Reading a Builder's Purchase Agreement in Tennessee: 12 Clauses to Understand Before You Sign (2026)

A Tennessee builder's purchase agreement is not the standard resale contract most buyers expect. Resale homes in Middle Tennessee are usually written on the Tennessee REALTORS Purchase and Sale Agreement (form RF401, current version 01/01/2026) — a balanced form used by both sides. New construction is almost always written on the builder's own contract: a document the builder's attorneys drafted to protect the builder. The clauses most likely to surprise you are the completion-and-delay language, the deposit and its refundability, the allowance budgets, the change-order process, the mortgage and appraisal contingencies, and binding arbitration.

Before you sign, read the deposit, completion, allowance, contingency, and dispute-resolution sections most carefully, and have your own agent and a Tennessee real estate attorney review the document. Tennessee REALTORS also publishes a dedicated New Construction Purchase and Sale Agreement (form RF403), but most production and semi-custom builders use their in-house agreement instead. Below we walk through 12 clauses so you know exactly what you are signing before you sign it.

Why a builder's contract is a different animal

On a resale, the seller's agent and your agent typically work from the same family of TN REALTORS forms. The Purchase and Sale Agreement (RF401) is a known quantity — balanced, widely used, and built to be fair to both sides. Tennessee REALTORS even publishes a dedicated New Construction Purchase and Sale Agreement (form RF403) for situations where a REALTORS form is appropriate.

Most production and semi-custom builders in the Nashville region do not use those forms. They use a contract their own legal team wrote. That is not sinister — it reflects the reality that the builder is producing a product over many months and needs flexibility on timing, materials, and pricing. But it does mean the protections you would assume are present on a resale form may be narrowed, reworded, or absent entirely. Reading the document line by line is the only way to know.

It also means new construction is exempt from a disclosure step you would get on a resale. Under Tennessee's Residential Property Disclosure Act, the first sale of a newly built home accompanied by a written builder warranty is exempt from the standard seller property condition disclosure (Tenn. Code Ann. § 66-5-209). Builders typically deliver an exemption notification — the TN REALTORS version is form RF203 — instead of the full disclosure. That makes the warranty language and your own walkthrough and inspection even more important, because there is no seller disclosure form filling in the blanks.

The 12 clauses to understand before you sign

1. Completion date and delay language

Almost every new construction project hits delays — weather, supply chain, labor, and inspection backlogs are all routine. Read how the contract defines the completion or delivery date. Many builder contracts give an estimated completion window rather than a firm date, and reserve the right to extend it for a long list of reasons. Look for: how long the builder can delay before you have any remedy, whether you can walk away (and get your deposit back) if completion slips past an outside date, and whether the builder owes you anything for the delay (usually not). If your lender's rate lock or your lease has a hard expiration, this clause is the one that can cost you real money.

2. Earnest money and deposit handling

On a TN REALTORS resale contract, earnest money is held in a broker's or attorney's escrow account, and there are clear timing rules — under the REALTORS form, earnest money is generally not disbursed prior to 14 days after deposit absent written evidence of bank clearance, and must be disbursed, interpleaded, or turned over to an attorney within 21 calendar days of a written request for disbursement. Builder contracts may hold deposits differently. Confirm who holds the money, whether it sits in an escrow or trust account, and exactly what triggers its release. New construction deposits also tend to be larger than the modest earnest money on a resale, which raises the stakes on the next clause.

3. Deposit refundability

This is the single most important number in the contract. Builder deposits are frequently non-refundable, or refundable only in narrow circumstances. Some contracts let you cancel and recover your deposit only if the builder fails to complete by a stated outside date; others make the deposit forfeit if you cannot close for financing or any other reason. Read precisely which scenarios return your money and which forfeit it. If you put down a five-figure deposit and your financing falls through because of a problem you could not control, you want to know in advance whether that money is at risk.

4. Allowances

Allowances are dollar budgets the builder sets for categories you will select later — flooring, cabinets, countertops, lighting, appliances, landscaping. The contract price assumes you stay within those allowances. The trap is a low allowance that looks attractive on paper but does not cover the finishes shown in the model home. If the carpet, tile, or fixtures you actually want exceed the allowance, you pay the difference (sometimes with the builder's markup). Ask for the allowance schedule in writing, and ask honestly whether those numbers reflect builder-grade or model-grade selections.

5. The change-order process

A change order is any modification to the plans or selections after the contract is signed. Builder contracts spell out how changes are requested, priced, approved, and paid — and they usually require both parties to sign and the cost to be paid up front or at the next billing milestone. Two things to verify: whether there is a deadline after which changes are locked out (framing and rough-in stages come fast), and whether the builder can make substitutions on their side — swapping a specified material for one of 'equal or greater value' — without your sign-off. Get every promise in writing as a signed change order; a salesperson's verbal 'we'll take care of that' is not enforceable.

6. Mortgage and financing contingency

On a resale, a financing contingency protects you: if your loan is denied, you can usually exit and recover earnest money. Builder contracts handle this very differently. Some include a financing contingency; some do not. Some require you to use the builder's preferred or affiliated lender to receive an incentive, and route the contingency through that lender. Read whether a loan denial returns your deposit, and how long you have to obtain loan approval. If the contract has no financing contingency, you may be on the hook even if your mortgage falls apart.

7. Appraisal contingency

If the home appraises below the contract price, your lender will only lend against the appraised value, leaving you to cover the gap in cash to close. Resale contracts commonly let you renegotiate or walk if the appraisal comes in low. Many builder contracts do not give you that out — the price is the price, and a low appraisal becomes your problem, not the builder's. Confirm whether an appraisal shortfall lets you renegotiate, walk, or recover your deposit, or whether you are simply expected to bring the difference.

