Texas New Construction Contracts 2026: Builder Addenda, TREC Form 23 vs 36, and Buyer Traps

Why the Builder's Contract Is Not the Same as the TREC Form Your Agent Knows

Texas has two TREC-promulgated contracts for new home purchases, and most major Houston-area builders use neither of them. When you walk into a sales office at a DR Horton, Lennar, Perry Homes, or Highland Homes community, the contract you will be handed is a proprietary builder purchase agreement that was written by the builder's attorneys to protect the builder, not you. Understanding the difference between what TREC provides, what builders actually use, and what the Texas Residential Construction Liability Act gives you by statute is the foundation of any informed new construction purchase in Texas.

TL;DR: TREC publishes two new home contract forms: Form 23-19 (Incomplete Construction) and Form 24-19 (Completed Construction). Most major Houston builders use their own proprietary contracts. Those contracts commonly include mandatory arbitration clauses, no independent inspection contingency, preferred lender incentives that tie buyer benefits to builder financing, and limited warranty terms that begin at the builder's discretion. The Texas Residential Construction Liability Act (RCLA, Property Code Chapter 27) gives buyers a floor of rights regardless of contract language, including a mandatory 60-day notice and inspection process before any lawsuit can be filed. Builder incentives at Bridgeland and comparable Houston communities in 2025-2026 have included rate buydowns to promotional rates in the 3.5% to 5.0% range for first-year terms, plus $15,000 to $50,000 in flex cash, but always tied to using the builder's preferred lender and title company.

TREC Form 23-19 vs Form 24-19: What the State Provides

The Texas Real Estate Commission (TREC) publishes two contract forms specifically for new home transactions, both with an effective date of January 3, 2025.

Form 23-19: New Home Contract (Incomplete Construction)

Form 23-19 applies when the buyer is purchasing a home that is not yet built or is still under construction at the time of contracting. The contract contains provisions for a completion deadline, inspection rights tied to construction milestones, and seller obligations to complete construction in a specific manner. It is the appropriate TREC form for a buyer who signs a contract on a to-be-built home, a spec home with a slab just poured, or any situation where the certificate of occupancy has not yet been issued at contract execution.

Form 24-19: New Home Contract (Completed Construction)

Form 24-19 applies when the home is already complete, meaning the builder has finished construction and the home is ready for immediate occupancy. This is the form that applies to quick move-in inventory homes, model homes being sold by the builder, and new construction that was completed but never occupied before going under contract. The key difference from a resale contract is that Form 24-19 uses builder-specific warranty language rather than the standard seller disclosure provisions.

The problem: These forms are optional, not mandatory, for builders. Unlike one-to-four-family resale contracts, where TREC forms are required for licensed agents, builders in Texas are not required to use TREC forms for their own construction sales. Major national builders routinely use their own proprietary agreements, which are typically much longer, more detailed, and written with heavily favorable terms for the builder.

What Major Houston Builders Actually Use

Understanding the landscape of major builders active in the Houston area and their contracting approach is essential before your first sales office visit.

DR Horton: The nation's largest homebuilder by volume uses a proprietary purchase agreement that runs 15 to 20 pages and includes a mandatory binding arbitration clause, deposit forfeiture provisions of up to the entire earnest money amount upon buyer default, and limitations on the buyer's right to back out even for documented construction defects. The Hunterbrook Media investigation of DR Horton and Lennar contracts found that buyers who discovered mold, foundation issues, and other major defects during construction were threatened with losing their entire deposit if they attempted to terminate the contract.

Lennar: Lennar's proprietary contract similarly contains mandatory arbitration and class-action waiver provisions. A Texas Supreme Court case, Lennar Homes of Texas Land & Construction, Ltd. v. Whiteley (2023), confirmed that arbitration clauses in Lennar's original purchase agreements can bind subsequent purchasers through the doctrine of direct-benefits estoppel, meaning even resale buyers may be subject to arbitration terms written into a contract they never signed.

Perry Homes: A Texas-based builder with strong presence in Bridgeland, Harvest Green, and other Houston-area master-planned communities. Perry uses its own contract but is generally regarded as more accommodating on inspection access than the large nationals. Perry Homes has active new home listings across 19 communities in the Houston area, with 26 homes in Bridgeland alone as of early 2026, per houstonicon.com builder inventory data.

