When you buy a resale home in Middle Tennessee, you and the seller usually sign a standardized purchase and sale agreement that most agents in the market already know line by line. New construction is different. The contract a builder hands you is almost always the builder's own form, drafted by the builder's attorneys. That is not a red flag, and it is not a reason to be nervous. It is simply how production and semi-custom homebuilding works, and once you understand why the paper looks the way it does, you can read it confidently. This guide walks through what is actually inside a builder's purchase agreement, clause by clause, so that when you sit down to sign, you know exactly what you are agreeing to and where your protections live.
Why builders use their own contract instead of the standard resale form
A resale purchase agreement is built around a finished home that exists today. Both sides can see it, inspect it, and close on a defined date. A new-construction agreement has to govern something that does not exist yet: a home that will be built, selected, and finished over weeks or months. Because of that, the builder writes a contract that fits a construction process rather than a one-day handoff. It has to cover how options are chosen and paid for, what happens if a supplier is late, how the home is inspected before it is finished, and how the limited warranty works after closing. The standard resale form was never designed to carry that load.
Builders also sell the same plans to dozens or hundreds of buyers, so they need one consistent document and one consistent process across every transaction. Using their own form is an operational necessity, not a trick. The trade-off for you as the buyer is that the contract is naturally written to fit the builder's process first. That is exactly why it pays to read it carefully and to have someone in your corner who reads these every week. The terms are negotiable far less often than in a resale, but the document is absolutely readable, and the most important clauses are predictable once you know where to look.
One practical note for relocating buyers: because this is the builder's form rather than the familiar resale contract, do not assume any protection is in there just because it would be in a resale deal. In new construction, the rule is simple. If it matters to you, confirm it is written into the contract or an addendum. Verbal assurances from a sales representative, however well-intentioned, are not the contract.
Completion-date language: target versus guarantee
This is the clause that surprises people most. In a resale, the closing date is a firm date. In new construction, the closing date is usually tied to when the home reaches completion, and the contract almost always frames that as an estimate or target rather than a hard guarantee. You will often see the home described as ready at "substantial completion," and the agreement may give the builder a wide window to deliver. Industry guidance is blunt about this: closing dates on new homes are typically estimates rather than fixed dates, and some contracts give the builder a year or more of leeway to complete the home even when the sales team is verbally projecting something much faster.
When you read the completion section, look for three things. First, how is completion defined? "Substantial completion" should specify which systems and finishes must be done before you are obligated to close. Second, is there a target date and an outside date, and what notice does the builder owe you as the date moves? Third, what are your remedies if it slides past the outside date? Some contracts give you a right to terminate and recover your deposit if completion runs beyond a stated long-stop date. Knowing that number before you sign is far better than discovering it during a delay.
Delay provisions and force majeure
Closely related is the delay or force majeure clause, which lists the events that extend the builder's deadline without penalty. These commonly include weather, labor shortages, supply-chain disruptions, permitting delays, and material substitutions. A reasonable delay clause is normal and fair, because no builder can control a backed-up county inspection schedule or a national shortage of a specific window unit. What you want to understand is the scope: what counts as an excused delay, whether material substitutions of "equal or better" quality are allowed, and whether there is any cap or any obligation for the builder to keep you informed in writing as the schedule moves. The goal is not to fight a fair delay provision; it is to know exactly how much flexibility you are granting.
Allowances, upgrades, and the option addenda
A big part of what makes a builder contract longer than a resale contract is the way selections and pricing get documented. The base contract sets the price for the home as specified, and then your structural options, interior selections, and upgrades are captured in separate addenda or change orders, often signed in stages as you make decisions at the design center. Some builders also use allowances, which set a dollar budget for a category like flooring or lighting; if your final selection costs more than the allowance, the difference is added to your price, and that adjustment flows back into the contract through a change order or addendum.
When you review this part, treat every addendum as part of the contract, because it is. Read the base contract together with all selection sheets, option addenda, and allowance schedules as one document. Three questions are worth asking on each: Is this option deposit refundable or applied to the price? Are upgrade payments due at selection or at closing? And is the price for each option locked once the change order is signed? It is also worth confirming that what the model home showed, or what the sales materials advertised, is actually reflected as included rather than as an upgrade. In new construction, "what's included versus what's an upgrade" is one of the most common sources of sticker surprise, and the contract addenda are where the answer lives.
Earnest money and deposits: amount and refundability
Expect the deposit on a new build to be larger than on a typical resale, and expect the contract to be more protective of the builder about keeping it. The reason is straightforward and reasonable: the builder is about to construct a home to your specifications, and if you walk away late in the process, the builder is left with a home built around your choices. Because of that risk, builder contracts frequently require a meaningful initial deposit at signing, sometimes followed by additional earnest money tied to the options you select along the way, and they often limit the situations in which that deposit comes back to you.
So the question to answer before you sign is precise: under exactly which conditions is my deposit refundable, and under which is it forfeited? Map your deposit refundability to the contingencies discussed below. If your financing falls through outside a stated window, or you cancel after a certain construction milestone, the contract may allow the builder to keep some or all of the deposit. None of that is unusual. The point is to read it so there are no surprises, and to make sure any condition you are relying on to get the money back is written down, not assumed.
Tennessee buyers do have one statutory backstop worth knowing. Under Tennessee law, it is a criminal offense for a new home construction contractor, acting with intent to defraud, to fail to refund amounts paid under a new home construction contract within ten days of accepting a properly delivered written refund request, and a violation is punishable as theft (Tenn. Code Ann. § 39-14-154). That statute is a narrow fraud protection, not a substitute for reading your refundability terms, but it is a meaningful consumer guardrail that sits behind the contract.
