SPEC HOUSE: Should I Rather Build Or Buy?

spec house
Image source: securebuilt

A spec house is one of the best investments you can make. Purchasing a rental property is obviously one of the best ways to start investing in real estate. If you decide to purchase a spec house, you can take advantage of a number of benefits. We will guide you through this post by listing down the tips for buying a spec house and ways of making an offer for a spec house building as well.

Spec House

A new home built by a home builder on the assumption that it will sell quickly and for a profit is known as a “spec house,” which is short for “speculative house.” These move-in-ready homes are created by builders to be as desirable to buyers as possible. In other words, a speculative home builder builds the home based on theorizing about what prospective homeowners want.

The Cost of Building the Spec House

A spec home typically costs less per square foot than an equivalently customized production home or a custom-built home. Quality home builders invest their money in house plans that they are confident will result in sturdy structures. Giving homebuyers a good value on a solidly constructed house is the aim.

What Factors Affect the Cost of Building a Spec House?

The cost of building a spec house will depend on a few things, such as the following:

  • An abundance of vacant lots
  • Features and improvements
  • Values of nearby homes in a specific neighborhood
  • The home’s design
  • Material excellence
  • Square feet
  • Demand and supply

The Benefits And Drawbacks Of Buying A Spec Home

Let’s go over the benefits and drawbacks of purchasing a spec home.

The Advantages of Buying a Spec House

  • New residences that are ready for occupancy. You don’t need to be concerned about replacing the countertops or cabinetry, or whether the roof is in poor condition. You’ll get to settle into a lovely house right away.
  • They are inexpensive. A spec home costs a lot less than a personalized one. Builders often work to keep expenses under control when they construct, taking into account factors including size, design, and the caliber of the materials utilized.
  • The waiting period for the building is minimal to nonexistent. You probably won’t have to wait too long for the spec home to be ready to move into, even if you decide to customize a few elements to your taste, like the color of the countertops.

The Disadvantages of Buying a Spec House

  • Customization options are limited. The majority of the characteristics are selectable by the builder. Whether it’s to your taste or not, they will base it on what they think purchasers want in a new house.
  • Fixed floor plan: You won’t have a choice in the layout. Once more, the decision will be up to the builder.
  • The residence will be standard. Spec homes frequently have fairly simple floors, cabinetry, paint hues, and other features. The majority of spec homes resemble other spec homes that the builder has previously constructed.
  • Unable to select the property or the area. The spec house will already be constructed or nearly constructed when you look at it, so you cannot choose the lot or community where it is situated.

When Is a Spec House The Right Time To Buy?

You might want to think about purchasing a spec house from a nearby builder (particularly when you want to negotiate a deal). Try to purchase them during times of low demand, such as the dead of winter or close to significant holidays. Your real estate agent may also guide you through the process of purchasing a home and assist you in choosing the ideal time to do so in your neighborhood.

Can the Cost of a New Home be Negotiated?

Since builders frequently construct a number of comparable spec homes, the cost of the particular design will probably be established. They could want to remain with their base pricing rather than engage in negotiations with you. You might be able to haggle the price, though, depending on your particular circumstances.

You can think about requesting the seller to pay your closing fees as part of a negotiation. For your lender to process your real estate deal, you must pay closing costs. Closing costs cover expenses incurred during the home-buying process, such as origination fees, appraisal fees, title searches, and other expenses.

If the house hasn’t been built yet, you might be able to bargain for upgrades like better-quality cabinetry, countertops, or carpet. With this approach, you can maintain a lower price while getting a finer house.

Be aware that a spec home may occasionally be constructed for you and sold as-is. If you want to make any alterations to it, you could have to pay for them after you’ve bought the house. Builders could occasionally refuse to improve as you want.

Spec House Building

Speculative home construction is currently one of the newest real estate trends. A spec home is one that is constructed on the off chance that it may eventually be purchased by a buyer. In other words, these brand-new, custom-built homes are finished or nearly finished before they have been really sold. This strategy has a lot of benefits and drawbacks.

Advantages for the Spec House Building Seller

The following are the advantages of a spec house building for sellers:

#1. It is Simpler in Selling Than Older Existing Homes

Brand-new custom homes, then, should be simpler to sell than older existing homes. Easier to Sell Than Existing Homes This is due to the fact that they have few if any, issues given that everything is brand new and covered by a warranty.

