What is a Spec Home?
A spec house home – also known as a speculative home – is a home that a property developer builds with the speculation that they will be able to sell it quickly for a profit. Spec homes are designed based on what the builder thinks homeowners may want.
Spec homes are typically move-in ready and offer attractive features that may entice homeowners to buy, such as modern design elements, a swimming pool, or any other amenity.
Home builders rely on local real estate trends to predict which features will make the home as desirable as possible to attract buyers looking for a brand-new residence but don’t have the time or budget to build a house from scratch.
Why Buy a Spec Home?
1. Spec Homes Are Cheaper Than Custom Homes
Many homebuyers like spec homes because they offer brand new construction at a much lower price than building a custom home. So, if you want a home that has never been lived in but don’t have the budget to develop a property from scratch, a spec home is the perfect solution.
2. Move-in Ready
Spec homes are built to be move-in ready, so you don’t have to wait for months until the construction is complete. Developers are typically looking to close as soon as possible, so you can put in an offer as soon as you decide you like the property.
3. Less Risky the Building a Custom Home
Spec homes also offer brand new construction without the risk of developing it yourself. Even with the most experienced developer, there are always risks associated with building a house from the ground up that could delay construction or force you to go over budget. Since spec homes are already pre-built, the buyer has no risk of delays.
4. Feature Attractive Amenities
Developers often include attractive amenities to encourage homeowners to make an offer. They are financing the construction, which means that if no one makes an offer, they lose that investment. So, spec homes often feature sought-after amenities to ensure interest.
What Determines the Price of a Spec Home?
Local real estate sales data and trends will determine the price of a spec home. Ultimately, developers will list the house at the highest possible price they believe homeowners are willing to pay. They will base this price on the values of other surrounding properties, the cost of property lots, and the supply and demand of the local market.
They will also base the pricing on the quality of the building materials, the square footage, and the inclusion of any amenities or upgrades. Once the developers determine a listing price, they will start showing it until they get an offer and may drop the price gradually until they see interest.
When is the Right Time to Purchase a Spec House?
The best time to buy a spec house is when the developer is desperate to sell, so look for homes that have been on the market for a while if you want to get the best price possible.
It also depends on how quickly you need to move. If you have the time to wait, you may find a better deal during the slow season, which is winter for most markets. You’ll usually have more luck when there is less competition from other buyers.
Can You Negotiate the Price of a Spec House?
You can always try to negotiate, but the developer may not be willing to budge on the price. Developers typically sell spec homes at a set price that’s based on market conditions. If the demand for that type of home is strong in the area, they’ll likely wait for another buyer rather than accept a lower offer. But if it’s a strong buyer’s market and the home has been completed for a while, they may be willing to make a deal.
Even if you can’t get them to drop the price, you could always ask them to cover your closing costs or throw in additional upgrades for free. Of course, whether or not they accept it will depend on how confident they feel in getting other offers, but it can’t hurt to try.
Pros and Cons of Buying a Spec House
Pros of Buying a Spec House
Spec homes offer brand new construction at a much lower price than building a house from scratch. Plus, if the developer is anxious to sell, they may include certain upgrades and amenities at a discounted price, allowing you to get a nicer home at a reduced cost.
With a spec home, you typically don’t have to wait for construction to be completed or for the previous owner to vacate before moving in. Depending on how far along the construction process is, you can usually move in as soon as you close.
Simpler than Building a Home
Spec homes offer many benefits of building a house from scratch, yet the process is much simpler. You don’t have to agonize over the fixtures and interior design elements – all the key decisions, aside from a few optional add-ons and upgrades, are made for you.
Cons of Buying a Spec House
Can’t fully customize
The biggest downside of buying a spec house is that you can’t fully customize the design. Developers typically have a set floorplan that they offer with the ability to change a few features and design elements. But you won’t have as much control as if you built the home from scratch.
Can’t choose the location
You also don’t get to choose the location or neighborhood. The spec house will already be built in a particular area that fits the developer's vision, so you won’t have any say over the location. But you can always look at spec houses already built in a place you like.
Developers will want to close quickly
Developers typically want to close on a spec home as soon as possible so they can recoup their investment. By the time you can view the property, they will likely be looking to field offers. So, if you aren’t ready to make a move, you may miss out on a particular property if there are a limited number available.
Spec House Bottom Line
Spec houses offer an excellent opportunity to buy a newly built property at a fraction of the cost of building a custom home. They often provide attractive features, including brand new materials, and are typically move-in ready. But you don’t have as much say over the design or location of the home, plus there may not be as much room to negotiate the price. So, spec homes are great for certain homebuyers but may not be the best option for everyone.