Builder contracts are drafted by builder attorneys to protect the builder. Here's what every Arizona buyer needs to know — and watch for — before putting pen to paper.
This guide is educational information about common contract provisions found in Arizona new construction purchase agreements. It is not legal advice. Every builder contract is different. Always consult a licensed Arizona real estate attorney for review of any specific contract before signing.
You've toured the model home. You love the floor plan. The builder's sales rep has been wonderful. Now she slides a thick stack of papers across the table and says, "Just sign here, here, and here."
Stop.
Builder contracts in Arizona are not like resale purchase agreements. They are not balanced instruments negotiated between equals. They are documents written by teams of attorneys whose job is to protect one party: the builder. Buyers who don't understand what they're signing often find out — at the worst possible moment — that the contract didn't work the way they assumed.
This guide covers the 15 most important red flags to identify and understand before you sign any Arizona new construction purchase agreement. Whether you're buying with D.R. Horton, Meritage, Taylor Morrison, Lennar, Pulte, or any other builder, these issues appear in some form in virtually every builder contract.
In a typical resale transaction, both parties use the Arizona Association of REALTORS® (AAR) Residential Purchase Contract — a standardized form that's been refined over decades to be reasonably fair to both sides. Both parties have the same form as the starting point. Negotiations happen in addenda.
In new construction, the builder uses their own proprietary contract — drafted by their attorneys, favorable to them, and hundreds of pages long in some cases. You are not starting from the same form. You are starting from their form.
Additionally, the builder's sales representative — no matter how friendly — works for the builder. They have a fiduciary duty to the builder, not to you. This is why having your own buyer's agent (and ideally a real estate attorney) review the contract before signing is so important — and costs you nothing extra.
Most builder contracts require binding arbitration to resolve any dispute between you and the builder — meaning you waive your constitutional right to a jury trial. Arbitration is generally faster and cheaper than full litigation, but it's also generally more favorable to builders, particularly if the builder has a long-standing relationship with the arbitration firm or arbitrator pool.
Why this matters: If you discover significant construction defects after closing — defects the builder disputes — you cannot sue in civil court. You must go through arbitration. The arbitrator's decision is binding and typically not appealable.
Some builder contracts include language allowing the builder to substitute "equivalent" or "comparable" materials if the specified product is unavailable, discontinued, or backordered. Here's the critical issue: "equivalent" is defined by the builder, not by you.
Example: Your contract specifies Brand A cabinets in your selected finish. The builder's supplier runs out. Builder substitutes Brand B cabinets — which they've determined are "equivalent" — in a finish that's close but not identical. You discover this at your pre-closing walk-through.
Post-COVID supply chain disruptions made this clause extremely relevant — and buyers who didn't pay attention to it were often surprised by substitutions they didn't want.
Read the cancellation provisions in your builder contract very carefully. In many builder contracts, the builder has the right to cancel the contract under certain circumstances (cost overruns beyond a threshold, inability to obtain permits in a specified timeframe, force majeure events, etc.) while your right to cancel is limited to narrow, specifically defined windows.
The critical question: If the builder cancels, what happens to your earnest money? The answer varies by builder and contract. Some contracts are clear that builder cancellation triggers a full refund. Others have language that could be interpreted differently. Know the answer before you sign.
Builder contracts typically require earnest money of 3–10% of the purchase price at contract signing. Compare this to resale transactions where 1% is the Arizona norm. On a $600,000 home, that's $18,000 to $60,000 in earnest money — all of which may be non-refundable if you miss your cancellation window by even one day.
Cancellation windows in builder contracts are typically very specific and can be very short. There's often a brief "due diligence" or "review" period (7–14 days) during which you can cancel for any reason. After that window closes, your earnest money may be at risk for any cancellation you initiate.
Real scenario: Buyer signs a contract on June 1 with a 10-day review window closing June 11. On June 12, the buyer's employer announces layoffs. Buyer cancels. Builder keeps $45,000 in earnest money. Contract was clear — buyer just didn't fully internalize the timeline.
Most Arizona builder contracts do not guarantee a specific completion date. They provide an "estimated" completion range (typically expressed as a quarter or a 2–3 month window). The contract then typically includes language stating that the builder is not liable for delays beyond this estimate, even significant ones.
