Earnest Money on New Construction in Denver: How Builder Contracts

Buyers walk into builder sales offices every week thinking new construction works like a resale. It doesn't. The contract you sign with a builder is not the Colorado Real Estate Commission's standard form — it's a document the builder's legal team wrote to protect the builder. The earnest money terms, the contingency structure, and what it takes to walk away are all different — and in most cases, less favorable to you.

If you've bought a resale home in Denver before, you know how the standard contract works: earnest money goes into escrow, you have an inspection window, and you have a financing contingency that gives you a path out if your loan falls through. Builder contracts often strip away or narrow those protections. That's not a reason to avoid new construction — there are real advantages — but you do need to go in with your eyes open.

This post covers how earnest money works on a standard Colorado resale transaction, how builder contracts handle it differently, the specific risks that can put your deposit at stake, what's actually negotiable, and why you need independent representation before you sign anything.

How Earnest Money Works on a Standard CREC Resale Contract

Earnest money is the deposit you put down when you go under contract — it tells the seller you're serious, and it sits in escrow while the deal moves toward closing. On a standard Colorado resale transaction, earnest money is commonly around 1% of the purchase price, though it's fully negotiable and can go higher in competitive situations where you want to signal stronger commitment.

On the CREC Contract to Buy and Sell Real Estate — the state-approved form used in most Denver resale transactions — your earnest money is held by a neutral third party, typically a title company. Colorado closings run through title companies rather than attorneys, so the title company is the escrow hub.

The CREC form gives you two key ways out. First, there's an inspection objection period — in Denver practice, this is commonly set around 7 to 10 calendar days from acceptance, though it's a negotiated date, not a fixed rule. During that window, you can raise concerns based on what the inspection turns up, and if the seller won't address them, you can walk away and get your earnest money back. Second, there's a financing contingency: if your loan falls through under conditions the contract covers, you can walk away and get your deposit back.

The result is a structure where your earnest money is genuinely at risk only if you walk away for reasons outside those protected windows — or if you simply change your mind after the contingency deadlines pass. That's what makes the contrast with builder contracts worth knowing.

How Builder Contracts Handle Earnest Money Differently

Builder contracts are written by the builder's attorneys, and the differences from the CREC form show up right away in the earnest money terms.

The deposit is typically larger. Where a resale might call for roughly 1% down at signing, builder contracts often require a higher initial deposit — and many add more deposits as construction hits certain milestones. You might put down an initial deposit at contract signing, then another deposit when you make your design center selections, and potentially more at framing or other defined points in the build. Each one adds to what you have on the line.

The builder typically holds the money. On a resale, a neutral title company holds your earnest money. With many builders, the deposit goes into the builder's own escrow account — not a neutral third party. That matters: the entity holding your money is the same one you'd be in a dispute with if the deal falls apart.

The contingency protections are narrower — or gone. Most builder contracts don't include an inspection objection period that mirrors the CREC form's termination rights. Some offer a limited inspection right, but what you can object to and what you can do about it is typically far more restricted. More importantly, financing contingencies in builder contracts are often narrower than what the CREC form gives you. The window during which your deposit is protected if your financing falls through may be shorter, and the conditions under which the builder can keep your deposit if you can't close are broader.

Non-refundability triggers are explicit and binding. Builder contracts typically spell out exactly when your deposit — or portions of it — becomes non-refundable. Once you hit those points, the money is the builder's if you don't close, regardless of why.

By the time the home is framed and you've made your design selections, you may have a significant sum at stake with limited protection if something goes wrong.

The Specific Risks Buyers Face — and When Money Is Actually at Stake

Here's where the money actually gets put at risk.

Your financing falls through after the contingency window closes. Builder contracts often include a financing contingency, but the window is typically shorter and the conditions more specific than the CREC form's. If your loan is denied — or your financial situation changes — after that window closes, the builder may be entitled to keep your deposit. Under the CREC form, you'd typically have more protection in the same situation.

You try to exercise an inspection right the contract doesn't actually give you. It's easy to assume you have the same inspection rights you'd have on a resale. You don't. If the builder contract doesn't include a meaningful inspection objection period, raising concerns about construction quality after the fact doesn't give you a way to walk away and get your deposit back. You may have recourse through warranty claims after closing, but that's a different situation than walking away before you close.

Construction delays push your closing past your rate lock. This is one of the most common risks in Denver new construction right now, and one of the least talked about. Rate locks matter. Most rate locks run 30 to 90 days. New-construction timelines routinely slip by weeks or months. If your builder is running behind and your rate lock expires, you face a choice: pay to extend the lock, re-lock at whatever rate is current (which may be higher), or try to close on a timeline the builder isn't meeting. None of those options are free, and the contract may not give you a way out even if the delay is the builder's fault.