Highland Homes, David Weekley, and Coventry: These Texas-based builders tend to use proprietary contracts but have reputations for greater negotiating flexibility than the nationals, particularly on inspection access, option period rights, and preferred lender requirements.

Toll Brothers: Luxury segment builder with a proprietary contract. Toll Brothers transactions generally involve larger deposits and longer build timelines. Their contracts include detailed change order procedures with markup provisions.

When your agent accompanies you to a new construction sales office, the first document that should be reviewed before anything is signed is the builder's purchase agreement. This review is not optional and should happen before you are pressured to sign to "lock in the lot" or "secure the price."

The Five Builder Contract Clauses That Bite Buyers

1. Mandatory Arbitration and Class-Action Waiver

The most consequential clause in most major builder contracts is the mandatory arbitration provision. By signing, buyers waive their right to sue in court and must instead submit any disputes, including construction defect claims, to a private arbitration process. The clause typically also waives class-action rights. While arbitration is not inherently unfair, the practical effect is that individual buyers with defect claims face significant procedural and cost barriers compared to a public court proceeding. Some state courts have found arbitration clauses in new home contracts to be unconscionable when buyers lacked meaningful choice, but Texas courts have generally enforced them.

2. No Meaningful Inspection Contingency

Standard resale contracts in Texas give buyers an option period with the right to terminate for any reason. Builder proprietary contracts typically do not include this feature. Instead, they may allow limited inspection access at certain construction milestones (pre-drywall and final walkthrough are common) but restrict what the buyer can do with the inspection results. DR Horton's contract, for example, has reportedly required one week's notice and more than $1,000,000 in inspector liability insurance as conditions for third-party inspection access, per the Hunterbrook investigation. If you cannot walk away based on your inspector's findings, you have no meaningful inspection contingency.

3. Preferred Lender Requirements and Incentive Traps

Builder incentives in the Houston market have been substantial: the Bridgeland incentive page showed builders in late 2025 and early 2026 offering promotional FHA 5/1 ARM rates of 3.500% (6.778% APR), $10,000 to $50,000 in closing cost credits and design studio options, and in some cases six months of mortgage interest, real estate taxes, and homeowner's insurance covered by the community. The catch: every one of these incentives requires financing through the builder's preferred lender and, often, closing with the builder's preferred title company. Buyers who bring outside financing forfeit the incentives entirely.

The incentive comparison math matters. If a builder is offering a $25,000 closing cost credit when using their preferred lender, but the preferred lender's rate is 0.375% higher than your credit union's rate on a $525,000 loan, that rate difference costs approximately $1,300 per year and $39,000 over 30 years. In that scenario, the $25,000 incentive comes out ahead in the short run but may not over the life of the loan. Buyers should get a competing quote from an independent lender and run the specific payment and interest-cost math before deciding which financing path to take.

4. Change Order Pricing and Cost-Plus Markups

Builder contracts typically reserve the right to price change orders at cost plus a markup percentage. When a buyer upgrades a kitchen countertop after contract execution, or requests structural modifications during the build, the change order process may include a 10% to 20% contractor markup on materials and labor. Contracts may also allow the builder to pass through material cost increases for long build timelines. Buyers who are making substantial selections at the design center should understand that selections made at contract are locked at the quoted price, while post-contract changes are subject to the change order pricing terms.

5. Lot Premiums, Structural Options, and Price Lock Risks

Lot premiums for cul-de-sac positions, greenbelt backing, and water-view lots are common in Houston master-planned communities and can range from $5,000 to $50,000 or more above the base lot price. These premiums are typically non-negotiable and are locked into the contract price at signing. Structural option changes, such as adding a bonus room, modifying the floor plan, or upgrading the foundation specification, are priced differently from design center upgrades and are generally locked out after a defined structural deadline early in the construction timeline.

Texas Property Code and Builder Disclosure Requirements

Texas Property Code Section 5.008 governs seller disclosure requirements for residential properties, but new construction homes that have never been occupied are specifically exempt from the standard seller's disclosure obligation, per Texas statute. This means a builder selling a brand-new, never-occupied home is not required to complete the TXR Seller's Disclosure Notice that a resale seller would provide.

