Let the Buyer Beware: New Build Purchase Contracts

Colorado development means that new build homes are a common and attractive option for many prospective homeowners. The allure of a brand-new property with modern amenities is undeniable. However, many homeowners considering a new build are unaware of a fundamental difference from purchasing an existing home: builders use their own purchase contracts, drafted to primarily protect their interests, unlike the standardized forms for resales. Since there’s no standardized form, buyers must carefully review what they’re signing before signing to ensure that their expectations for their new home are met.

Signing a builder's contract without proper review is unwise, potentially leading to unexpected costs, construction delays, and diminished buyer protections. These contracts often contain complex clauses regarding warranties, change orders, dispute resolution, and completion timelines that are atypical compared to buying a home from a traditional homeowner. GLO emphasizes that thoroughly reviewing any new build purchase contract with your own experienced attorney is not just recommended, but a critical step to safeguard your investment and ensure your dream home becomes a reality without unnecessary complications.

Why Seek Legal Guidance for New Build Contracts

New build purchase contracts are highly technical legal documents that ultimately protect the builder at the end of the day, after all, their attorneys draft the contact. For homeowners, failing to understand or negotiate the nuanced clauses within these agreements can lead to unexpected costs, frustrating delays, limited room for recourse, and a significantly higher risk of misunderstanding compared to purchasing an existing home with the standard CREC contract.

Your Protections Are Not Assumed

Unlike the CREC form, which has evolved to balance the rights and obligations of both buyers and sellers in existing home sales, new build contracts are unilateral. This means that many common buyer protections found in the CREC form-such as clear deadlines for loan objections, appraisal contingencies, inspection objection rights, and specific remedies for default- may be absent. For instance, a new build contract might have vague "completion dates", or define "completion" in a way that allows the builder to hand over a house that is technically complete but still has outstanding punch-list items or unfinished elements.

Contracts can often contain clauses that limit a buyer's ability to access the property during construction, perform independent third-party inspections at critical stages, or even make change orders without incurring significant fees or extending the delivery timeline. Essentially, the burden of identifying and negotiating for crucial buyer protections falls entirely on the homeowner. Without a discerning legal eye, a buyer might unknowingly waive critical rights, leaving them with limited recourse if construction quality issues arise, delays occur, or the finished product doesn't meet their expectations. Read Buying Colorado Real Estate - an Attorney’s Role for more information on the importance of legal guidance during a real estate purchase.

Implications of Contract Vulnerabilities

Beyond the general lack of buyer-centric protections, new build contracts can contain clauses that present significant financial and legal risks for homeowners if not reviewed properly before signing. The handling of earnest money is a prime example. While earnest money in a standard resale contract is typically refundable under various contingencies, new build contracts may require a larger earnest money deposit, make it largely non-refundable, or define termination conditions so narrowly that the buyer risks forfeiture even for issues that would be protected under a standard contract. The contract also defines closing costs and who pays for what, which can be an area where builders shift more of the financial burden to the buyer than might be customary in a traditional resale. Without careful review, a homeowner could face unexpected fees at closing that eat into their budget.

These clauses, if not carefully reviewed and potentially negotiated, can restrict a homeowner's ability to seek redress for structural issues, material defects, or unsatisfactory workmanship discovered after closing. The technical language surrounding these limitations can be opaque, making independent assessment difficult for the average homeowner.

How GLO Can Help

Buying a newly constructed home in Colorado offers great rewards—but builder contracts are complex; it is extremely important to have an attorney review the contract before signing so that no one is taken off guard. At GLO, our real estate attorneys carefully review new build agreements to protect your rights and investment. To learn about how GLO can guide you through a new build purchase, read New Build Real Estate Contract Consultations.

We identify key risks in provisions related to completion timelines, earnest money, access for inspections, change orders, and dispute resolution. We also help you negotiate fair terms and, if needed, add an attorney review contingency before signing. With GLO’s guidance, you can move forward confidently and avoid costly surprises in your new home purchase.

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GLO has prepared this blog to provide general information on legal issues that may be of interest. This blog does not provide legal advice for any specific situation and this does not create an attorney-client relationship between any reader and GLO or its attorneys. GLO engages clients only through specific signed fee agreements. GLO does not guarantee any results.