during your final walkthrough can help ensure all items are properly documented.
Before You Sign
A new construction contract is often one of the longest and most one-sided agreements many consumers will ever sign. While reputable builders routinely construct quality homes, buyers should not assume the contract provides the same protections found in a typical resale transaction. Having your trusted Florida real estate attorney review the contract before signing can help you understand construction deadlines, inspection rights, default provisions, warranties, punch list procedures, and other important terms. Identifying potential issues before you become contractually bound is far less expensive than trying to resolve them after a problem arises.
