Glossary
Construction terms, defined.
Plain-English definitions of the residential construction terms that show up in budgets, draws, contracts, and field reports.
A
AIA (American Institute of Architects)
AIA is the professional organization for architects in the United States, best known in construction for its standardized contract documents and payment forms.
AIA G702 (Application and Certificate for Payment)
AIA G702 is the cover sheet a contractor submits to request a progress payment, certifying the amount due and percentage of work completed.
AIA G703 (Continuation Sheet)
AIA G703 is a line-item schedule that breaks down the contract value by trade, shows work completed in prior periods and current period, and tracks retainage.
Allowance
An allowance is a fixed dollar amount in the contract budget for items the buyer will select later, such as flooring, fixtures, or appliances.
As-built drawings
As-built drawings are updated versions of the original construction plans that show what was actually built, including all field changes and deviations.
B
Base bid
The base bid is the contractor’s price for the scope of work as shown in the original plans and specifications, before alternates or allowances.
Bid bond
A bid bond is a surety bond posted by a contractor when submitting a bid, guaranteeing that if the bid is accepted, the contractor will enter into the contract at that price.
Bonded warehouse
A bonded warehouse is a secure, off-site storage facility where construction materials can be stored before delivery to a job site, supported by a warehouse bond.
Builder’s risk insurance
Builder’s risk insurance is a property-insurance policy covering the project during construction against fire, theft, weather, vandalism, and other named perils.
Building permit
A building permit is government authorization to begin construction after the plans are reviewed and approved, issued by the local building department.
Buyer broker
A buyer broker is the real-estate broker representing the buyer in a residential transaction, separate from the listing agent.
Buyer walkthrough
A buyer walkthrough is the final pre-closing inspection where the buyer reviews the completed home, identifies any incomplete or defective work, and generates a punch list.
C
Certificate of Insurance
A certificate of insurance is a document issued by an insurance carrier confirming a contractor holds active liability and workers’ compensation coverage.
Certificate of Occupancy
A certificate of occupancy is the government document confirming a structure meets code requirements and is safe for occupancy.
Change order
A change order is a written modification to the construction contract that adjusts scope, cost, and timeline after the contract is signed.
Close-out
Close-out is the final phase from substantial completion to final payment, including punch list resolution, inspections, lien waivers, and document handover.
Conditional Lien Waiver
A conditional lien waiver is a vendor-signed waiver of lien rights that becomes effective only when payment is received and clears.
Contingency
A contingency is a budget reserve held against unforeseen conditions, typically 3-7% of hard cost on residential projects.
D
Draw
A draw is a periodic disbursement from a construction loan tied to documented work in place, typically 5-8 draws per residential project.
Draw Schedule
A draw schedule is the structured plan dividing a construction loan into disbursements, with percentages and milestone triggers.
Dry-in
Dry-in is the construction milestone when a building is enclosed against weather, with roof complete, windows installed, and exterior wrap applied.
F
H
Hard costs
Hard costs are direct construction expenses including materials, labor, equipment, and subcontractors, representing the bulk of a residential build budget.
Holdback (Retainage)
Holdback is a percentage of each draw payment withheld by the lender or owner until the project is complete, also called retainage.
L
Lien agent
A lien agent is a designated party, usually a title company, named to receive and centralize Notice to Lien Agent notifications on certain residential projects.
Lien waiver
A lien waiver is a document signed by a contractor, subcontractor, or supplier in which they waive their right to file a mechanics lien for work or materials provided.