Most cost conversations stop at the number. What does it cost per square foot, what does the site work add, what is the all-in range. We have written about that at length, and it matters.
But once a family is close to signing, the question changes. It is no longer “how much?” It is “where does my money actually go, and what protects it?” That is a fair question when you are about to hand a builder a deposit and commit to a seven-figure project. The good news is that Maryland law answers a lot of it, and most families have never heard of the statute that does.
Maryland’s Custom Home Protection Act: What It Requires
Maryland’s Custom Home Protection Act (Real Property Article, §10-501 and following) applies to a very specific situation: a single-family home built for the buyer’s own residence, on land the buyer owns or previously owned, under a contract of $20,000 or more. In other words, it applies to exactly what most of our Harford County and Baltimore County clients are doing when they build on their own lot.
We are builders, not attorneys, and nothing here is legal advice. Have your own attorney read your contract. But every family should know the basics of what this law requires, because it gives you a checklist for evaluating any builder’s paperwork.
Your money is held in trust
Under §10-502, money a custom home builder receives under the contract is held in trust for the buyer’s benefit. It is meant to pay for your house, your subcontractors, and your materials, not the builder’s other obligations.
Advance payments go into escrow, or are bonded
Under §10-504, money paid in advance of the labor or materials it covers generally has to be placed in an escrow account kept separate from the builder’s regular funds. There is an exception when advance payments total no more than 5% of the contract price. The law also lets a builder use a separate escrow account for each project, requiring both the buyer’s and builder’s signatures to withdraw, or maintain a corporate surety bond instead.
In plain terms: if you pay a large deposit before work begins, you should be able to ask your builder exactly how that money is being protected, and get a clear answer.
What Maryland Custom Home Contracts Must Include
Section 10-505 requires every custom home contract to be in writing and to include several specific items. This is the part we encourage families to check line by line.
1. What a Draw Schedule Is and Why Maryland Requires One
The contract must include a draw schedule on its own sheet of paper, signed separately by the buyer and the builder. A draw schedule ties each payment to completed work. A typical one might release funds at milestones such as foundation complete, framing and dry-in, rough mechanicals inspected, drywall, trim and cabinetry, and final occupancy. The exact percentages vary by project and lender, but each draw should correspond to work you can see and verify.
2. Primary subcontractors named
To the extent known, the contract should identify the primary subcontractors who will work on your home.
3. A written change order process
The contract must state that every change is recorded as a change order specifying the change in the work and its effect on the price. This is where budgets are protected or lost. At Battaglia Homes, Tom McCord, our Pricing and Purchasing Manager, prices changes as they come up so you see the effect on your budget before you approve anything, not at closeout.
4. Warranty disclosure in bold type
The contract must state in bold whether the builder is covered by a third-party warranty program.
5. Payment reports within 30 days of each draw
After each progress payment, the builder must deliver within 30 days a list of the subcontractors and suppliers who have provided more than $500 of goods or services to date, showing which have been paid.
6. Lien waivers after final payment
The builder must provide lien waivers from subcontractors and suppliers within a reasonable time after final payment.
Section 10-506 also requires a separately signed page explaining the buyer’s risk under Maryland’s mechanics’ lien laws. That risk is simple: if a builder does not pay a subcontractor, the subcontractor may be able to place a lien on your property. The payment reports and lien waivers above exist to protect you from that outcome.
Why the Draw Schedule Protects Your Custom Home Budget
Families usually think of budget risk as “the house costs more than we thought.” That is real. On a Harford County or Baltimore County custom home, luxury custom build costs commonly run $350 to $550 or more per square foot, and a complete project budget typically runs 25 to 40% above the build cost alone.
But the less-discussed risk is cash-flow risk: paying ahead of the work, losing track of who has been paid, or discovering an unpaid supplier after move-in. A clear draw schedule, disciplined change orders, and regular payment reporting turn a large, anxious number into a sequence of smaller, verifiable steps.
That is the same principle behind how we run projects. Evelyn Testerman manages billing and payment tracking so every draw is documented, and Zach Still, our Project Supervisor, manages the jobsite milestones those draws are tied to. The goal is that you always know what has been built, what has been paid, and what comes next.
Questions to Ask Any Builder Before You Sign
- How is my deposit held: escrow, a project-specific account, or a surety bond?
- Can I see a sample draw schedule, and what milestone triggers each payment?
- Who are the primary subcontractors on my home?
- How are change orders priced, and when do I see the cost?
- Will I receive the subcontractor and supplier payment report after every draw?
- When will I receive lien waivers?
A builder who welcomes these questions is usually a builder whose paperwork is in order. A builder who deflects them is telling you something too. For more questions worth asking, see our 12 vital questions about building a custom home and our custom home builder FAQ.
Frequently asked questions
What is the Maryland Custom Home Protection Act?
It is a Maryland law (Real Property Article, §10-501 and following) that applies to single-family homes built for the buyer’s residence on land the buyer owns or previously owned, under contracts of $20,000 or more. It requires money paid to the builder to be held in trust and sets out required contract terms.
Does my custom home deposit have to be held in escrow in Maryland?
Generally, advance payments made before the related labor or materials must go into a separate escrow account, unless advance payments total no more than 5% of the contract price. A builder may instead use a project-specific escrow account or a corporate surety bond.
What is a draw schedule?
A draw schedule ties each payment to specific completed work. Maryland requires it to be on a separate page of the custom home contract, signed separately by the buyer and the builder.
How do I know my builder is paying subcontractors?
Maryland requires the builder to provide, within 30 days after each progress payment, a list of subcontractors and suppliers who have provided more than $500 of goods or services, showing which have been paid, plus lien waivers after final payment.
Ready to Talk?
If you own land in Harford County, Baltimore County, or the surrounding area and are getting close to choosing a builder, we are glad to walk you through how our contracts, draw schedules, and change orders work before you commit to anything.
Book a consultation at battagliahomesllc.com/contact or call (443) 752-5770.
Build with confidence. Live with pride.
