What is a spec house: Meaning, pros and cons
Quick insights
- A spec house is a new home built on “speculation” by a builder who anticipates finding a buyer for it.
- Spec homes offer a middle ground between resale homes and custom builds, providing new construction with less wait time and fewer decisions.
- Spec homes offer limited customization options compared to a fully-custom build.
The housing market might seem hot just when you’re ready to look for your perfect home. As you start your own house hunt, you might come across a term that may be new to you: the spec house. But what is a spec house, and why do you need to understand the spec home meaning as part of your journey? Let’s discuss.
What is a spec house?
The word “spec” in “spec house” is short for “speculative.” A builder or developer buys a plot of land and builds a house on it with the speculation that a buyer will come along and purchase it.
The builder makes all the design decisions, from the floor plan and exterior materials to the kitchen cabinets and bathroom tiles. The plans try to predict which features and styles will appeal to the largest number of potential buyers in a given market.
It’s like the ready-to-wear version of homeownership. Rather than commissioning a suit tailored to your exact measurements, for example, you’re buying one off the rack. However, it’s designed to fit well, with a style that tries appealing to a broad audience.
How much does a spec home cost?
In general, one of the most attractive features of a spec home is the price. You can expect to pay less per square foot on average for a spec home than for a custom-built house. This is because builders buy materials in bulk and use efficient, repeatable processes, which result in savings they then pass on to you.
The final price is determined by factors like location, square footage and the level of finishes the builder chose. High-end fixtures, premium flooring and luxury appliances will naturally drive the cost up.
Can you negotiate the price? Sometimes. If a builder has constructed several similar spec homes in a development, they often have set and similar prices. However, if the house isn't finished when you find it, you might have some wiggle room. You could potentially negotiate on certain features or even ask for an allowance to choose your own appliances.
A major cost-saving element is the floor plan. Pre-designed floor plans used for spec homes can cost between $500 and $5,000. In contrast, hiring an architect to draw up custom blueprints can run anywhere from $5,000 to $20,000. For a spec home, the builder typically rolls the cost of the floor plan into the total price of the house, saving you a separate, hefty expense.
How are spec homes constructed?
The spec home construction process is very similar to that of any other new build. The builder secures permits, preps the land, lays the foundation and frames the house. Then comes installing the roof, windows and siding. After that comes the interior work: plumbing, electrical, insulation and drywall. Finally are the finishing touches like paint, cabinets, flooring and light fixtures.
The key difference is that the builder, not the buyer, is making all the choices along the way. They select everything based on their experience and knowledge of what sells. This streamlined process allows them to work efficiently, often completing the home much faster than a custom project.
Spec home vs. custom home
You might be wondering about the differences between a spec home and a custom home. The main distinction, again, comes down to who is in the driver’s seat. A custom house is a one-of-a-kind home designed especially for a client and their chosen piece of land.
When you build a custom home, you work directly with an architect and builder from the very beginning. You get to decide every detail, from the layout of the rooms and the height of the ceilings to the type of doorknobs and the color of the grout. It’s a project tailored to your tastes and needs.
A spec home, on the other hand, doesn’t offer that level of personalization. Most, if not all, of the design choices are made by the builder before the home even goes on the market. You are buying a finished product, or one that is very close to completion.
What is the difference between a spec home and a model home?
It’s also easy to confuse spec homes with model homes, but they are different. A model home is like a floor display at a car dealership. It’s a demonstration house that shows potential buyers the builder’s craftsmanship and the variety of styles available in a housing development.
While both can be built on large plots of land, model homes are primarily sales tools. The builder furnishes and decorates them to help you visualize living there. They often sell the model home last, once the other builds have been sold.
Spec homes are built with the intention of being sold quickly. Because of this, they are often built with more upgraded features than a base-level model home would have. They might include high-end appliances, countertops or flooring to make them more attractive to homebuyers.
In some cases, if you buy a spec home mid-construction, you might even get to select some of the final finishes. Model homes, on the other hand, are typically sold “as-is,” which can include signs of wear from months of tours.
Reasons to consider buying a spec house
As you continue house hunting, you could find several compelling reasons to consider a spec home instead of a custom one:
- Move-in ready: A huge advantage is the timeline. You may find a spec house is likely already finished or very close to it. This means you can close and move in quickly, avoiding a potentially long and unpredictable construction schedule.
- Affordable new construction: You get the benefits of a brand-new home, including modern systems and energy efficiency, often at a more accessible price point than a custom build.
- Faster financing: Lenders typically need a certificate of occupancy and an independent appraisal before finalizing a mortgage on new construction. Because a spec home is nearly or fully complete, you can typically lock in your mortgage rate faster.
- A more finalized asking price: With a custom build, the initial base price can increase due to upgrades or construction delays. A spec home comes with a set asking price, just like a resale home, so you know what you are paying from the start. You can see the finished quality for yourself before committing.
- Little to no wait time: It takes an average of just over six months to complete a move-in-ready home like a spec home, while owner-built homes may take nearly 14 months. Translation: a spec home may get you in the door far sooner.
What are the disadvantages of buying a spec home?
Of course, there are some potential downsides to consider as well:
- Limited customization: This is the biggest trade-off. You don’t get to choose the floor plan, finishes or fixtures. The house is designed to appeal to many, so it might not be a perfect reflection of your personal style.
- Fixed floor plan: If you were dreaming of an open-concept living area but the spec home has a more traditional, sectioned-off layout, there isn’t much you can do about it without undertaking a major renovation later.
- Generic home: Because they are built for mass appeal, spec homes can sometimes lack character. Your house might look very similar to others in the neighborhood.
- Paying for unnecessary features: The builder may have included upgrades you don’t particularly want or need, but the building costs are baked into the home’s price.
- Unable to choose your lot or neighborhood: The builder has already selected the location. If you love the house but aren’t thrilled with the lot size, the street or the neighborhood, you’re out of luck.
How to buy a spec home
If you think a spec home might be right for you, start by finding a real estate agent who has experience with new construction. They can help you find available spec homes from various home builders in your desired area and within your budget.
When you find a home you like, tour it thoroughly. Pay attention to the quality of the construction and the finishes. Ask the builder or their representative about warranties, which are a common and valuable feature of new homes. And don’t forget about a home inspection. Even though the home is brand new, plenty of issues could pop up.
Once you decide to move forward, you’ll make an offer, secure financing and proceed to closing, much like you would with any other home purchase.
In summary
A spec home occupies a unique and valuable space in the real estate market. It offers the excitement and benefits of a brand-new house without the long wait and endless decisions of a custom build. While you admittedly sacrifice personalization, you gain convenience, speed and maybe a more predictable budget.
Now that you know what a spec home is, you can better evaluate whether this move-in-ready option is the perfect fit for your lifestyle and homeownership goals. If you’re ready to skip the stress of a custom build and start living, a spec home might just be the fast track to a dream home you’ve been looking for.
