A residential construction contract covers plans and specifications as contract documents, pricing structure (fixed-price or cost-plus with a fee of 10–20%), a draw schedule tied to construction milestones (foundation, framing, dry-in, mechanicals, finishes), allowances for owner selections, written change orders, builder's risk insurance, construction timeline with weather-delay terms, statutory new-home warranties (1-2-10 patterns in many states), lien waivers per draw, and walkthrough/punch-list closeout. New builds average $150–$350+ per square foot.
Residential Construction Contract Template
Reviewed by the Agiled editorial teamUpdated June 2026
Building a house is a year of decisions funded by the largest checks most people ever write. The contract that governs it has to do industrial-strength work:...
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Full template text
RESIDENTIAL CONSTRUCTION CONTRACT
Date: _______________
Project Address: _______________
PARTIES
This Residential Construction Contract ("Agreement") is entered into by and between:
Owner: _____________ ("Owner"), residing at _____________
Contractor: _____________ ("Contractor"), with principal offices at _____________, License No. _____________, insured under Policy No. _____________
CLAUSE 1 — SCOPE OF WORK
The Contractor shall furnish all labor, materials, equipment, and services necessary to construct a residential dwelling at the Project Address in accordance with the plans and specifications prepared by _____________ (Architect/Designer), dated _____________, attached hereto as Exhibit A ("Plans"). The Work includes all items described in the Plans and the specification document attached as Exhibit B.
CLAUSE 2 — CONTRACT SUM
The Owner agrees to pay the Contractor the total sum of $_____________ ("Contract Sum") for the complete and satisfactory performance of the Work. This sum includes all costs, overhead, and profit unless otherwise stated herein.
CLAUSE 3 — PAYMENT SCHEDULE
Payments shall be made based on the following draw schedule:
- Draw 1: 5% ($___) upon execution of this Agreement
- Draw 2: 10% ($___) upon completion of foundation
- Draw 3: 15% ($___) upon completion of framing
- Draw 4: 10% ($___) upon roof dry-in
- Draw 5: 15% ($___) upon completion of rough-in (mechanical, electrical, plumbing)
- Draw 6: 15% ($___) upon completion of drywall and interior trim
- Draw 7: 15% ($___) upon substantial completion
- Draw 8: 5% ($___) upon final completion and issuance of Certificate of Occupancy
- Retainage: 10% ($___) held for thirty (30) days after final completion
The Contractor shall submit a written draw request with documentation of completed work. Payments are due within ten (10) business days of the Owner's approval.
CLAUSE 4 — CONSTRUCTION TIMELINE
Construction shall commence on or about _____________ and shall reach Substantial Completion on or before _____________. Substantial Completion means the dwelling is ready for occupancy and all major systems are operational. Delays due to weather, material shortages, owner-requested changes, governmental actions, or force-majeure events shall extend the completion date proportionally.
CLAUSE 5 — CHANGE ORDERS
Any change to the Plans, specifications, Contract Sum, or timeline shall be documented in a written Change Order signed by both Parties. The Change Order shall describe the change, the cost impact, and the schedule impact. No changed work shall proceed without a signed Change Order.
CLAUSE 6 — ALLOWANCES
The Contract Sum includes the following allowances for items not yet selected by the Owner:
- Flooring: $_____________
- Lighting fixtures: $_____________
- Appliances: $_____________
- Plumbing fixtures: $_____________
- Landscaping: $_____________
If the actual cost of an allowance item exceeds the budgeted amount, the difference shall be added to the Contract Sum via Change Order. If the actual cost is less, the difference shall be credited to the Owner.
CLAUSE 7 — PERMITS AND INSPECTIONS
The Contractor shall obtain all building permits and schedule all required inspections. Permit fees are included in the Contract Sum. The Contractor shall comply with all applicable building codes, zoning ordinances, and governmental regulations.