You walk away for personal reasons after the non-refundable trigger. Life changes — job relocations, relationship changes, financial shifts. Under the CREC form, if you walk away before the contingency deadlines pass, you typically get your earnest money back. Under a builder contract, if you've crossed the non-refundable threshold, the builder keeps the deposit. The further along in construction you are, the more money is at stake.

What you have at stake adds up across milestones. If you've made an initial deposit at signing, a second at design selections, and a third at framing, the total you have on the line by mid-construction can be substantial. Each deposit is subject to the non-refundability terms in the contract, and those terms don't reset between milestones.

What Buyers Can Actually Negotiate in a Builder Contract

Builder contracts are presented as standard and non-negotiable. Some of them largely are — particularly with large national production builders. But it's worth pushing on that, especially with smaller local and regional builders who have more flexibility.

Here's what's worth raising before you sign:

• Refundability window. Ask whether the initial deposit can stay fully refundable for a defined period — even 10 to 14 days — while you do your due diligence. Some builders will agree to this, particularly if you're early in the process.
• Financing contingency language. The CREC form's financing contingency gives you meaningful termination rights if a loan falls through. Ask whether the builder will include comparable language, or at minimum a longer window before the deposit becomes non-refundable if your financing falls through.
• Inspection rights. Even if the builder won't grant a full CREC-style inspection objection period, ask for the right to have an independent inspector on-site at framing and before drywall. This doesn't give you a termination right, but it gives you documentation and something to stand on with warranty claims.
• Phased deposits vs. lump-sum. If the contract calls for a large lump-sum deposit at signing, ask whether it can be structured as smaller phased deposits tied to construction milestones. This limits your early exposure.
• Closing-date flexibility tied to construction completion. Ask for language that ties the closing date to actual construction completion rather than a fixed calendar date — and that gives you a remedy if the builder's delays cause you to incur rate-lock extension costs.

National production builders — KB Home, Lennar, Richmond American — have standardized contracts and legal teams that review every deviation. You'll have less room to negotiate with them. Local and regional builders typically have more flexibility, and their sales teams have more authority to make changes. That doesn't mean you'll get everything you ask for, but asking is worth your time.

Bring a buyer's agent and a real estate attorney before you sign. The builder's on-site sales rep works for the builder. You need someone in the room who works for you.

The Role of a Buyer's Agent in a New-Construction Transaction

The builder's sales office has an agent. That agent is good at their job. They are not your agent.

A buyer's agent does something the sales rep can't: they review the contract with your interests in mind. That means flagging non-standard earnest money terms, identifying gaps in the contingency protections, and pushing back on language that puts your deposit at unnecessary risk. They'll also coordinate the independent inspection — something the builder's rep has no incentive to encourage.

There's a common misconception that using the builder's preferred lender or waiving representation saves you money. The builder's preferred lender may offer incentives — closing cost credits, rate buy-downs — but those are priced into the deal. Waiving representation doesn't lower your price; it just removes the person at the table who's reading the contract on your behalf. The negotiation work that matters most in a new-construction deal happens before you sign, not after.

Earnest Money on New Construction: What to Know Before You Sign

The CREC form gives you a structured set of protections: a neutral escrow holder, a negotiated inspection window, and a financing contingency with defined termination rights. Builder contracts typically narrow or eliminate those protections, require larger deposits, and include explicit non-refundability triggers that can put a significant sum at risk before the home is even finished.

Before you sign, three things matter most. First, read the earnest money and contingency terms carefully — specifically, when deposits become non-refundable and under what conditions the builder can keep them. Second, bring independent representation: a buyer's agent who has reviewed builder contracts before, and ideally a real estate attorney for the contract review itself. Third, understand the phased deposit schedule and how much you have on the line at each construction milestone, not just at signing.

New construction in Denver can be a good buy. The contract just requires more preparation than a resale.

Buying New Construction in Denver? Let's Talk Through the Contract First.

The builder's sales office can walk you through floor plans, finishes, and move-in timelines. What they can't give you is independent advice on a contract written to protect the builder.

I work with buyers on new-construction purchases in Denver and I know how builder contracts differ from the CREC form — where the gaps are, what's worth negotiating, and what your deposit exposure looks like at each stage of the build. If you're looking at a new-construction home and want to go through the contract before you sign, bring the contract and your timeline. I'll bring experience with Denver builder contracts and a clear read on where the standard CREC protections diverge from what you're being asked to sign.

Check current Denver market conditions before your conversation — knowing where the broader market sits helps frame the negotiation.

Book a consultation and let's go through it together.

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Paul McCoy, Realtor | Fathom Realty | License #: FA.100105533 | (319) 325-0668 | pmccoy626@gmail.com

Paul McCoy is a licensed real estate professional in Colorado. Equal Housing Opportunity.