However, builders are subject to a separate mandatory disclosure under Texas Property Code Section 53.255 (via Texas Business and Commerce Code provisions) that requires delivery of a disclosure statement to buyers before a residential construction contract is signed. That disclosure covers the buyer's rights regarding subcontractors and suppliers, mechanic's lien risks, and the right to reserve 10% of payments for 30 days after final completion to protect against lien claims.

Builders are also subject to Texas Property Code Section 5.022 (deed restriction enforcement) and the Texas Deceptive Trade Practices Act for misrepresentations made during the sales process. Oral representations by a builder's sales representative about what will be included in the home, what the neighborhood will look like, or what amenities are planned should be confirmed in writing and incorporated into the contract before signing, because under Texas law an oral promise not in the written agreement may be unenforceable.

The Texas RCLA: Your Statutory Floor on Builder Accountability

The Texas Residential Construction Liability Act, Property Code Chapter 27, governs all construction defect claims against residential builders in Texas. Regardless of what a builder contract says, the RCLA creates a mandatory pre-litigation process that both parties must follow.

Under the RCLA, as described by Davis Business Law's analysis:

Step 1: Written 60-day notice. Before a homeowner can file any lawsuit for construction defects, they must send a written demand letter to the builder at least 60 days before filing. The letter must be sent via certified mail and must describe all known defects with reasonable specificity, including whether they are structural or cosmetic, and include supporting evidence such as photos, videos, expert reports, and inspection reports.

Step 2: Builder inspection rights. After receiving the demand letter, the builder has 35 days to inspect the alleged defects, up to three times.

Step 3: Builder settlement offer. Within 60 days of receiving the demand letter, the builder must provide a written settlement offer proposing repair, replacement, or monetary compensation.

Step 4: Homeowner response. The homeowner has 25 days to accept or reject the offer. If rejected, the builder has 10 additional days to provide a supplemental offer.

According to Fertitta and Givens' RCLA notice guide, if a homeowner refuses to allow inspection after sending the RCLA notice, their recoverable damages may be capped at the fair market value of the builder's last settlement offer. This means the process is not optional: homeowners must follow it correctly to preserve their full range of remedies.

The RCLA statute of limitations is four years for breach of contract and warranty claims, and two years for negligence and product liability claims, measured from the date the defect was discovered or should have been discovered.

Builder Warranty Types: 1/2/10 Coverage, RWC, and 2-10 HBW

Most major Texas builders provide a 1/2/10 warranty structure, either through their own warranty department or through a third-party administrator. The three layers cover different timeframes and different systems.

According to the 2-10 Home Buyers Warranty Texas program and Logan Walter's Texas builder warranty guide:

The one-year workmanship warranty is the most time-sensitive. Claims must be submitted before the one-year anniversary of closing or the builder can deny them on timeliness grounds. Buyers should schedule a comprehensive third-party inspection at the 11-month mark, not at the end of the warranty year when they may be out of time to document and submit claims.

Third-party warranty administrators operating in Texas include Residential Warranty Company (RWC) and 2-10 Home Buyers Warranty. When a builder uses one of these programs, the warranty is backed by the third-party administrator rather than solely by the builder's balance sheet, which provides additional protection if the builder goes out of business or denies a claim.

Pre-Drywall and Final Walkthrough Inspections: When to Inspect and What to Examine

Two inspection windows are standard in most Houston-area new construction contracts, though the terms and buyer rights during each window vary significantly by builder.

Pre-drywall inspection: This occurs after framing, electrical, plumbing, and HVAC rough-in are complete but before drywall is installed. This is the only opportunity to see inside the walls. A qualified inspector will look for lumber defects, inadequate fire blocking, improper electrical box placement, plumbing rough-in issues, HVAC duct routing problems, and insulation gaps. Getting a licensed third-party home inspector (not just the builder's in-house quality control representative) at this stage is critical.

Final walkthrough inspection: This typically occurs one to three days before closing. Buyers walk through the completed home with the builder's representative and document a punch list of items that need to be addressed. The practical problem is that finding significant structural or systems issues at the final walkthrough puts the buyer in a difficult position: closing is imminent, moving arrangements are made, and backing out at that stage often means losing a deposit or triggering contract penalties. This is why pre-drywall inspection matters so much.