CLAUSE 8 — INSURANCE
The Contractor shall maintain general liability insurance ($1,000,000 per occurrence / $2,000,000 aggregate), workers' compensation insurance as required by law, and builder's risk insurance covering the full Contract Sum. Certificates of insurance shall be provided to the Owner before construction begins.
CLAUSE 9 — WARRANTY
The Contractor warrants all workmanship for a period of two (2) years from the date of final completion. The Contractor further provides a structural warranty of ten (10) years covering the foundation, load-bearing walls, and roof structure. This warranty does not cover defects caused by Owner misuse, normal wear and tear, or acts of nature. Manufacturer warranties shall be assigned to the Owner.
CLAUSE 10 — OWNER RESPONSIBILITIES
The Owner shall provide the Contractor with access to the Project Address, temporary utilities as needed, and timely decisions on material selections and change-order requests. The Owner shall not interfere with the Contractor's work or direct subcontractors without the Contractor's written consent.
CLAUSE 11 — SUBCONTRACTORS
The Contractor may engage subcontractors to perform portions of the Work. The Contractor shall remain fully responsible for the quality and timeliness of all subcontracted work. The Contractor shall provide a list of subcontractors to the Owner upon request.
CLAUSE 12 — LIEN WAIVERS
The Contractor shall provide conditional lien waivers with each draw request and unconditional lien waivers upon receipt of each payment. Final lien waivers from all subcontractors and material suppliers shall be provided before the retainage is released.
CLAUSE 13 — DISPUTE RESOLUTION
Any dispute shall first be submitted to mediation. If unresolved within thirty (30) days, the dispute shall proceed to binding arbitration in accordance with the rules of the American Arbitration Association, or to litigation in the courts of the state where the Project Address is located, at the election of the claiming Party. The prevailing Party shall recover reasonable attorney's fees.
CLAUSE 14 — TERMINATION
Either Party may terminate this Agreement for cause upon fifteen (15) days' written notice if the other Party fails to cure a material breach within the notice period. The Owner may terminate for convenience upon written notice, and shall compensate the Contractor for all Work completed, materials ordered, and reasonable demobilization costs. Upon termination, the Contractor shall secure the site and remove equipment within a reasonable period.
CLAUSE 15 — SITE CLEANUP
The Contractor shall maintain the site in a reasonably clean and safe condition throughout construction. Upon final completion, the Contractor shall remove all debris, temporary structures, and surplus materials, leaving the property in broom-clean condition.
CLAUSE 16 — GOVERNING LAW AND ENTIRE AGREEMENT
This Agreement is governed by the laws of the State of _____________. This Agreement, together with all Exhibits and executed Change Orders, constitutes the entire agreement between the Parties and supersedes all prior discussions and agreements. Amendments must be in writing and signed by both Parties.
SIGNATURES
Owner: ___________________________ Date: _______________
Printed Name: ___________________________
Contractor: ___________________________ Date: _______________
Printed Name and Title: ___________________________
Exhibit A — Architectural Plans and Drawings
Exhibit B — Specifications and Material Selections
- Build cost
- $150 – $350+ / sq ft
- Cost-plus fee
- 10 – 20% over costs
- Draws
- 5 – 7, milestone-verified
- Warranty pattern
- 1-2-10 in many states
What your residential construction contract should cover
Contract documents
Plans (by sheet and revision date), specifications, and the finish/selection schedule incorporated as contract documents — with an order of precedence when they conflict. The house being built is the one on these papers, not the one in anyone's memory.
Price structure: fixed or cost-plus
Fixed-price: the builder owns estimating risk, change orders adjust. Cost-plus: owner pays actual costs plus a fee (10–20%), with open-book accounting, a defined cost list (what's a 'cost' — supervision? trucks?), and ideally a guaranteed maximum price (GMP) capping the open end.
