Buying new construction: what to check that resale buyers never have to

A new house removes one set of questions and replaces it with another. The seller is the builder, the contract is usually the builder's own paper rather than the standard form, and several protections a resale buyer takes for granted work differently or not at all. That is not an argument against buying new. It is an argument for a different checklist, read before you sign.

The builder's contract is not the standard form

In a resale, an accepted offer is followed by a purchase and sale agreement that attorneys on both sides negotiate. In new construction you are handed the builder's own contract, often presented as fixed. Some of it is. Enough of it is not that an hour of your attorney's time before signing is the best-spent hour of the purchase. What to read for:

• The completion date, and what happens when it slips: a right to extend, a rate-lock cost, a right to walk, or nothing.
• Substantial completion: how the contract defines it and who decides it has happened. That phrase controls money and deadlines.
• The plans and specifications actually incorporated by reference. A rendering, a brochure or a model home is not a specification.
• The substitution clause, letting the builder swap materials of "equal or better" quality. Ask who judges that.
• Dispute resolution: arbitration, venue, who pays fees, and any cap on remedies.
• The outs: what happens if the lot will not perc, a permit is denied or the approval is appealed, and whether the deposit comes back.

Check who is building. A one- or two-family dwelling must be built under the supervision of a licensed Construction Supervisor, who normally pulls the permit, with a narrow exemption for an owner building the home they will live in. Ask for the licence number and read the permit. Note also what does not apply: home improvement contractor registration under Chapter 142A, with its contract requirements and its guaranty fund, governs existing homes, not new builds.

The deposit, and what secures it

New-construction deposits are usually larger than resale deposits and often staged: at signing, at permit, at framing. Before paying any of them, get three answers in writing. Who holds the money, in what account, and what happens to it if the builder defaults, becomes insolvent or cannot deliver clear title.

A deposit held by a broker is subject to escrow rules. One paid directly to a builder and spent on the build is, in practice, unsecured credit you have extended. That is not automatically wrong, but it is a risk to price, and more negotiable than buyers assume.

Allowances and change orders

An allowance is a placeholder figure for something not yet chosen: cabinets, flooring, tile, lighting, appliances. If it was set below what you will actually pick, you pay the difference, usually at retail and often with the builder's markup on top.

Ask for the allowance schedule and, for each line, which supplier and product the number was based on. Then price it yourself, before signing. A schedule you have tested is a budget; one you have not is a surprise with a date on it.

Change orders need the same discipline. Get the price and the schedule impact in writing before the work happens. A change made after a trade has left the site costs far more than the material, and verbal agreements are where these disputes are born. Ask too what the contract price excludes outright: landscaping, final grade, driveway top coat, gutters, irrigation and appliances routinely are.

The warranty, and what it actually covers

Massachusetts has no statutory new-home warranty. You have whatever the builder puts in writing, plus the implied warranty of habitability recognised by the Supreme Judicial Court in Albrecht v. Clifford in 2002.

That implied warranty is real and narrow. A buyer must show a new house bought from the builder-vendor, a latent defect that appeared after the purchase, caused by the builder's design, materials or workmanship, creating a substantial question of safety or making the house unfit to live in. Claims run against the three-year limitation period and six-year repose period in Chapter 260, Section 2B. Nail pops and cracked grout are not what it is for.

Which is why the express warranty matters. Read it for the term on each category, since structure, systems and finishes differ; who backs it; the notice procedure and its deadlines; what voids it; whether it transfers; and whether accepting it waives anything else.

There is a second reason to negotiate it. Under the state's inspection-waiver regulation, new construction is exempt only where the first contract predates substantial completion and the seller gives an express written warranty of at least one year covering construction and the functioning of the systems. That warranty is what buys a builder out of those rules, which makes it a live negotiating item: what the Massachusetts inspection-waiver rules do and do not allow.

A brand-new house still needs an independent inspection

Every house is built by people working to a schedule. Municipal inspections check code compliance at stages; that inspector works for the town, not for you, and the file is not a condition report.

Book three of your own. Pre-drywall, while framing, fire blocking, flashing and rough mechanicals are still visible: the only chance anyone gets. Pre-closing, to build the punch list from more than your own eyes at a walkthrough. And before the first year ends, while the express warranty still has time on it.

The paper you must have at closing

• The Certificate of Occupancy. Under the state building code, no building may be occupied until the building commissioner or inspector of buildings issues one. A temporary certificate can be issued for part of the work, for up to 180 days and extendable in 30-day increments. It means work remains: get the list, the dates and the money held against it.
• The septic and well paperwork. The board of health's Certificate of Compliance and the as-built plan, recording that the system was built to the approved design, plus the design flow and approved bedroom count, and on a private well the completion report and water test. How a septic system is approved, inspected and paid for explains why that bedroom count follows the house.
• Final sign-offs on electrical, plumbing and gas, and the smoke and carbon monoxide certificate.
• The recorded plan, the lot's frontage and access, and any covenant or easement against it.

What is not finished at closing

This is what catches people: the house is done and the subdivision is not.

• Landscaping and final grade are seasonal. Ask what is promised, by when, and what money is held.
• The driveway and road top coat. Binder goes down during construction; the top coat waits until the subdivision settles, often a year or more.
• Road acceptance. A subdivision street stays a private way until town meeting votes to accept it, and only once it is built to the planning board's standard. Meanwhile the board holds security: a bond, a deposit, or a covenant recorded against the lots. Until acceptance, plowing, repair, drainage and lighting may fall to the owners or the developer. Ask the planning board for the status, the security and what has been released.
• The punch list. Written, dated, signed, with a completion date and money escrowed against it. A promise to take care of it is not one.
• The tax bill. In towns that have accepted it, state law allows a pro-rata assessment when an occupancy permit issues after 1 January on a property whose value rose substantially through new construction. Ask the assessor whether your town accepted that provision and what is coming; how assessed value and the tax rate actually work here covers the mechanics.

Before you sign anything

Put your attorney on the contract, price the allowance schedule yourself, get the warranty document in advance rather than at closing, and book the pre-drywall inspection the week the frame goes up. The rest of the sequence is on the buyer's guide to this market and its public records. To go through a builder's contract and the town file behind it, talk to Tim Harvey.