#2. Fewer Rivals 

Like bespoke homes, spec homes are exceptional and of high quality. There are consequently fewer comparable houses available on the market at any given time. Because of the reduced level of competition, it is frequently simpler to sell them.

#3. Potential Large Return on Investment

You have a strong chance to get a sizable return on your investment if your spec home sells quickly, particularly if it sells before it is finished.

Disadvantages for the Seller on Spec House Building

The following are the disadvantages of a spec house building for sellers

#1. Finding the Right Buyer Is Difficult 

Building spec homes may have many advantages, but there are also significant hazards. You are taking a significant chance that you won’t find a buyer who genuinely loves your choices because you are custom-creating a home without the actual buyer being engaged.

#2. Your Profits Will be Reduced by a Slower Sale.

As you have to pay interest on the loans you took out to finance your project, your profits will drop the longer your spec home is on the market. You could also have to drop your asking price to sell the house if it stays on the market for too long. Your profit will be further reduced as a result.

Advantages for the Buyer on Spec House Building

#1. Save Time 

Building a bespoke home on your own takes a lot of time. You need to put some thought into the ideal design, layout, components, and finishes that you want and that work well together. Even after making the initial choices, you will need to take the time to make more choices as the building process progresses.

Even though someone else has spent all the time making these decisions, if you buy a spec home, you will still be getting a custom-built home. Typically, they are qualified designers who are already familiar with the “ideal mix of architecture, colors, and finishes.”

#2. Spend Less 

Because many spec home builders construct several homes, they have more purchasing power because they can buy various supplies in bulk. They might be in a position to give these savings to their customers.

#3. Easy Financing

Financing for a spec home is typically simpler to obtain than financing for a custom home that you build yourself. The majority of spec homes are comparable to buying an existing home because they may be bought once they are finished.

#4. Quicker Move-In Date 

Since spec homes are frequently either finished or nearly finished, you won’t have to wait months to move into your new home.

Disadvantages for the Buyer of a Spec House Building

#1. It Might not be Exactly What you Want 

If you buy a spec home that is nearly finished, many of the design and feature decisions have already been made and put into practice. They might not have the features you desire. However, if you buy a pre-built home sooner, you might be able to select some of the amenities you really desire.

#2. Features You Don’t Want Could Be Included In The Price 

Tips for buying a pre-built spec house may also entail receiving features that you don’t actually require or desire. But if you buy a pre-existing house, this is also true. But with a spec home, you get a brand-new house as opposed to buying an old one. For the benefit of being able to move in far sooner than if you were to build a home from the ground up, you might be ready to forgo paying for the extra feature.

Building a Spec House: Professional Advice

The benefits and drawbacks of purchasing a spec home have been covered thus far. Spec homes are often finished and ready for occupants at the time of purchase for homebuyers.

As an alternative, you can decide to construct and market spec homes. If you decide to construct a spec house for financial gain, keep these three suggestions in mind:

#1. Establish a Reasonable Budget and Schedule 

It’s best to be reasonable when establishing your initial budget and schedule. Don’t assume that your house will sell right away, despite the fact that spec homes are typically intended to sell quickly. Additionally, you might find yourself spending more than you anticipated on the land. It needs some guessing to estimate your prospective profit, so it’s preferable to be on the safe side.

#2. Carrying Costs Should be Taken into Account 

When creating your budget, don’t forget to account for carrying costs. The expenses incurred by owning and maintaining a property prior to selling it are known as carrying costs. Your carrying costs will increase while a house sits on the market for a longer period of time. You will be required to pay carrying costs when building and selling your spec homes, such as taxes, insurance, and mortgage payments. In the event that it takes longer to sell, we advise including a buffer in your budget.

#3. Implement Your Plans as Soon as You Can 

New investors frequently make the error of delaying planning their construction project until after the close of a plot of land. Instead, begin planning projects early so that they can be implemented immediately. This includes selecting and hiring contractors, completing construction designs and blueprints, and selecting a real estate agent. You can help save time and money by carefully planning and carrying out these steps at each stage of your project.

Tips for Buying a Spec House

A better option could be to buy a pre-built house. Purchasing a spec home has a number of advantages since spec home builders give you newly built, ready-to-use spec homes because they know that time is money.