Why this matters practically: Many buyers time the sale of their current home or the end of their lease to line up with the builder's estimated completion. When the build runs 3–6 months late — which happens frequently in high-demand markets — buyers find themselves in hotels, extended-stay apartments, or living with family at significant cost.
Builders in high-production periods (like Phoenix's current market) often have every crew stretched thin. Your home gets delayed when your framing crew is pulled to another project that's also behind.
Arizona's Right to Repair law (ARS §12-1361) requires specific written notice to the builder before any legal or arbitration action on construction defects — and your builder's contract likely has additional notice requirements on top of state law. Missing these notice deadlines can waive your right to a claim.
The notice requirement typically means: If you discover a construction defect, you must notify the builder in a specific format within a specific timeframe. You cannot simply call the warranty line — you need written, documented notice. If you skip this step or do it wrong, you may lose your legal remedy even if the defect is real and significant.
Some builder contracts include provisions stating that once you accept possession and close, you accept the home in its current condition — "as is" — except for specifically identified punch list items and the formal warranty. This language can be used against you if warranty disputes arise over issues you did not specifically document in writing at or before closing.
Example: You notice a soft spot in your bathroom floor tile during your pre-closing walk-through but don't put it in writing — you mention it verbally to the superintendent. After closing, you discover it's a structural issue. Builder says it was present before closing and you accepted the home. No written documentation of your objection.
Most Arizona builders require you to use their affiliated title company. This is legal under Arizona law, but it creates an inherent conflict of interest worth understanding. The builder's affiliated title company has an ongoing business relationship with the builder — thousands of closings per year. Their primary client relationship is with the builder, not with you specifically.
RESPA Section 8 prohibits certain kickback arrangements in affiliated title companies, and the relationship must be disclosed. But even disclosed and legal, it's a dynamic worth being aware of. The title company is required to be neutral in the transaction — but they have a long-term relationship with the builder and a one-time relationship with you.
Any modification to your contract after signing is a change order. Change orders add cost, can add time to your build schedule, and must be documented in writing to be binding. This is where many new construction buyers get burned — not from anything in the original contract, but from verbal conversations during the build.
Common scenario: During a site visit, you tell the superintendent "I'd love to move that outlet to the other wall." He says "sure, no problem." It doesn't happen. You ask at your pre-closing walk-through. Builder says there's no record of the request. You have no evidence it was agreed to.
Another scenario: You verbally agree with the design center coordinator to "upgrade later" to the better countertop. There's no change order. You close with the standard countertop and have no contractual claim for the upgrade.
Many buyers sign a builder contract before they've received or reviewed the HOA documents — the CC&Rs (Covenants, Conditions, and Restrictions), bylaws, and rules. HOA documents can contain significant restrictions that materially affect your use and enjoyment of the property and your ability to operate it as an investment.
Common HOA restrictions in Arizona new construction communities: prohibitions on RVs, boats, or trailers in driveways; color restrictions for exterior paint; restrictions on fence types; pet breed or size limits; rental restrictions (particularly short-term rental prohibitions); restrictions on home-based businesses; parking regulations.
For new construction, the HOA is typically developer-controlled initially — meaning the builder effectively runs the HOA during the construction period. Buyer protections under ARS §33-1806 (HOA disclosure rights) are stronger in resale transactions.
Community Facilities Districts (CFDs) are special taxing districts authorized under ARS Title 48. In new construction communities, the developer creates a CFD to fund infrastructure — roads, drainage, utilities, parks — and the cost is passed to homeowners as an annual assessment that appears on your property tax bill, separate from regular property taxes.
CFD assessments in Arizona typically run $500–$3,000+ per year depending on the community and the infrastructure funded. On a $600K home with a $2,000/year CFD, your effective property tax burden is significantly higher than the base tax rate would suggest — and this can meaningfully impact your monthly payment and long-term affordability.
Some builder sales representatives are not proactively forthcoming about CFD amounts, particularly if they know the buyer is already emotionally committed to the home. By the time the buyer discovers the CFD in the contract or disclosure documents, they feel locked in.
Some builder contracts include language allowing the builder to assign or transfer your purchase contract to a parent company, affiliate, subsidiary, or successor without your consent. You contracted with Builder XYZ Arizona LLC; you might find yourself closing with Builder XYZ Holdings Inc., or a completely different entity after a corporate acquisition.