8. Preferred lender and title company language

Builders often offer incentives — closing-cost credits, design-center dollars, or rate buy-downs — for using their affiliated mortgage company and title company. These can be genuinely valuable. The point is to read the strings attached: whether the incentive is forfeited if you shop elsewhere, and whether closing with the builder's title company is effectively required to get your keys at closing. You generally retain the right to choose your own lender and title provider; just understand the trade-off in writing before you decide.

9. Warranty terms and the inspection question

Because new construction is exempt from the resale property disclosure, the written warranty becomes your primary protection. Read what is covered, for how long, and what is specifically excluded. Builders often provide a limited warranty (commonly a tiered structure — shorter coverage on workmanship and systems, longer on major structural components), and the contract may channel all warranty claims through a third-party warranty company. Separately, confirm your right to bring your own independent home inspector before closing. New homes still have defects, and the right to inspect is something you want stated, not assumed.

10. Dispute resolution and binding arbitration

Many builder contracts require binding arbitration for disputes instead of a lawsuit, and may waive your right to a jury trial or to join a class action. Arbitration sends disagreements to a private arbitrator whose decision is binding, often with limited appeal rights. Note an important detail: a later buyer of the same home can be bound by arbitration provisions in the original contract. None of this is automatically bad, but it is a meaningful waiver of rights — read the dispute-resolution section closely and ask your attorney what it means in your situation.

11. Default and the builder's remedies

The default clause defines what happens if either side breaks the contract. Look closely at the asymmetry: if you default, the builder may keep your deposit and pursue additional damages; if the builder defaults, your remedy may be limited to a refund of your deposit with no further recourse. Understand what counts as your default (missing a selections deadline or a closing date can qualify) and what your actual options are if the builder fails to perform.

12. Right to assign, walkthroughs, and 'as-is at closing'

Finally, watch the housekeeping clauses that carry weight. Many builder contracts prohibit you from assigning the contract to another buyer. Most define a final walkthrough or orientation and a punch-list process — read how punch-list items are handled and whether you can hold any funds until they are completed (often you cannot; items get tracked through the warranty instead). And watch for language that has you accepting the home in its condition at closing. Knowing these terms in advance keeps the final week from becoming a scramble.

Why your own representation matters with new construction

Here is the part many buyers misunderstand: the friendly agent in the builder's model home works for the builder. They are a professional, and they may well be a great partner to work with — but their fiduciary duty runs to the seller. When you walk in without your own agent, no one in the room is contractually obligated to look out for your interests.

Bringing your own agent to a new construction purchase costs you little or nothing in most cases. Our team reviews the builder's contract clause by clause with you, flags the allowance, deposit, and contingency terms worth negotiating, coordinates your independent inspections, and keeps the timeline honest from contract to keys. We work as a partner to the builder's listing agent — not an adversary — because a smooth transaction is in everyone's interest. The builder built the house; our job is to make sure the paperwork protects you while you buy it.

Two cautions worth stating plainly. First, in many cases you must have your agent involved from your very first visit to the community — register with your agent on the initial visit, because some builders will not honor outside representation if you toured alone first. Second, a real estate agent is not a lawyer. For a contract this consequential, we routinely recommend a Tennessee real estate attorney review the agreement and arbitration language before you sign. The cost of an attorney review is small next to a five- or six-figure non-refundable deposit.

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On a resale, both sides usually work from the same balanced TN REALTORS form. On new construction, you are reading the builder's home-field contract. Reading it carefully — with your own agent and an attorney — is the cheapest insurance you will buy in the whole transaction.

Where this matters most in Middle Tennessee

New construction is everywhere across the Nashville region right now, and builder contracts are the norm in the fast-growing communities of Sumner, Williamson, Wilson, and Rutherford counties. If you are shopping new homes in Hendersonville, Gallatin, Mount Juliet, Nolensville, Spring Hill, Thompson's Station, or the master-planned communities around Franklin and Murfreesboro, you will almost certainly be handed a builder's own agreement rather than a resale form. Each builder's contract is different, so do not assume the terms from one community carry over to the next.

For the negotiation side of the equation — price, incentives, rate buy-downs, and timing — see our companion guide on negotiating new construction in Middle Tennessee. This article is about understanding the document itself; that one is about what to ask for. Read both before you sit down at a builder's design center.

Frequently asked questions

Is a builder's contract the same as the standard Tennessee purchase agreement?

No. Resale homes are usually written on the Tennessee REALTORS Purchase and Sale Agreement (RF401), and there is a REALTORS new-construction form (RF403) as well. Most builders use their own attorney-drafted contract instead, which is structured to protect the builder. The clauses, contingencies, and remedies can differ significantly from the resale form.

Is my deposit on a new construction home refundable in Tennessee?

It depends entirely on the contract. Builder deposits are often non-refundable, or refundable only in narrow situations such as the builder failing to complete by a stated outside date. Some contracts make the deposit forfeit if your financing falls through. Read the deposit and default sections carefully — this is the single most important thing to verify before you sign.

Why doesn't a new construction home come with a seller's disclosure?

Under Tennessee's Residential Property Disclosure Act, the first sale of a newly built home with a written builder warranty is exempt from the standard seller property condition disclosure (Tenn. Code Ann. § 66-5-209). Builders typically provide an exemption notification instead. That makes the written warranty and your own independent inspection your main lines of protection.

Do I need my own agent if I'm buying directly from a builder?

The agent in the model home represents the builder, not you. Having your own agent typically costs little or nothing while giving you someone obligated to review the contract, flag negotiable terms, and coordinate inspections on your behalf. Register with your agent on your very first visit, since some builders will not honor outside representation if you toured the community alone first.