New Construction Purchases
A builder's purchase agreement is written by the builder's lawyer, for the builder. It is presented as standard, and buyers sign it because they assume it is.
Buying a home that does not exist yet is a different transaction from buying one that does. You are not inspecting a house, you are relying on a promise about a house, and the document defining that promise was drafted entirely by the party making it.
These agreements routinely limit the warranty, restrict how disputes may be brought, allow the builder to substitute materials, permit delays without consequence, and cap or exclude the damages a buyer can recover. Every one of those provisions is normal in the industry. Several of them are negotiable, and buyers rarely ask.
What the builder's contract usually does
| Provision | Effect on the buyer |
|---|---|
| Warranty terms | Often replaces broader implied protections with a limited express warranty on defined items for a defined period, and disclaims the rest. |
| Dispute resolution | Frequently requires arbitration, sometimes in a stated forum, and may waive a jury and limit class claims. |
| Completion date | Commonly permits extension for a wide range of causes, so a delay is not a breach and the buyer absorbs the carrying cost. |
| Allowances and selections | Sets budgets for finishes that are often below real cost, with overages payable by the buyer at the builder's pricing. |
| Change orders | Defines how changes are priced and approved. Loose language here is where budgets move the most. |
| Substitution rights | Allows the builder to substitute materials of comparable quality, a phrase that does substantial work. |
| Deposit and default | States what happens to your deposit if you cannot close, and whether the builder's liability is limited to returning it. |
| Punch list and closing | Determines whether you can withhold funds for incomplete work or must close and rely on a promise to return. |
Before closing, the builder wants your money and will usually address a list. After closing, you are a warranty claimant. Whether funds can be escrowed for unfinished items is one of the more valuable things to negotiate in advance.
Defects and warranty claims
Where problems appear after moving in, the route depends on what the contract preserved and what Michigan law provides regardless. Common issues include water intrusion, foundation and grading problems, framing and structural defects, mechanical systems that were undersized or improperly installed, and finish work that was never completed.
Notice provisions matter here. Many builder warranties require written notice within a specific period and an opportunity to inspect and repair before any claim may be brought. Skipping that step can forfeit an otherwise good claim, so the sequence is worth getting right even when the builder has become unresponsive.
How these matters run
- Review before signing where possibleThis is the stage where the most value exists. Warranty scope, delay consequences, escrow for incomplete work and dispute terms are all live before signature.
- Document the conditionWhere a defect has appeared, photographs, dates and any correspondence with the builder form the basis of the claim.
- Notice given correctlyWritten notice in the manner and time the contract requires, preserving the claim rather than waiving it.
- Claim pursued in the right forumArbitration or court, depending on what the agreement requires, with the remedies the contract actually leaves available.
Questions about new construction
The builder says the contract is not negotiable. Is that true?
Sometimes, particularly with large national builders in a strong market. Even then, specific items such as escrow for incomplete work, allowance amounts and completion date language are more often adjustable than the sales office suggests. With a regional or custom builder, considerably more is negotiable.
The house is months late. Do I have a claim?
It depends on the completion date provision. Many builder agreements permit extension for weather, supply and labor issues, in which case delay alone is not a breach. What the contract says about outside dates and about your right to terminate is the starting point.
Should I close if the work is not finished?
That is the decision with the most consequence. Once you close, your leverage is largely gone and you become a warranty claimant. If you have an escrow or holdback right, use it. If you do not, this is worth a conversation before the closing date rather than after.
My contract requires arbitration. Does that end my options?
Not necessarily. Arbitration clauses are generally enforced, but their scope and the specific procedures they impose vary, and not every claim always falls within them. The clause should be read carefully rather than assumed to be absolute.
Have it reviewed before the deposit is committed.
[PHONE]Matters with a closing date, a filing deadline or a hearing already on the calendar are handled by phone.