Understanding Florida New Construction Contracts

How Builder Contracts Differ from Resale Contracts

New construction purchase contracts are significantly different from standard Florida REALTOR Association resale contracts. The builder's contract is drafted by the builder's legal team and is designed to protect the builder's interests. It is typically more one-sided than a resale contract and gives you less leverage during the transaction.

Key differences include:

Longer timelines: Instead of 30-45 days to closing, builder contracts cover 6-12 months of construction, with specific milestones and deadlines.
Fixed pricing with escalation clauses: Some contracts include provisions for price increases if material costs go up (though many builders now offer fixed-price contracts).
Design center addendum: A separate document outlining your selections and their costs.
Builder-friendly dispute resolution: Many contracts limit your right to sue or require arbitration.
Limited inspection rights: You typically have specific windows for inspections rather than open access to the property.

It is essential to read the contract carefully and have your agent or attorney review it before signing.

Deposit Structure and Protection

Builder deposit structures are different from resale deposits. Here is what you should know:

Typical deposit amounts: In Central Florida, builder deposits typically range from 5 to 10 percent of the purchase price. Some builders require less (3 to 5 percent) for lower-priced homes. Luxury builders like Toll Brothers may require more.

Deposit timing: You typically pay an initial deposit (earnest money) when you sign the contract. Some builders require additional deposits at specific milestones, such as when construction starts or when framing is complete.

Deposit protection: Your deposit should be held in a Florida-licensed escrow account or title company. The funds should not be used for construction. If the builder defaults or fails to deliver the home per the contract, you are entitled to a full refund of your deposit.

Deposit forfeiture: If you default on the contract (cancel without a valid contingency reason), you may lose some or all of your deposit. Read the cancellation clause carefully before signing.

Inspection Rights During Construction

One of the most important protections for buyers is the right to inspect the home during construction. Builder contracts typically specify when and how you can inspect:

Pre-drywall inspection: You typically have the right to inspect before the drywall is installed to see the framing, plumbing, electrical, and insulation. This is your best opportunity to catch issues that will be hidden behind walls.
Final walkthrough: A walkthrough before closing to identify any cosmetic issues, damage, or incomplete work.
Third-party inspections: Most builders allow you to bring a licensed home inspector for the pre-drywall and final inspections. Some builders require the inspector to sign a waiver.

Schedule both inspections with your builder well in advance. Bring your inspector and a digital camera. Document everything. Any issues found should be submitted in writing to the builder with a request for repair before closing. For a full breakdown of the inspection phases, the 1-2-10 warranty, and wind mitigation, see our new home warranties and inspections guide.

Cancellation Clauses and Deadlines

Builder contracts include provisions for when you can cancel and what happens to your deposit:

Right to cancel: Florida law gives you a right to cancel within a specified period after signing (typically 3 to 7 days depending on the contract). After that period, cancellation is more restricted.

For-cause cancellation: You may cancel with a full deposit refund if the builder fails to meet its obligations, such as missing the estimated completion date by a specified number of days (often 30 to 60 days past the estimated completion date).

Finance contingency: If you cannot obtain financing within the specified time, you can typically cancel with a deposit refund. Make sure you understand the timeline for your loan commitment.

Discretionary cancellation: If you cancel for any reason not covered by a contingency, you forfeit your deposit. Read the contract carefully to understand what grounds give you a refund and what grounds result in forfeiture.

What's Negotiable vs Standard

Many buyers assume builder contracts are non-negotiable. While builders have standard forms, certain terms can be negotiated:

Typically negotiable:

Incentive packages (closing cost credits, rate buydowns, design center credits).
Addendums or modifications that the builder has used for other buyers.
Closing date flexibility if the builder has multiple inventory options.
Appliances or other finish upgrades not yet ordered.

Rarely negotiable:

Base price of the home (builders are typically firm on base pricing).
Standard contract language related to liability and dispute resolution.
Construction timeline estimates (these are estimates, not guarantees).
Standard warranty terms (these are typically fixed).

Your agent can tell you what specific builders in Central Florida have been willing to negotiate based on recent transactions.

The Role of Your Own Agent in New Construction

Having your own agent representing you in a new construction purchase is critical. Here is what your agent does:

Register you on your first visit: You must register your agent with the builder on your first visit to the community, not after you have signed anything. If you go alone and register later, the builder may not pay your agent's commission.
Review the contract: Your agent reads the builder's contract and identifies terms that are not favorable to you. They can suggest changes or point out risks.
Negotiate incentives: Your agent handles the negotiation for incentives, price reductions, and closing cost assistance.
Coordinate inspections: Your agent schedules inspections and helps you interpret the inspection reports.
Monitor construction: Your agent can visit the property during construction to monitor progress and flag issues.
Protect your interests: Throughout the process, your agent represents you, not the builder. This is especially important when issues arise.

The builder pays your agent's commission from their marketing budget. There is no cost to you for having representation. Do not go through the new construction process without your own agent.

Common Contract Red Flags

Here are specific clauses and terms to watch for in a Florida new construction contract:

Arbitration clause: Some contracts require that disputes go through binding arbitration rather than court. Understand what you are agreeing to.
Right to substitute materials: Builders often reserve the right to substitute materials if the specified ones become unavailable. This is common, but make sure substitution standards are reasonable.
Escalation clause: Some contracts allow the builder to increase the price if material costs rise. Look for this clause and understand the limitations.
Completion date language: Builders use estimated completion dates, not guaranteed dates. The contract should specify what happens if construction is significantly delayed.
Force majeure: Builders typically include broad force majeure clauses that can extend timelines for many reasons. This is standard but should not be unlimited.
Lien rights: The contract should address how mechanics liens from subcontractors will be handled. The builder should warrant that the property will be lien-free at closing.
As-is at closing: Some contracts state that you accept the home as-is at closing. Make sure any agreed-upon repairs are completed or credited before closing.

If you are unsure about any contract terms, have a Florida real estate attorney review the contract before you sign.

Frequently Asked Questions

Can I make changes to the builder's standard contract?

Builders are generally not willing to make significant changes to their standard contract forms. However, they may agree to addendums for specific concerns. Ask your agent what other buyers have been able to negotiate with each builder.

Should I hire an attorney to review my new construction contract?

Yes, especially if the contract has complex terms or you are uncomfortable with the language. A Florida real estate attorney can identify risks and advise you on whether the contract is fair.

What happens if the builder goes bankrupt during construction?

This risk exists with any builder. Larger national builders like Lennar, DR Horton, and Pulte have lower bankruptcy risk. Review the contract's provisions for what happens to your deposit if the builder defaults. Your deposit should be held in escrow, not used for construction.

Can I sell the home before it is built?

Builder contracts often restrict your ability to assign or sell the contract before closing. If you need this flexibility, negotiate an addendum before signing.