In most cases this is a technical distinction that doesn't affect your closing. But in cases of builder financial difficulty, bankruptcy, or acquisition, the assignment provisions can become critical — determining which entity's warranty you have, which entity you can pursue for defects, and what entity holds your earnest money.
Arizona's Right to Repair law (ARS §12-1361) sets minimum warranty periods: 10 years for structural defects, 8 years for mechanical systems, 1 year for workmanship. But your builder's warranty program may have specific claim requirements — forms, formats, and deadlines — that go beyond the minimum statutory process.
Missing a warranty claim deadline or submitting a claim in the wrong format can give the builder grounds to deny the claim — even if the defect is real and covered. This is particularly common with "11-month inspection" issues: the standard industry practice is to hire an inspector at month 10–11 to document all issues before the 1-year warranty expires. Buyers who skip this inspection often discover issues after the 1-year workmanship warranty window closes.
Builder advertising of "starting from $450K" can be significantly misleading when: (1) the $450K base price applies to the smallest home on the least desirable lot; (2) the community requires selection of a minimum design package adding $20K–$50K; (3) your preferred lot carries a $15,000–$50,000 homesite premium; and (4) a solar package or energy package is mandatory (common in some Arizona communities).
By the time you add the mandatory package minimum, lot premium, and required options, the true minimum price may be $100K+ above the advertised starting price. Some buyers only discover this after investing significant emotional energy in a specific lot and floor plan.
Many builders offer significant incentive packages (closing cost credits of $10,000–$30,000+ or below-market interest rate buydowns) that are contingent on using the builder's preferred or affiliated lender. These incentives can be genuinely valuable — but they come with important considerations buyers often overlook.
First: using the builder's lender is legal and can be financially beneficial. The incentives are real. Second: the builder's lender may not offer the most competitive rate for your specific situation. Third: if you switch lenders after signing (because you find a better rate elsewhere), you may forfeit all or part of the incentive package. And fourth: some builder contract provisions treat a change of lender as a material change to the transaction, with potential contract implications.
Based on buyer and agent experience across the Phoenix metro market, here's a general sense of which provisions major builders are known to negotiate (individual communities and market conditions vary — always ask and get everything in writing):
| Contract Provision | D.R. Horton | Meritage | Taylor Morrison | Lennar | Pulte |
|---|---|---|---|---|---|
| Arbitration Removal | Rarely | Rarely | Sometimes | Rarely | Sometimes |
| Earnest Money Negotiation | Sometimes | Sometimes | More Often | Sometimes | Sometimes |
| Material Substitution Clause | Rarely | Sometimes | Sometimes | Rarely | Sometimes |
| HOA Review Extension | Sometimes | Often | Often | Sometimes | Often |
| Independent Lender (Full Incentive) | No | No | No | No | No |
| Delay Compensation | No | No | No | No | No |
| Factor | Resale Transaction (AZ Norm) | Production Builder (Typical) | Semi-Custom Builder |
|---|---|---|---|
| Earnest Money % | ~1% of purchase price | 3–7% of purchase price | 5–10% of purchase price |
| On $500K Home | ~$5,000 | $15,000–$35,000 | $25,000–$50,000 |
| On $750K Home | ~$7,500 | $22,500–$52,500 | $37,500–$75,000 |
| Review/Cancel Window | 10-day inspection period (full refund) | 7–14 days from signing (varies) | 7–21 days from signing (varies) |
| Post-Window Refund | Earnest money at risk (buyer default) | All earnest money at risk | All earnest money at risk |
| Financing Contingency | Standard (AAR form) | Limited — often specific conditions | Limited — often specific conditions |
| Builder Cancel Refund | N/A | Full refund (should be explicit) | Full refund (should be explicit) |
Arizona law provides certain protections that exist regardless of what's in the builder's contract. Understanding what's guaranteed by law vs. what requires negotiation is critical:
| Protection | Guaranteed by AZ Law? | Statute | Notes |
|---|---|---|---|
| Right to Repair notice process before litigation | Yes | ARS §12-1361 | 10-yr structural, 8-yr mechanical, 1-yr workmanship |
| 10-year structural warranty minimum | Yes | ARS §12-1361 | Cannot be waived by contract |
| HOA documents provided before closing | Yes | ARS §33-1806 | Resale specifically; new construction varies |
| CFD disclosure on property tax bill | Yes | ARS Title 48 | Will appear on tax bill — may not be in sales materials |
| Pool barrier compliance | Yes | ARS §36-1681 | Required on all new construction with pool |
| Homestead protection on equity | Yes | ARS §33-1101 | Up to $400K equity protected from most creditors |
| Right to choose own title insurance company | Partial | RESPA | Builder can require affiliated company for lender's policy; buyer can purchase separate owner's policy |
| Specific completion date | No | N/A | Must negotiate — not guaranteed by law |
| Compensation for delays | No | N/A | Must negotiate — rarely granted |
| Right to independent inspector access | No | N/A | Must be specifically negotiated in contract |
Here's something many new construction buyers don't realize: using a buyer's agent when purchasing new construction costs you nothing. The builder pays the buyer's agent commission out of their budget — it doesn't add to your purchase price. This has been standard practice in the Phoenix market, and while the commission structure has evolved post-NAR settlement, the fundamental principle holds: representation from an experienced agent on your side of the table is available at no additional cost to you.
