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7 Things to Know About New Home Builder Contracts

Joe Phillips • January 14, 2025

Building a new home in Stapleton, or any neighborhood, from the ground up can be a great experience. My family and I did it, we love our new home and I’ve been lucky enough to help other families navigate the building process as well.  That said, buying new is very different from buying a resale, especially when it comes to the contract that is used. Builders have their own in-house contracts they use rather than using the Colorado approved forms, which were designed to handle resale transactions. My goal is to help buyers understand some of these differences between a builder contract and a standard resale contract. I’m a big supporter of the builders so I don’t want this to come off as negative, but these are the recurring issues that buyers ask me if they can change when they read the builder contracts.


7 Things to Know about New Home Builder Contracts:


1.  Earnest money on a new build is typically much more than a resale. A builder is building a home for you and allowing you to pick all the structural upgrades and finishes. There is risk involved with that (if you fall through that next buyer may not love the green carpet you picked!) so they usually require earnest money upon signing the contract and then additional earnest money as a percentage of the finishes that are selected along the way. (amount varies by builder)


2. The buyer’s loan “out” may not be as favorable as it is on a resale. On a resale transaction in Colorado buyers can back out all the way up to their Loan Objection Deadline if they have a loan problem, typically with no loss of their earnest money. With new builds, a buyer typically has 30 -45 days to back out based on loan reasons but there are often penalties that the builder will hold back from the buyer’s earnest money. Even if they tell you there is a loan “out” be cautious and read the fine print in their contract. If the buyer’s loan falls through late in the building process the builder typically keeps the earnest money.


3. Builder contracts are not contingent upon an appraisal. Meaning if the appraisal of the home comes in low once it’s built the builder is not obligated to drop their price to match the appraisal. The lender can still lend on it but because it appraised low the buyer will have to bring more cash to the table to keep the lender happy. The buyer can’t back out if the appraisal is low, unlike a resale, without losing earnest money.


4. Builders typically give themselves 1 – 2 years to build the home per the contract. This always makes buyers nervous. They are expecting to have the home built in 8 months based on conversations with the sales staff but when it comes time to sign the contract the builders give themselves a ton of leeway and most builders say they have 2 years to build it. (I’ve never seen one last even close to 2 years)

5. Inspections on a new build are different. When you inspect your home on a resale you can back out of the deal if you find issues. If you find issues on a new build you can’t back out but they will fix them for you if you are still in the building process. (or under warranty after closing)


6. Builders do not offer a lot of flexibility for changes. Buyers should know that most builders are “production builders”, meaning they build off a preset plan they offer their clients. Builders aren’t typically set up to make a lot of custom changes, so what you see in the floor plan is what you get. “Custom” builders are the ones who serve clients who want to build something completely unique where changes are encouraged.


7. Lastly, new build contracts involve time frames that are much longer than resale ones, so buyers can’t lock their interest rates right away because lenders don’t usually lock rates that long. New home buyers will need to wait to lock their rate later in the building process. In a rising rate environment this can be nerve racking.


So those are the 7 most common issues that buyers have once they review their builder contracts. Am I saying new homes are bad compared to resale? Absolutely not! They are a great fit for many of my buyers because they offer flexibility, customization and often the longer building time allows the client to sell their existing home. I just want buyers to go into the contract process knowing it will be a little different than the resale transactions they’ve done in the past.


Can anything be done by buyers to negotiate on some of these items from the builder contract? I’ll give you the attorney answer….it depends! Your leverage as a buyer depends on the state of the market and currently it’s a seller’s market…so builders don’t need to be flexible on making changes for their buyers. If you don’t like their terms there are other buyers that do right now. As the market balances, and eventually shifts back to a buyer’s market (real estate is always a cycle) buyer’s will gain more power and builders will be more eager to adjust some of these contract items. I’m not saying you shouldn’t try to improve the contract but I want to be upfront with clients that if they want a ton of changes made to the contract it’s not happening in the current market.


Hope this has helped set the right expectations regarding some of the differences between builder contracts and resale ones. If you have questions or if I can be of service as you make your next move I’d love to help! As a Realtor I’m not affiliated with any one builder so I can show clients the new and resale market to help them find the home that fits their needs!

Stephanie Airman

Stephanie Airman has been a proud Denver resident for over 25 years and joined Focus Real Estate in 2021. As a seasoned real estate professional, Stephanie assists both sellers and buyers, making the process as seamless as possible.

stephanie@focus-brokers.com
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(303) 525-4485

Vendor Spotlight: Emerald Window Cleaning—Keeping Homes in Top Condition

February 28, 2025
Keeping a rental property in top condition requires the right professionals, and Emerald Window Cleaning is one of our trusted local vendors. With over eight years of experience, owner Luis Estrella and his team specialize in window cleaning, screen repair, and seasonal maintenance—helping homeowners and property managers maintain their properties year-round. Worn-out window screens can make a home look neglected, invite pests inside, and reduce energy efficiency. To help, Emerald Window Cleaning is offering a limited-time special—most window screens can be repaired for just $25 each. Now is the perfect time to schedule repairs before peak rental season! Beyond window services, Emerald Window Cleaning also provides gutter cleaning and Christmas light installation, making them a great resource for year-round property maintenance. Learn more about their services and how to schedule an appointment in our latest blog post!
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Preparing Your Rental for the Market and Why It's Worth It

By Joe Phillips • January 7, 2025
Getting a rental property ready for the market can be a complex, time-consuming process, but that’s where a Focus Real Estate comes in!
A yellow house with a porch and a fence in front of it.