Buyers should request, in writing, the right to have a licensed third-party inspector present at both the pre-drywall and final walkthroughs. Some builders resist this but will often accommodate a buyer-retained inspector when the request is made professionally and in advance. If a builder's contract prohibits third-party inspections at the pre-drywall stage, that is a significant red flag that warrants negotiation or reconsideration.

For related guidance on working with builders and protecting your interests at each stage, see our guide on new construction buyer representation in Houston.

Worked Example: $525K Bridgeland New Build With $35K in Upgrades and Builder Lender Incentive Analysis

A buyer purchases a new home in Bridgeland (Cypress, TX 77433) priced at $525,000 from a major regional builder. The base price is $490,000; a greenbelt lot premium adds $20,000; and a structural option for a bonus room adds $15,000. The buyer visits the design center and selects $35,000 in upgrades above the standard allowances, bringing the total contract price to $560,000.

The builder's sales representative presents the following preferred lender incentive: - 30-year fixed rate of 5.875% using the builder's preferred lender (versus 6.25% from the buyer's own bank) - $20,000 closing cost credit when using the preferred lender - Mandatory title company: builder's title affiliate

The buyer's independent lender quotes 6.125% with no closing cost credit.

Payment comparison at $560,000, 80% LTV ($448,000 loan):

At 5.875% vs 6.125%, the monthly payment difference is approximately $69. The $20,000 closing cost credit from the builder's preferred lender would take approximately 24 years of monthly savings to break even if the buyer keeps the mortgage to term. However, most buyers refinance within 7 years. If the buyer refinances in year 5, the $20,000 credit more than compensates for the slightly higher rate on 60 months of payments ($69 x 60 = $4,140 in extra payment). The builder's preferred lender wins in this scenario.

The buyer also compares the builder's title affiliate versus an independent title company. The builder's affiliate offers the same TDI-promulgated title rates (title insurance is rate-regulated in Texas, so the premium is the same) but the buyer must use the builder's preferred escrow team. The buyer decides this is acceptable and uses the builder's lender and title to capture the $20,000 credit.

Post-closing, at the 11-month mark, the buyer hires a licensed inspector for the warranty inspection. The inspector finds three items: a bedroom window with a failed seal causing fogging, a bathroom exhaust fan wired to the wrong switch, and a hair-line crack in the master shower grout. All three are submitted as warranty claims before the one-year anniversary. The builder addresses the window seal and electrical issue within 30 days; the shower grout is scheduled for repair.

At 18 months, the buyer notices a soft spot developing in the subfloor near a bathroom. This is a systems defect potentially involving a slow plumbing leak, falling within the 2-year systems warranty. The buyer documents the issue with photos, hires a plumber to assess, and submits a warranty claim with supporting evidence. Under the 2-year systems warranty, the builder repairs the supply line and replaces the affected subfloor section.

See also our resources on understanding builder warranties in Houston-area new construction and how to negotiate upgrades and lot premiums with Houston builders.

Frequently Asked Questions

Are TREC contracts required for new construction in Texas?

No. Texas law requires licensed agents to use TREC-promulgated contracts for resale residential transactions, but builders selling their own new construction are not required to use TREC forms. TREC Forms 23-19 (Incomplete Construction) and 24-19 (Completed Construction) are available from TREC's forms library, but major builders like DR Horton, Lennar, and Perry Homes use their own proprietary purchase agreements. Buyers should review the builder's contract carefully before signing and should have a buyer's agent present who understands how builder contracts differ from standard TREC forms.

What does the Texas RCLA 60-day notice actually require a buyer to do?

Under the Texas Residential Construction Liability Act, Property Code Chapter 27, before filing any lawsuit for construction defects, the homeowner must send a written demand letter via certified mail at least 60 days before filing. The letter must describe each known defect with reasonable specificity, classify defects as structural or cosmetic, and include supporting evidence. After receiving the letter, the builder has 35 days to inspect (up to three inspections) and must provide a written settlement offer within 60 days. If the homeowner refuses to allow inspection, their damage recovery may be capped. The RCLA process applies whether or not the builder's contract includes an arbitration clause.