What does your buyer's agent do during new construction?
The builder's sales representative is doing all of this — for the builder. You deserve someone doing it for you.
Ryan Moxley has helped dozens of buyers navigate new construction purchases across the Phoenix metro — from contract through closing and beyond. He attends inspections, tracks milestones, and advocates for buyers at every step.
Call (480) 227-9143Reviewing a builder contract? Trying to decide which community is right for you? Let's talk.
One of the most financially significant decisions in a new construction purchase is whether to use the builder's preferred lender. The incentive packages builders offer for using their affiliated lender can be genuinely substantial — but there are important trade-offs to understand.
The right answer depends on your specific situation. Here's how to evaluate it:
In many cases, the builder's lender incentive is worth it — especially on large purchase prices where closing cost credits are significant. In other cases, a significantly lower rate from an independent lender outweighs the upfront credit over time. Run the math, don't assume either way.
Independent mortgage lenders typically offer rate locks of 30–60 days. On a new construction home that closes in 8–14 months, rate uncertainty is a real risk. Builder's lenders often offer extended rate locks for 6–12 months — sometimes with a one-time float-down option if rates drop. In a rising rate environment, this can be worth significant money. In a falling rate environment, the float-down provision becomes critical. Ask about the rate lock terms specifically.
Your builder contract likely specifies when (and whether) you have access to the property during construction for independent inspections. This is one of the most important provisions to understand — and in some cases negotiate — before signing.
This window occurs after the foundation forms are set, rebar and PT cables are laid, and vapor barrier is in place — but before the concrete is poured. Your inspector can verify:
This inspection window is brief — typically 24–48 hours before the pour. Your agent needs to know the pour date and have the inspector ready to respond quickly.
This is your most important inspection window. Everything is visible: framing, plumbing, electrical, HVAC, insulation. Once drywall goes up, these systems are inaccessible without destructive investigation. Your inspector should check:
Issues found at pre-drywall can be corrected relatively easily. The same issues found after drywall require drywall removal — expensive and disruptive. Some builders will not grant pre-drywall inspection access unless the buyer's contract explicitly provides for it. Ask about this before signing.
This is the punch list inspection — verifying that all work is complete, all finishes match your selections, all mechanical systems operate, and the home is move-in ready. Your agent should attend this with you. Your inspector should also be present if the builder allows it (not all do).
Arizona's climate, geology, and building practices create several construction considerations that are unique or more prominent than in other markets. Any inspector reviewing Arizona new construction should know these:
Post-tension concrete slabs are the standard foundation type in most AZ new construction. PT cables are steel cables tensioned after the concrete cures — creating a highly durable foundation that resists AZ's expansive soils. The critical rule: NEVER cut or drill into a PT slab without a structural engineer's approval. PT cables under tension — if cut — can release enormous force and are extremely difficult to repair. Buyers should communicate this to any future contractors before any work on the slab.
Caliche is a calcium carbonate-cemented layer of soil found throughout the Sonoran Desert. It can exist anywhere from 12 inches to several feet below grade. Caliche significantly impacts excavation costs for pools, landscape features, and utilities — costs that may not be apparent until you try to add a pool after closing. Ask your builder and perform due diligence if pool addition is in your plans.