3 Steps to Navigate Denver’s Residential Rental Licensing Program

By Joe Phillips • December 18, 2024
If “Get Denver Rental License” has been sitting on your “To Do” list for way too long this post can help you get it checked off! Not only will the post help you get it done, we’ll also provide you with the inspectors you need, give you tips and tricks to save you time and give you a deal that will save you money just for being a Scoop reader! We just completed the process successfully for one of our Denver rentals and we’re starting the process to help our property management clients as well. So we wouldn’t say we’re experts on this process yet, but we’ve been through it and we’ve learned some things we’ll share with you to make the process as painless as possible. As we continue to go through the process for more clients we’ll continue to update this and share what we learn. At Focus Real Estate Property Management we manage single family homes, townhomes and condos in Denver’s Central Park neighborhood and the surrounding areas. So this post is geared towards landlords that have those types of homes, it’s not geared to help those with larger multifamily properties. By the way, if you sign up with us for property management you can skip the rest of post… we’ll navigate this process for you at no extra charge, other than paying for your own inspection and license application. (Here is our Services and Pricing page .) A few quick things to cover before we jump in… First, the post should not be taken as legal advice. I’m going to share the information, tips and tricks that I’ve learned through navigating this process myself. Your property, your home inspector and your ownership structure may be different so you may have a different experience. Second, the rules for this program have been evolving and will likely continue to evolve. To make sure you’re always looking at the most current rules here is a link to Denver’s website for this program. Third, there are a few types of landlords that don’t need to do the entire process we outline below. If you have a Certificate of Occupancy from the last 4 years (which means your home is less than 4 years old) you’re exempt! You’d still need to go through the application part of the process but you can skip the first 2 steps below. Also, if you only rent your property out for less than 30 days at a time you don’t need this license, you need a short term rental license. Ok, for the rest of you… let’s get your Denver rental license done! 3 Steps to Get Your Denver Rental License We’ve broken the process into three main steps, which are outlined below. In each step we’ll include some tips and tricks based on our experiences. It’s important that you go through the 3 steps in the correct order or you can waste time and money. Note: If you get stuck during the process, we recently learned of a resource that could help. Go to this page on the city website and then scroll down on the right you’ll see “Schedule a virtual appointment (Microsoft Teams)”. (See screenshot below). You can choose a 15 or 30 minute time slot where they will meet with you virtually and get you through the process.
Three houses are lined up next to each other on a lush green lawn.

New Wee Cottages in Central Park

By Stephanie Airman • November 13, 2024
New “Wee Cottages” in Central Park – And 3 BIG Incentives for Buyers!
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Considerations for Owners When Determining the Best Rental Rate

By Joe Phillips • October 16, 2024
At Focus, we understand that your rental property is an investment and that setting the right price is important for optimizing your potential profit. Determining the best rental rate for a property can be challenging. Setting the rental rate too low will hurt your bottom line. Conversely, charging a high premium compared to similar properties in the area can lead to longer tenant vacancy, which is also costly and affects your bottom line more than you might suspect. This document shares information about: How Focus helps you determine the rental price sweet spot, Factors to consider in the pricing process – including the cost of vacancy, and How Focus’ processes are designed to proactively command top dollar. Focus’ Rental Rate Estimate Ultimately, the final rental rate decision is up to you as the owner. That said, as your property manager, Focus will complete and send you a rental analysis and estimated rental rate. Our rental analysis takes into account several factors such as: Rates for comparable properties looking at: Active and leased comparable properties on the MLS, which is the site that real estate brokers access to help clients buy and sell homes. Rental data is less prevalent in this system compared to “for sale” property data, but some rental data exists, and we comb through it to leverage what we can. Rental rates for properties on Zillow. The Zillow “Rent Zestimate,” which is what Zillow thinks the property could rent for. Redfin’s Rental Estimate, which looks at aggregate rental data and presents an estimate of the fair market rental value of an individual home. Level of market demand and lease-up time that we are seeing based upon: Overall market conditions (driven by numerous factors such as rental saturation, seasonality, and interest rates) and Rentals similar to yours (size, location, pet policy, amenities, etc.). Your pet policy since allowing pets opens up the prospective tenant pool, can decrease time on the market, and can decrease tenant turnover. The Cost of Vacancy Despite the rental analysis, some owners are torn on whether to charge “just a bit more” on their rental property. For this reason, we want to outline some important considerations in making the final rental rate decision because charging too high of a premium compared to similar properties in the area can lead to longer tenant vacancy, which can be costly. In fact, the cost of vacancy can, at times, quickly offset the benefit of “just a bit more” rent. Let’s break this down a bit by listing some of the tangible costs of vacancy: Lost rent (which we often see in the range of $3,000 to $4,000 in our portfolio) Re-leasing fee costs, which is half of the lease’s first month’s rent Tenant turnover costs, which includes maintenance that inevitably pops up between tenants and is necessary to get the property ready to re-lease Your property carry costs, which includes your mortgage, taxes, insurance, utilities, etc. The lost rent alone is significant. If “just a bit more” rent results in your property being on the rental market for longer, it could take months (or even years) for the higher rent to make up for the cost of prolonged vacancy. To bring this to light, below is an example where, if you chose to increase the rent by $100 more / month and that caused the home to be on the market for an extra 2 weeks, it would take 1.3 years for the higher rent to make up the cost of vacancy. If the leasing took 4 extra weeks, it would take over 2 years for the higher rent to make up for the cost of vacancy.
Apartment buildings