The draw schedule
5–7 draws tied to verifiable milestones — foundation complete, framing/dry-in, mechanical rough-ins inspected, drywall, finishes, substantial completion — each verified before release (lender-funded builds get inspections automatically; cash builds should buy them). Money follows work in place.
Allowances and selections
Realistic allowance amounts per category with a selection deadline calendar — late selections are the top owner-caused delay. Overages at documented cost plus the stated markup; underages credited.
Change orders
Written, priced (cost and days), signed before execution, and logged with a running contract-value total. On cost-plus builds, changes still get documented — 'plus' is not a substitute for paper.
Schedule and delays
Start date, substantial-completion target, day-for-day extensions for weather (beyond a stated normal allowance), owner delay, and change orders. Liquidated damages, if used, set at realistic per-day carrying costs — and paired with an early-completion incentive if the owner wants symmetric motivation.
Insurance and risk
Builder's risk policy covering the structure during construction (who buys it — typically the owner on custom builds, stated either way), the builder's GL and workers' comp with certificates, and subcontractor insurance flow-down.
Lien waivers per draw
Conditional waivers from the builder and major subs with each draw, final unconditional waivers at closeout. The owner's defense against paying twice — non-negotiable mechanics in every state with preliminary-notice regimes.
Warranties
The statutory or customary pattern: 1 year workmanship, 2 years mechanical systems, 10 years structural (several states mandate versions of this; some require warranty insurance). Manufacturer warranties registered and handed over in the closeout package.
Closeout
Walkthrough and written punch list at substantial completion, a punch-out window (30 days), final payment releasing on completion plus final lien waivers, and the closeout package: warranties, manuals, as-builts, permits, and the certificate of occupancy.
Typical residential construction terms (U.S., 2026)
| Item | Typical range | Notes |
|---|---|---|
| Build cost | $150 – $350+ / sq ft | Region and finish level |
| Cost-plus fee | 10 – 20% | GMP cap recommended |
| Draw count | 5 – 7 | Milestone-verified |
| Retainage | 5 – 10% | Released at punch-out |
| Build timeline | 8 – 14 months | Custom homes longer |
| Workmanship warranty | 1 year | 2 yr systems / 10 yr structural |
| Liquidated damages | $100 – $500 / day | If used; realistic carrying cost |
Costs and statutory warranty requirements vary by state. Lender-financed builds add the bank's draw-inspection regime on top of the contract's — align the two schedules before signing either.
How residential construction contracts work in practice
Fixed-price versus cost-plus
The fork every custom build faces. Fixed-price buys certainty at a premium — the builder pads for estimating risk, and every deviation is a change order negotiated from opposing sides. Cost-plus buys transparency and flexibility — the owner pays what things cost plus the fee, sees every invoice, and changes course cheaply — but owns the inflation, surprise, and efficiency risk. The hybrid that's become standard for larger customs: cost-plus with a GMP, open books below a capped ceiling, savings split stated. Whichever structure: the cost definition list (is the builder's pickup a cost? site supervision? warranty callbacks?) decides more dollars than the fee percentage.
The draw that outran the work
The catastrophic failure mode of home building: the owner (or an inattentive lender) funds draws ahead of work in place, the builder hits trouble — insolvency, another project's hole, worse — and the owner holds a 60%-paid, 35%-built house. Every protection in the contract points at this: milestone verification before release, retainage (5–10%) on every draw, lien waivers proving subs were paid from prior draws, and the right to direct-pay subs from draw funds if waivers stop arriving. An independent draw inspector costs $150–$300 per draw — the cheapest insurance in construction.
The year-two warranty claim
Drywall cracks, a door that won't latch, an HVAC zone that never balanced. The closeout package and warranty structure decide whether this is a phone call or a fight: the 1-2-10 pattern routes the claim (cosmetic settlement: year-one workmanship; the HVAC: two-year systems; foundation movement: ten-year structural), the documented walkthrough separates pre-existing punch items from new issues, and the registered manufacturer warranties cover the equipment. Builders with real warranty operations schedule an 11-month walkthrough proactively — catching year-one items inside the window instead of litigating them outside it.