Three-coat stucco is the dominant exterior finish in Arizona new construction. While durable in AZ's dry climate, stucco water intrusion occurs primarily at penetrations — windows, plumbing pipes, electrical boxes, light fixtures, hose bibs. Improper flashing and sealing at these penetrations allows water infiltration during monsoon rains. Your pre-drywall inspector should examine window rough openings and house wrap installation; your final walk-through inspector should look for any stucco cracking or improper caulking at penetrations.
Arizona summers are extreme. Your HVAC system is not optional equipment — it's life-safety equipment. Verify: proper system sizing (Manual J calculation), duct sealing and insulation (especially in unconditioned attic space), equipment brand and warranty, SEER rating (higher SEER = lower utility bills), and programmable or smart thermostat included. The pre-drywall inspection of ductwork is particularly important in AZ — poorly sealed ducts in a 150-degree attic can cost $200–$400/month in wasted cooling energy.
New construction in the Phoenix Active Management Area (AMA) is subject to ARS §45-576 Assured Water Supply requirements. Builders must demonstrate a 100-year water supply before platting. All new construction must also comply with Arizona's water conservation standards — low-flow fixtures, efficient irrigation systems, xeriscape-friendly landscaping requirements in many communities. Understand what landscape irrigation infrastructure is included in your home and what isn't.
Most builder warranty programs include a 1-year workmanship warranty — covering cosmetic and functional items that develop defects within the first year. After month 12, the workmanship warranty expires and only structural (10-year) and mechanical (8-year) warranties remain.
The industry-standard practice is to hire a home inspector at 10–11 months into homeownership specifically to identify any warranty items before the 1-year window closes. Cost: typically $300–$500 for a full inspection. Potential value: thousands of dollars in repairs covered under warranty that would otherwise become your expense.
Common items found at 11-month inspections:
Set a calendar reminder now for month 10 from your anticipated closing date. Don't let this window pass without action.
Use this checklist before signing any Arizona new construction purchase agreement:
After working with dozens of new construction buyers across the Phoenix metro, here are the most common mistakes — all of which are avoidable:
| # | Red Flag | Risk Level | Negotiable? | Your Action |
|---|---|---|---|---|
| 1 | Binding Arbitration | High | Sometimes | Understand and accept, or walk away |
| 2 | Material Substitution | Medium | Sometimes | Request buyer approval rights |
| 3 | One-Sided Cancellation | High | Sometimes | Ensure builder cancel = full refund |
| 4 | Large Non-Refundable Earnest Money | Very High | Sometimes | Know your windows; calendar every deadline |
| 5 | No Completion Date Guarantee | High | Rarely | Don't close current home without CO date |
| 6 | Dispute Notice Requirements | High | Rarely | Document everything in writing from Day 1 |
| 7 | As-Is Acceptance at Closing | High | Sometimes | Written punch list; don't close with open items |
| 8 | Builder-Required Title Company | Low-Medium | Sometimes | Ask about enhanced buyer title insurance |
| 9 | Change Order Process | Medium | Yes | Every change = signed written change order |
| 10 | HOA Docs Not Pre-Reviewed | High | Yes | Read all HOA docs before signing |
| 11 | CFD Not Disclosed Upfront | High | No | Ask for exact CFD amount in writing |
| 12 | Contract Assignment Clause | Medium | Sometimes | Ensure earnest money in escrow, not with builder |
| 13 | Warranty Claim Format Requirements | Medium | No | Read warranty; schedule 11-month inspection |
| 14 | True All-In Price Not Clear | Medium | Yes | Get written all-in minimum price before touring |
| 15 | Builder Lender Incentive Trade-offs | Medium | Sometimes | Compare total cost with independent lender quotes |
Ryan Moxley is a top 1% REALTOR® nationally, based in the Phoenix metro and licensed with My Home Group (ADRE SA643872000). Ryan has represented buyers in new construction communities across Scottsdale, North Phoenix, Gilbert, Chandler, Queen Creek, Goodyear, and throughout the valley — attending pre-pour inspections, pre-drywall inspections, and final walk-throughs, reviewing builder contracts, and advocating for buyers when issues arise.
If you're considering new construction anywhere in the Phoenix metro, Ryan offers a complimentary consultation to review your options, compare communities, and ensure you have experienced representation at the table. Call (480) 227-9143 or email moxleysellsaz@gmail.com.