Denver Real Estate Market: 3 Key Insights for Buyers

By Joe Phillips • September 18, 2024
Part of our job as Realtors is helping our clients and the Central Park neighborhood in general informed on market trends. In this quick post I’m going to take a look at the September Market Report provided by the Denver Metro Association of Realtors (“DMAR”) and provide you with three key take-aways for potential homebuyers. Although this report, which our trade association puts out monthly, is focused on the Denver market in general, we’re seeing the exact same trends playing out in Central Park, the neighborhood we focus on. Before we jump into the 3 key take-aways for buyers below, I wanted to give you the full DMAR Market Trends Report in case you like to jump into the details! 1. Inventory of Homes Continues to Climb The Denver metro area is experiencing a significant increase in housing inventory. In September, active listings rose to 9,163, marking a 10.49% increase from August and a substantial 29.33% jump from last year. This trend is excellent news for buyers, as it means: More home options to choose from. I feel like we’ve been talking about tight inventory for a decade in Denver, so increased inventory is a sight for sore eyes for buyers. If you were one of the buyers that eventually gave up or paused your search until the competition died down, now may be that time. (Side note: I promised to never be the Realtor saying “it’s a great time to buy” so I’m just going to say it’s a less competitive time to buy!) Potentially less competition for desirable properties. Those homes that used toget snatched up in a day, or even before a home was listed, are largely gone. The absolute best ones still go fast, but you do have time to see it, gather your thoughts andmake an intentional decision. A shift towards a more balanced market Sellers have had the upper hand in negotiations for a long time. With the increased inventory, buyers have more options which equates to more leverage. Buyers may have more say than in the past on price, terms, leasebacks, closing dates, etc. What this means for Buyers : With more homes available, you have a better chance of finding a property that meets your specific needs and preferences. Take advantage of this increased inventory by thoroughly exploring your options. 2. Prices Are Stabilizing While home prices in Denver remain high, we’re seeing signs of stabilization. The median close price for detached single-family homes in September was $610,000, showing a slight decrease of 1.61% from August. This indicates that the market is becoming more buyer-friendly. Key price indicators: Median close price (detached): $610,000 Median close price (attached): $390,000 Average close price (all properties): $624,185 What this means for you : As a buyer, you may find more room for negotiation and potentially better value for your investment. However, it’s crucial to act decisively when you find a property you love, as good deals may still attract multiple offers. Your experienced local agent (we’d love to help if Central Park is your desired market!) can help you assess the situation when you see a home, gauge the potential competition and help you decide how aggressive you need to be in your negotiations with the seller. 3. Properties Are Staying on the Market Longer The average number of days on market for properties in the Denver metro area has increased to 27 days, up from 23 days in August. This trend suggests that: Buyers have more time to make informed decisions. There’s less pressure to make rushed offers. You used to have to jump on a property with an offer the same day you see it. That is now always the case. You may have more leverage in negotiations What this means for Buyers : Take advantage of this slower pace by conducting thorough due diligence on properties you’re interested in. Don’t feel pressured to make hasty decisions, but remember that well-priced, attractive homes can still sell quickly. In conclusion, the Denver real estate market, and Central Park in our experience, is showing signs of becoming more balances after a long 10 year run of being a “sellers market”. Buyers and sellers now have a very balanced amount of leverage in negotiations, which will feel real refreshing for any buyer that was trying to purchase a home in the past white hot market days. With increased inventory, stabilizing prices, and longer days on market, you have a great opportunity to find your ideal home under less stressful conditions. As always, I’m here to guide you through the process and help you make the most of these market conditions. My contact info is below. Happy house hunting!
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