New Home Build Terminolgy
ADDENDUM – A document added to the Contract, which is created when a Buyer requests changes to the house plan or specifications after the contract and final plans have been signed, but before the financing arrangements are finalized. The total cost of the Addendum is added to the total Contract amount for all financial purposes.
ALLOWANCE – A dollar amount included in the contract for specific items (i.e., appliances, flooring, etc.) when the exact cost cannot be determined at the onset. When the actual cost exceeds the allowance, the Buyer is responsible for paying the overage/extra.
CHANGE ORDER – A document created when a Buyer requests changes to the house plan or specifications after the contract is signed and the Buyers have signed the final plans. A fee applies to each change order. (There are no fees assessed if changes are made before plans are finalized.)
CLOSING COSTS – The fees due from the Buyer to the Title Company at the closing.
COLOR SHEET – A document containing the Buyer’s selections on options such as paint and tile colors, style of door-knobs, etc. In order for the Buyer’s choices to be used, they must be submitted to the Builder before the job has gone to the city’s Building Department for permitting. (Colorsheet instructions and forms will be provided upon the signing of the contract.) If selections are not received from the Buyer by permit time, the Builder will choose a neutral, decorator-approved package from which to order the materials.
CONTRACT – The legal document that defines the terms of the agreement between the Builder and Buyer for the construction project.
DOWN PAYMENT – The earnest money given to the Builder by the Buyer at the signing of the contract. The amount of the down payment can vary depending on the total cost of the project.
EXTRA/OVERAGES – The item costs for which the Buyer is responsible that exceed the allowances in the contract. (Example: Allowance for fill dirt may be $4000, actual cost could be $5500, Extra/Overage = $1500) Extras/Overages must be paid by the Buyer prior to, or as part of, the final closing financial transaction.
FINANCING (Cash) – The construction costs are paid directly to the Builder by the Buyer. A schedule of payments is established when the contract is signed.
FINANCING (Construction Loan) – The loan secured by the Buyer from a bank/lending institution to pay construction costs as the home is being built. The bank/lending institution will provide the Builder with a schedule of payments when the contract is signed. As different stages of work are completed, the bank/lending institution gives payments (or “draws”) to the Builder. The Buyer is charged financing costs by the bank/lending institution only on the amount of money “drawn” by the Builder.
FINANCING (End Loan) – A loan secured for the Buyer by the Builder from the bank/lending institution to pay construction costs as the home is being built. The Buyer is charged a fee for this type of financing.
IMPACT FEES – Fees collected by the county and the city in which any new home is built for schools, parks, fire departments, roads, and other items deemed to be impacted by additional housing. Impact fees typically exceed $8,000 per single family home, vary according to the jurisdiction, and are subject to change.
OPPOSITE SERVICE – A situation in which the electrical power source is on the side of the house opposite of the garage. This requires a special disconnect box and cable to be run across the house to the electric panel in the garage, which the Buyer will incur as an additional cost.
PUNCH LIST – The list of items made during the Walk-Through at the end of construction by the Buyer and the Builder identifying items needing attention/correction by the Builder. The list will be completed by the Builder within 30 days of closing.
REALTOR COMMISSION – The percentage of the base contract price that a realtor is paid by the Builder for bringing the Buyer to them.
SOIL BORE TEST/LOT INVESTIGATION – Testing performed by a licensed engineer to determine the stability of the soil under the proposed house slab. Both the Builder and the Buyer must be certain of the stability of the lot prior to construction. If the test was performed prior to the Buyer’s contact with the Builder, the Buyer must supply a copy of the engineer’s report to forego any further testing and related costs.
SOIL DENSITY/COMPACTION TEST – Testing required by a licensed engineer, when it is necessary to raise the level of a building lot 15” or more by adding fill dirt, to ensure the new soil is properly compacted to support the house.
SPECIFICATIONS (“Specs”) – The document containing the detailed description of requirements, dimensions, materials, etc., of the construction project. Upgrade – Items not included in the base price of the home (i.e., different roof shingles, additional fill dirt, different floor coverings, change in cabinetry finishes, lawn sprinkler system, etc.) which the Buyer adds to the contract before the contract is signed.
WALK -THROUGH – The inspection of the house and premises done prior to closing by the Buyer (or their representative) and the Builder. Items noted as needing attention/correction are are called a “punch list”, which will be completed by the Builder within 30 days of closing.
WATER & SEWER CONNECTION FEES/TAP FEES – Fees charged by the municipality in which the house is built for connecting the house to the municipality’s water and sewer systems.
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