Buying New Construction in Texas: Contracts, Earnest Money and Walkthroughs

A new home in a Houston-area community is bought on the builder's paperwork, on the builder's timeline and, often, with the builder's lender, and none of that works the way a resale purchase on the TREC contract does. This page explains the differences, what to expect on deposits and financing, when to inspect, what the warranty actually covers, why your agent has to register before your first visit, and the HOA, MUD and PID costs that come with a new community.

Builder contracts versus TREC forms

TREC publishes two optional New Home Contract forms, one for incomplete construction and one for completed construction, and license holders use them when a builder agrees to. Most production and custom builders selling their own homes do not agree; they are principals, not license holders, and they are free to use their own contracts. The sales counselor in the model home works for the builder, and the contract is written from the builder's side. Expect it to differ from a resale contract in these ways:

Term TREC resale contract Typical builder contract
Option period Negotiated unrestricted right to terminate for an option fee that is credited at closing Usually none; some builders allow a short cancellation window of a few days, after which deposits are at risk
Earnest money Held by a neutral title company; refunded on most contract contingencies Often held by the builder or its affiliated title company; refundable only in the situations the contract names
Design and option deposits Not applicable A deposit on structural options and design-center selections that becomes non-refundable once materials are ordered
Completion date A fixed closing date; extensions require an amendment An estimated completion date the builder may extend for weather, materials, labor and permitting, with the buyer obliged to close shortly after the home is finished
Materials and plans The house as it stands The builder may substitute materials and features of similar quality; elevations and lot placement can change
Financing Third Party Financing Addendum with a financing approval period Application and approval deadlines; a refund if the builder's lender denies the loan, often not if an outside lender does
Seller's disclosure notice Required under Property Code Section 5.008 Not required for a never-occupied new home; the MUD, PID and HOA notices still are
Disputes Mediation, then court Binding arbitration is common

Read the whole contract before you sign it, and for a custom build have a Texas real estate attorney read it too. Builders accept addenda more often than buyers expect, especially in slower months: a right to inspect at defined stages, a refund of deposits if the home is not complete by a date certain, and an appraisal or financing protection are the three we ask for most.

Earnest money and design-center deposits

Production builders in the Houston area commonly ask for earnest money of a few thousand dollars on a home from inventory or a quick-start plan, and more, often expressed as a percentage of the base price, on move-up and custom homes. When you choose structural options and finishes at the design center, the builder asks for a second deposit, typically a percentage of the options total, because those items are built or ordered for your house alone. Both deposits are credited at closing, and both are the builder's to keep if you walk away outside the contract's refund provisions, so ask three questions before you pay: who holds the money, under exactly which conditions is it refunded, and when does each deposit stop being refundable. On a resale contract those answers come from the TREC form; on a builder contract they come from the paragraphs you negotiate.

Financing contingencies and builder lenders

Most large builders own or partner with a mortgage company and a title company, and they tie their best incentives to using them: a credit toward closing costs, a rate buydown, or upgrades. That is legal with the required affiliated business disclosure, and the incentive can be worth real money. You are also free to use any lender you choose, usually at the cost of the incentive. The right move is to take the builder lender's written quote to an outside lender and compare the net of rate, fees and incentive, then decide. Three other points matter on a build that will take six to twelve months: the contract's financing deadlines, which usually require an application within a set number of days and may make your deposits refundable only if the builder's own lender declines you; the rate lock, which needs an extended lock or a float-down to cover construction; and the appraisal, which can come in below a contract price loaded with options, leaving a gap you fund in cash.

Inspections at pre-drywall and final

Municipal and county inspections confirm code minimums at a few points in construction. They are not an inspection for you, and the builder's own third-party quality checks report to the builder. Hire your own inspector, licensed by TREC, and schedule three visits through the construction manager:

  • Pre-drywall. After framing, roof decking, windows, plumbing, electrical and HVAC rough-in are complete and before insulation and drywall cover them. This is the only time anyone will see the framing connections, the window and roof flashing, the duct joints, the plumbing slopes and the anchor bolts. Findings get fixed for almost nothing now and for a great deal later.
  • Final, before the builder's walkthrough. A full inspection of the finished house: roof, attic, grading and drainage, all systems, appliances, doors and windows, and the cosmetic punch list. Bring the report to the builder's orientation walkthrough so the blue-tape list is complete, and get a written commitment and a date for every item not finished before closing.
  • Eleven-month. A month before the one-year workmanship warranty expires, so settlement cracks, nail pops, sticking doors, HVAC balance and drainage problems are claimed in writing while the builder still owes the repair.

Do a last walkthrough the day before or the morning of closing to confirm the punch list was completed and nothing was damaged by the final cleaning and trades.

Warranties: what 1-2-10 means

Texas has no state-run new-home warranty program; the Texas Residential Construction Commission, which once registered builders and reviewed defect complaints, closed on September 1, 2010 after the Legislature declined to renew it. The warranty you get is the one in your contract, and the common structure is 1-2-10: one year on workmanship and materials, two years on the plumbing, electrical and mechanical systems, and ten years on major structural components, usually administered through a third-party warranty company. Read the definitions. "Structural" typically means the failure of load-bearing elements, not cosmetic cracks in a slab or brick, and the coverage usually requires written notice within the warranty period and follows a defined claim process. Appliances, the roof covering, windows and other components carry their manufacturers' warranties, which you should register in your name.

Behind the written warranty sits the Texas Residential Construction Liability Act, Property Code Chapter 27. Before a homeowner can sue over a construction defect, Section 27.004 requires written notice by certified mail at least 60 days before filing; the builder may inspect the home during the 35 days after receiving the notice, up to three times; the builder has 60 days from the notice to make a written offer to repair or pay; the homeowner has 25 days to accept or explain in writing why the offer is unreasonable; and accepted repairs must be completed within 60 days of the builder receiving the acceptance. Texas courts also recognize implied warranties of good workmanship and habitability in new homes. Keep every notice to the builder in writing and dated.