Mistakes that weaken a residential construction contract
Cost-plus without a cost definition
'Costs plus 15%' with no list of what counts as a cost is an argument with a fee on top. Define included costs, excluded overhead, and the documentation standard — open books mean actual invoices.
Calendar-based draws
Draws tied to dates fund time, not construction. Milestones, verified, with retainage — money should arrive just behind the work, never ahead of it.
Fantasy allowances
The $40/yard carpet allowance against hardwood expectations is a five-figure surprise at selection time. Price allowances at the finish level the plans imply, and calendar the selection deadlines.
No weather baseline
'Weather delays excluded' without a stated normal allowance turns every rainy month into a dispute. State the assumed rain days per month; extensions apply beyond them.
Skipping the closeout package
No as-builts, no warranty registrations, no manuals — every future repair starts with archaeology. The closeout list belongs in the contract, and final payment is the lever that gets it delivered.
How to use this template
- 01
Download the residential construction contract template in Word or PDF.
- 02
Incorporate plans, specs, and the selection schedule as contract documents.
- 03
Choose the price structure — fixed or cost-plus with fee and GMP — and define costs.
- 04
Build the draw schedule: milestones, verification, retainage, lien waivers per draw.
- 05
Set schedule terms, weather baseline, change-order discipline, and insurance.
- 06
Add the warranty structure and closeout package list, then sign before breaking ground.
Skip this template if…
- Renovations of existing homes — a remodeling contract handles concealed conditions and occupied-home terms better.
- Commercial construction — different lien regimes, retainage customs, and AIA-style documents govern commercial work.
FAQs
How much does it cost to build a house?
Typically $150–$350+ per square foot depending on region, complexity, and finish level — custom and high-spec builds run well beyond. Land, site work, utilities, and soft costs (design, permits, financing) sit on top of the build number. Cost-plus contracts add a 10–20% builder fee over documented costs.
What's the difference between fixed-price and cost-plus construction?
Fixed-price: one number, the builder owns estimating risk, deviations become change orders — certainty at a premium. Cost-plus: actual costs plus a fee (10–20%), open books, flexibility — with the owner holding cost risk. The popular middle path is cost-plus with a guaranteed maximum price (GMP), capping the owner's exposure while keeping the transparency.
How does a construction draw schedule work?
The price is split into 5–7 payments tied to verifiable milestones — foundation, framing/dry-in, mechanical rough-ins inspected, drywall, finishes, substantial completion. Each draw releases after verification (lender inspection or an independent draw inspector), minus 5–10% retainage held to punch-out, with lien waivers exchanged each time. The principle: money follows work in place.
What warranty comes with a new house?
The common pattern — statutory in several states — is 1-2-10: one year on workmanship, two years on mechanical systems (plumbing, electrical, HVAC), ten years on structural elements. Manufacturer warranties on equipment and materials stack on top and should be registered and delivered in the closeout package. Ask for the builder's 11-month walkthrough practice — good ones schedule it proactively.
How do lien waivers protect a homeowner during construction?
Subcontractors and suppliers who go unpaid can lien the home even if the owner paid the builder in full. Conditional lien waivers collected with each draw — from the builder and major subs — prove the money flowed through, and final unconditional waivers at closeout clear the title. A contract without lien-waiver mechanics leaves the owner exposed to paying for the same framing twice.
What happens if construction runs late?
The contract should set a substantial-completion target with day-for-day extensions for weather beyond a stated baseline, owner-caused delays, and change orders — and, if the parties want teeth, liquidated damages at a realistic daily carrying cost ($100–$500/day covering the owner's rent and interest). Symmetric contracts pair the penalty with an early-completion bonus.
Pair it with the construction invoice template
The contract sets the terms — the invoice collects on them. Free download with the right line items pre-filled.
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