Tips on Buying a Spec House

The process of purchasing a spec house in particular, in and of itself. Here are some tips to assist you in getting the best price while buying your dream spec house:

#1. Keep up With Your Research.

When buying, make a short list of the spec houses you want to purchase and learn more about the builders’ educational and professional backgrounds. By contacting a few regional builders’ associations, you can learn more about the spec house builders. Buying a spec house tips include checking their building resume, public documents, websites, and social media handles. These come next in tips for buying a spec house.

#2. How to Speak With a Real Estate Agent

Although a lot of home builders have recommended real estate agents, it’s among the good tips to do your research and pick an expert who can guide you through the complete spec house-buying process. Choose a specialist who has the necessary expertise and abilities to adapt the process to your needs and the circumstances at hand.

#3. Prepare to Make Concessions About the Aspects of the House.

Be at ease with the possibility that the best spec home you find won’t resemble your ideal home before searching for it. You might not have enough opportunity to make enough alterations because the house is built to the builder’s requirements. However, it is not a terrible idea to ask the builder for potential modifications and additions. They will help you upgrade the appliances and even walk you through the customizations.

#4. Seize the Opportunity to Increase Your Value.

Most of the time, spec builders won’t agree to lower their sales price, which affects the values of the nearby houses. Instead, you might ask them to make some customized changes for no additional cost.

#5. Have an Expert Inspect the House.

The most important of all the tips for buying a spec house is this one. Before you get down to negotiating, it is recommended to have your spec home professionally assessed for quality and workmanship. The most vital point is to do your own investigation and hire an expert rather than taking the builder’s advice.

Is It A Good Investment To Buy A Spec Home?

Spec houses have historically been associated negatively, although this is unfair. There may have been instances of builders making cost-saving compromises, but that is possible with any kind of construction. In actuality, spec homes strike an excellent balance between high quality and low cost.

Overall, investing in a spec home might be a wise decision. This is particularly true now that there is a serious shortage of brand-new, reasonably priced single-family houses. The following are the explanations for why investors and homebuyers alike are creating spec homes:

#1. Accessibility

In most U.S. markets, there is a significant lack of single-family, entry-level homes, necessitating the construction of new homes to fulfill demand. This is particularly true now that the market for fix-and-flip properties has become so competitive.

However, it is expensive to build a new home, and not all families can afford to do so. Pre-built spec homes are a cost-effective choice that accommodates homebuyers’ needs.

#2. Risk Minimization

Your risk can be greatly decreased by purchasing a spec home. Fixer-uppers have become a popular choice for purchasers as a result of reality television’s glamorization of the process of purchasing and refurbishing old houses. They plan to purchase a reasonably priced older property and renovate it to suit their modern tastes.

However, what we see on television doesn’t always reflect reality. Inexperienced home flippers run the danger of being caught off guard by unexpected charges. The goal of conserving money can be defeated by damages and issues that raise the cost of a renovation project.

You can have peace of mind knowing you’re purchasing a problem-free, move-in-ready house at a reasonable price by purchasing a spec home.

#3. Quick Accessibility

Due to the shortage of housing, homes are selling and closing quickly. As a result, sellers frequently have only a few weeks or months to find and move into a new house. Move-in-ready spec homes are a terrific option if you’re short on time. Within a few weeks, purchasers can preview, buy, and close on a spec home.

#4. Equitable Amenities

Spec homes are constructed by qualified experts. They frequently understand what clients want and select solutions based on popularity. Even though you might not be able to completely design your home, you’ll probably discover a pre-built home that meets your needs.

These skilled contractors can pass on savings to customers since they have access to supplies and appliances that are sold at wholesale rates. Buyers of custom homes profit from a cost-effective strategy that balances quality and amenities without compromising the inexpensive pricing.

#5. Check Before You Buy

Not least among other things, spec homes are real. Before making a decision, potential purchasers can visit the property and acquire a sense of its appearance, texture, and comfort. If you’re not too picky, moving into a recently built home will benefit you because you won’t have to deal with the stress of building and having to make judgments about style, design, layout, and materials. Professional, skilled builders hand-pick each component of a spec home.

Making an Offer on a Spec House

Making an offer is crucial when you’re ready to purchase a spec house because oral pledges are not legally enforceable in real estate deals. Realtors typically maintain a selection of standard forms that are up to date with the latest legal requirements. Keep in mind that your offer or contract to purchase a spec house must abide by all applicable federal, state, and local laws if you are not working with a Realtor. Because state laws differ, your location might need to include particular clauses.