Contingencies: how inspection, financing, and appraisal show up (or don't)
Contingencies are the conditions that let you exit the deal and protect your deposit if something specific goes wrong. In a resale contract they are robust and familiar. In a builder contract they are often narrower, and they work differently, so this is the section to read most slowly.
Inspection
On a resale, an inspection contingency typically lets you walk if you do not like what the inspector finds. On a new build, you usually cannot inspect the home at the contract stage because it does not exist yet, so the contract handles quality differently. Concerns are addressed through builder repairs during construction and through a pre-closing walkthrough and punch list, then through the limited warranty after closing, rather than through a resale-style right to terminate over defects. That makes the walkthrough and punch list especially important, and it is worth confirming in writing that you have the right to a private, professional pre-closing inspection and that items on the punch list will be completed. Independent inspections of a new home are smart even though the contract structure is different; just understand that your remedy for issues is correction, not cancellation.
Financing
Builder contracts usually include a financing provision, but it can be more limited and more time-bound than the resale standard. You may be given a defined window early in the process to qualify and demonstrate financing, after which the financing out narrows or closes. Because construction can run for months, your rate lock is a separate issue from your contract contingency, and lenders generally will not lock a rate for an extended build period, which means you may not be able to lock until late in construction. Read the financing clause for the deadline to provide loan approval, what happens to your deposit if financing fails after that deadline, and whether using the builder's affiliated lender changes any terms or incentives. Make sure your real protection is the written deadline, not a verbal reassurance.
Appraisal
Many builder contracts are simply not contingent on the home appraising at or above the contract price. That is a real difference from a typical resale contract. If the appraisal comes in low, the builder generally will not reduce the price, and the contract may require you to make up the gap in cash to satisfy your lender rather than giving you a clean exit. Knowing this in advance changes how you plan your cash. If an appraisal protection matters to you, look for it specifically; if it is not there, plan for the possibility of an appraisal gap. New-construction appraisals have their own quirks, and going in informed is the whole game.
Warranty and dispute resolution: where to look
Most new-home contracts include a limited builder warranty, and the contract will either spell out the warranty terms or, very commonly, incorporate a separate written warranty document by reference. A frequent structure pairs short-term coverage for workmanship and materials with longer coverage for major systems and a multi-year structural warranty, sometimes administered by a third-party warranty company. The contract is where you confirm a warranty exists and find the pointer to it; the warranty document itself is where the actual coverage, exclusions, and claim procedures live. Read both. For a full breakdown of how these tiers typically work and what they cover, see our companion guide on new-construction home warranties at /blog/new-construction-home-warranties-explained.
Dispute-resolution language is the other clause people skim and later wish they had read. Many builder contracts and warranties require mediation or binding arbitration to resolve disputes instead of going to court. If a clause calls for binding arbitration, that generally means a court lawsuit is off the table for covered disputes. Arbitration is not inherently bad, but it changes your options, so you want to know it is there before you sign.
Tennessee adds a specific wrinkle here that is genuinely useful to know. Under the Tennessee Uniform Arbitration Act, an arbitration provision in a contract for a structure used as a residence must be additionally signed or initialed by the parties to be enforceable under state law (Tenn. Code Ann. § 29-5-302). That separate signature requirement applies regardless of how prominently the clause is printed. There is an important caveat: where the Federal Arbitration Act applies, such as transactions involving interstate commerce, it can preempt the state rule and does not require that separate initialing. The takeaway for you is practical, not legal advice: find the arbitration clause, notice whether you are being asked to separately initial it, and make a deliberate decision about it rather than initialing on autopilot.
The remote-buyer angle: signing from out of state
If you are relocating to Middle Tennessee from out of state, e-signing a builder contract remotely is routine and completely valid. Electronic signatures are legally enforceable nationwide under the federal ESIGN Act and, at the state level, under the Uniform Electronic Transactions Act, which Tennessee has adopted (Tenn. Code Ann. § 47-10-101 et seq.). A signature cannot be denied legal effect simply because it is electronic, as long as both parties intend to sign and have agreed to do business electronically. In practice that means you can review, initial each required clause, and execute the full package, including the option addenda, from anywhere.
Because so much of a new-construction deal is forward-looking, a few things are worth verifying before you sign remotely. Confirm you have received and reviewed the complete package, including every addendum, selection sheet, and the warranty document the contract references, not just the signature page. Re-read the completion-date language with fresh eyes, since the projected date can slide and you will be managing your move, your lease or current-home sale, and your financing from a distance. Confirm your financing and rate-lock plan accounts for a build timeline that may extend, and that your deposit refundability conditions are clear in writing. Decide consciously about any arbitration clause you are asked to initial. And make sure you know who your local set of eyes will be for the walkthrough and punch list, since that is your quality remedy in a new build. None of this should slow you down; it just makes signing from a thousand miles away as informed as signing across the kitchen table.
Read it as one document, and read it before you sign
The single most useful habit with a builder contract is to treat the base agreement, every addendum, every selection and allowance sheet, and the referenced warranty as one combined document, because legally that is what it is. Builders use their own forms for good operational reasons, and the vast majority of these contracts are fair and routine. Your job is simply to read carefully, confirm that the things you are counting on are written down, and understand the handful of clauses that work differently from a resale: the completion-date language, the delay provisions, deposit refundability, the contingency structure, and the warranty and dispute-resolution sections. Do that, and you will sign with clarity instead of crossed fingers.
If you would like a second set of experienced eyes, send us the builder's contract and we will walk every line with you before you sign, including the addenda, the completion-date and delay terms, the deposit and contingency language, and the arbitration and warranty sections. Call or text The Will Johnson Team at 615-265-1000.
The Will Johnson Team
Nashville real estate · 12+ years · 60–100 transactions a year