Why your agent must register at the first visit

Nearly every builder's policy recognizes a buyer's agent only if that agent registers with the sales office at or before the buyer's first visit, in person, by the builder's online registration or by a written introduction. Walk into a model home alone, sign the guest sheet, and most builders will treat you as unrepresented for that community from then on, even if you hire an agent the next day. Register your agent before you visit, even for a casual look. Texas law reinforces the sequence: since January 1, 2026, Occupations Code Section 1101.563 requires a written agreement between you and your agent before the agent shows you any residential property, which includes a builder's inventory and model homes. The sales counselor represents the builder; your agent's duties run to you, and the builder's prices and incentives do not change based on whether you bring one.

HOA, MUD and PID costs in new communities

  • Homeowners association. Almost every new Houston-area community has one, with annual assessments plus one-time capitalization or transfer fees at closing. The builder provides the declaration and budget; on a later resale, TREC's property owners association addendum and the Property Code's resale certificate rules apply, with the certificate fee capped at $375.
  • Municipal utility district. New communities are nearly always in a new MUD, and new districts carry the highest rates; in Harris County's 2025 table the newest districts charge $1.50 per $100 of value. Water Code Section 49.452 requires the MUD notice, with the district's rate and bonded debt, before you sign the builder's contract. See our guide to MUD and PID taxes.
  • Public improvement district. Many new master-planned communities also levy a fixed PID assessment for roads, landscaping and amenities, paid annually for decades or in a lump sum. Property Code Section 5.014 requires the PID notice before contract.
  • The first-year tax surprise. Appraisal districts value property as of January 1. A home completed in June is taxed that year on the lot and whatever was standing on January 1, and the full value arrives the following year, so the first escrow analysis after a new-construction closing often brings a large payment increase. Budget for the full rate from day one, and file your homestead exemption as soon as you qualify.

Questions buyers ask about new construction in Texas

Do Texas builders use TREC contracts?

Rarely. TREC publishes optional New Home Contract forms for incomplete and completed construction, but builders selling their own homes are not required to use them and most large builders use their own contracts, which typically have no option period, builder-controlled completion dates, deposits that become non-refundable, materials substitution clauses and binding arbitration. Read the entire contract before signing and ask for an addendum covering inspection rights, deposit refunds if the home is late, and financing or appraisal protection.

Is earnest money refundable on new construction in Texas?

Only in the situations the builder's contract names, such as a loan denial by the builder's lender within the stated deadlines or the builder's failure to perform. Unlike the TREC resale contract, there is usually no option period, and design-center deposits become non-refundable once the builder orders the materials. Before you pay, confirm who holds the money, exactly when each deposit stops being refundable, and that both deposits are credited to your price at closing.

Should I use the builder's preferred lender?

Often, but only after comparing. Builders tie incentives such as closing cost credits, rate buydowns or upgrades to their affiliated lender, which is legal with the required affiliated business disclosure, and the incentive can outweigh a slightly higher rate. Get the builder lender's written quote, take it to an outside lender, and compare the net of rate, fees and incentive. Also check the contract's financing deadlines, arrange an extended rate lock for the construction period, and plan for an appraisal that may not cover every option you added.

When should I inspect a new construction home?

Three times, with your own TREC-licensed inspector: at pre-drywall, after framing, flashing, plumbing, electrical and HVAC rough-in are complete and before insulation and drywall cover them; at final, before the builder's orientation walkthrough, so the punch list is complete and every open item has a written completion date; and at eleven months, a month before the one-year workmanship warranty expires. Municipal inspections and the builder's own quality checks are not a substitute for your inspector.

What warranty comes with a new home in Texas?

The one in your contract, since Texas has had no state new-home warranty program since the Texas Residential Construction Commission closed in 2010. Most builders offer a 1-2-10 structure: one year on workmanship and materials, two years on plumbing, electrical and mechanical systems, and ten years on major structural components, usually through a third-party warranty company with its own definitions and claim process. Behind it sits the Residential Construction Liability Act, which requires written notice to the builder at least 60 days before any lawsuit and gives the builder inspection and repair-offer windows.

Why does my agent have to register with the builder before my first visit?

Because almost every builder's policy recognizes a buyer's agent only if the agent is registered at or before the buyer's first visit to that community, in person, online or by written introduction. If you tour a model home alone and sign the guest sheet, most builders will treat you as unrepresented there afterward. Since January 1, 2026, Texas law also requires a written agreement with your agent before the agent shows you any residential property, including model and inventory homes. The sales counselor works for the builder; your agent works for you.

Do new construction homes in Houston have MUD taxes?

Almost always, if the community is outside city limits, and new districts carry the highest rates because the bonds that built the water, sewer and drainage systems are new; Harris County's 2025 table shows the newest districts at $1.50 per $100 of value. Many new master-planned communities also levy a fixed public improvement district assessment and HOA dues. The seller must give you the MUD notice and any PID notice before you sign the contract, and your first-year tax bill will be based on the lot value, with the full bill arriving the following year.

Register us before your first builder visit How we represent new construction buyers

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Sources

About this page. Compean Group is a licensed Texas real estate brokerage that represents buyers of new construction and lists homes for builders. Deposit practices, incentives and warranty structures vary by builder and change with the market; the figures here are typical of our transactions, not a survey. This is general information, not legal or lending advice; the builder's contract, warranty booklet and your attorney control.

Updated October 29, 2026.