Your real estate agent, the seller’s agent, or frequently both, will present the offer to buy a spec house to the seller after it has been created and signed.

What to Incorporate Into an Offer for a Spec House

If accepted as is, your purchase offer for the spec house will result in a legally enforceable sales agreement. The spec house offer must include every component required to act as a guide for the ultimate transaction. The following should be included in the purchase offer of a spec house:

  • Address and, on occasion, the property’s legal description
  • Market value
  • Conditions, for instance, the deal is contingent on you receiving a mortgage for a specific amount or that this is an all-cash transaction.
  • The promise of the seller to deliver a clear title (ownership)
  • Closing date objective (the actual sale)
  • The amount of the earnest money put with the offer
  • How real estate taxes, rentals, gasoline, water bills, and utility costs between the buyer and seller are to be prorated
  • Clauses state who is responsible for paying for services like termite inspections, surveys, and title insurance
  • What kind of deed will be executed?
  • A chance for an attorney to evaluate the contract, disclosure of certain environmental concerns, or other state-specific clauses is additional obligations that are unique to your state.
  • Before closing, the buyer has the option to conduct a quick walk-through inspection of the house.
  • A deadline (ideally brief) after which the offer will end
  • Contingencies

Deposit Money

The deposit you include with your housing offer for a spec house is called earnest money. It makes sense that a seller would be wary of a written offer that wasn’t backed by a cash deposit to demonstrate good faith. In most cases, the deposit is held by an attorney or realtor. It counts toward your down payment and varies from community to community.


If you state in your proposal, “This offer is contingent upon (or subject to) a certain occurrence,” that event must occur before you will proceed with the acquisition. Two typical conditions found in buying a spec house offer are as follows:

#1. Financing 

The purchaser, you, must be qualified to obtain particular financing from a lending organization. The contract will not bind you if you are unable to get the loan.

#2. Home Examination 

Within ten days of the offer being accepted, a home inspector must provide a satisfactory report on the property.

Negotiation of Price

The realtor can estimate the home’s value for you using a Comparative Market Analysis (CMA), or you can look up nearby listings on realtor.com to see how many comparable properties have recently sold. If the house needs repairs, you might also demand a lower price or repair contingencies based on the results of the inspection.

If the following circumstances apply to your scenario, you are in a strong bargaining position and appear particularly welcome to a seller:

  • You only pay in cash
  • You have received a mortgage pre-approval
  • You don’t need to sell your home in order to acquire another one.

Are Spec House Cheaper?

However, it is expensive to build a new home, and not all families can afford to do so. Pre-built spec homes are a cost-effective choice that accommodates homebuyers’ needs.

Is Building a Spec House a Good Investment?

Overall, investing in a spec home might be a wise decision. This is particularly true now that there is a serious shortage of brand-new, reasonably priced single-family houses.

Why Is It Called a Spec?

Also known as a-spec. Abbreviation of “asexual and aromantic spectrums.” People that identify as A-spec are asexual, aromantic, or partially asexual or aromantic. This encompasses demisexual, grey asexual, lithromantic, fraysexual, and similar identities, but is not restricted to them.

How Do I Buy a Spec House?

The following should be included in these purchase offers:

  • Address and, on occasion, the property’s legal description
  • Market value
  • Conditions, for instance, the deal is contingent on you receiving a mortgage for a specific amount or that this is an all-cash transaction.
  • The promise of the Seller to deliver a clear title (ownership)
  • Closing date objective (the actual sale)
  • The amount of earnest money put into the offer.

Spec House Cost How Much?

A spec home typically costs less per square foot than an equivalently customized production home or a custom-built home. Quality home builders invest their money in house plans that they are confident will result in sturdy structures. Giving homebuyers a good value on a solidly constructed house is the aim.

What Is the Opposite of a Spec House?

Typically, tract homebuilders purchase huge parcels of land and construct neighborhoods with three available floor designs. Although the customer has little control over the home’s design beyond the basic floor plan, tract homes are typically less expensive (per square foot) than spec or custom homes and have a defined, quicker timetable.

How Do Spec Homes Make Money?

Typically, investors profit from speculative properties in one of two ways. They can finance a portion of the construction costs (loan money to the builder) and earn interest or a profit share when the home is sold.

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