What is covered under a Texas 1/2/10 builder warranty and what is not?

The 1-year workmanship warranty covers visible fit-and-finish defects: paint, flooring, tile, doors, cabinets, and trim. The 2-year systems warranty covers mechanical systems including electrical, plumbing, HVAC, water lines, and ductwork. The 10-year structural warranty covers the foundation, load-bearing walls, roof framing, and structural components affecting building stability. Warranties typically exclude damage from buyer misuse, drainage and grading issues, biological contaminants like mold, cosmetic issues that develop from normal settling, and items specifically carved out in the warranty document. Buyers should read their warranty booklet before the first-year deadline and submit documented claims for anything borderline.

Can a builder require buyers to use their preferred lender and title company?

Yes, but the builder cannot legally compel it without offering a corresponding incentive disclosure. Builders can and do tie incentives, including rate buydowns, closing cost credits, and design center allowances, to use of their preferred lender and title affiliate. In Texas, title insurance rates are regulated by the Texas Department of Insurance, so the base title insurance premium will be the same regardless of which title company closes the transaction. The economic choice is really about whether the builder's financial incentives justify the reduced flexibility of using builder-affiliated services. Get a full written breakdown of all incentive conditions before committing to the builder's preferred financing path.

How does the arbitration clause in a builder contract affect me after closing?

A mandatory arbitration clause in a builder purchase agreement requires that any dispute, including construction defect claims, be resolved through private arbitration rather than in court. The clause also typically includes a class-action waiver. The practical effect is that buyers with warranty disputes or defect claims must go through arbitration even if the builder's warranty department is unresponsive. Arbitration costs are generally shared between parties, and awards can sometimes be less predictable than jury verdicts. The Texas Supreme Court confirmed in Lennar Homes of Texas v. Whiteley (2023) that arbitration clauses in original purchase agreements can bind subsequent buyers through direct-benefits estoppel. Buyers who are concerned about arbitration terms should negotiate before signing: some builders will modify or remove arbitration clauses, particularly for buyers using buyer's agents who know to ask.

What lot premiums and structural options are typical in Bridgeland and similar Houston communities?

In Bridgeland, lot premiums for greenbelt-facing, water-view, or cul-de-sac positions typically range from $10,000 to $50,000 above the standard lot price, depending on the builder tier and the community phase. Structural options such as bonus rooms, additional bedrooms, extended garages, or modified floor plan configurations are priced separately from the design center allowances and typically must be selected before a structural deadline early in the construction process. According to Bridgeland builder incentive data, builders in the community have offered incentives of $15,000 to $50,000 tied to preferred lender use, promotional FHA ARM rates, and move-in ready close-by deadlines. Design center upgrades above the standard allowance are priced separately and typically subject to change order markup terms in the builder contract.

Get a Builder's Contract Reviewed Before You Sign Anything

Builder sales representatives are professionals whose job is to sell homes for their employer. They are not your advocates. Having a buyer's agent and, for significant purchases, a real estate attorney review the builder's contract before you sign is the single most cost-effective thing you can do in a new construction transaction.

Erick Harbert and The Harbert Real Estate Group at Realty Right have worked with buyers across Bridgeland, Harvest Green, The Woodlands, Sienna, and other Houston-area master-planned communities. Erick knows which builders are willing to negotiate on inspection access, which incentive structures are actually worth taking, and where the standard contract language creates unnecessary risk for buyers.

Builder representation through The Harbert Real Estate Group costs you nothing as a buyer: builders pay buyer's agent commissions. You get professional contract review, inspection coordination, and an advocate at every stage of the build at no additional cost.

Contact Erick Harbert and The Harbert Real Estate Group at Realty Right: (281) 305-2520 or [email protected]. Office: 6605 Cypresswood Dr Ste 300, Spring TX 77379. Full resources available at harbertgroup.com.

Sources: TREC New Home Contracts (Forms 23-19 and 24-19) | Texas Residential Construction Liability Act, Property Code Chapter 27 | Davis Business Law - Texas RCLA explained | 2-10 Home Buyers Warranty Texas builders program | Hunterbrook Media - builder contract investigation