SPEC HOUSE: Why and When Purchase

spec house

If you prefer an already built home rather than going through the hassle of designing it and the long wait of building the house, then the spec house is perfect for you. Where spec house is concerned, someone does the building and supervising hard work, and you get to make little adjustments and settle into your new house with ease. Let’s delve into what a spec house is, its builders, and building plans.

What Is a Spec House?

There are certain houses built with specific designs. The builders’ intention is always to sell the building and never to use it himself. One unique feature of a spec house is that the builder built the house without a buyer in heart and without a demand. However, he is believing that the house will be sold. The term spec house is a short word for speculative homes and refers to a house built without a buyer but then, the builders believe buyers who will be interested in purchasing the property when it goes on sale.

Generally, builders believe some people would prefer a finished house over going over the building process themselves. Spec houses can also be seen as brand new custom-built homes that have already been completed or virtually completed. Why would a builder take such a risk? Builders construct spec houses in the hopes that they will sell them quickly and profitably to buyers. As a result, they ensure that move-in-ready homes designs will appeal to potential buyers. This also means that while building a spec house, builders develop these projects in anticipation of the features that prospective buyers may seek. Because builders build in anticipation and speculation, they keep a close eye on the real estate market and trends to determine where and what to include in any new spec house.

Key Features of A-Spec House

  • Affordability
  • Reduction of Risk
  • Instant Accessibility
  • Intense but well-balanced features

Cost Of A Spec House

To get a spec home, you’ll pay less per square foot than you would for a custom-built or similar production home. Standard spec house builders invest their resources in house plans that they are confident will result in well-built residences. Since buyers are looking for fair deals on a well-built house, keeping the cost minimal, affordable, and striking designs should be prioritized by builders. According to HomeAdvisor, the cost of building a new spec home ranges from $117,971 to $450,345, with an average of $284,158. With the above figure, a spec house will cost from $200,000 and above.

What Determines The Price Of A Spec Home?

The cost of a spec home is influenced by several factors, including the following:

  1. The law of demand and supply
  2. Availability of property
  3. Upgrades and amenities are included with this package.
  4. Home layout and design
  5. Real estate values in the immediate vicinity
  6. Building square footage
  7. Quality of Material 

Advantages Of Spec Houses To The Buyer

We outline some of the benefits of spec houses below.

#1. They are brand new move-in ready houses

This simply means you only move in with your personal belongings. You need not worry about installing any countertop or cabinet. The houses are always well designed and equipped. That is why they are called ready homes.

#2. They save time

The spec house is for anyone who is not cut out for the long process of getting an architect to design building plans, contact construction companies, or go through the rigorous process of building and furnishing a house. All you have to do is move into your house. You won’t have to wait long to move into a spec home because they are typically either built or nearing completion.

#3. The prices are reasonable

 A spec home will cost you far less than a custom home. The location, design, and quality of the materials used in the construction all play a role in determining a building’s cost. However, spec house builders use plans to control costs. With that in place, they ensure materials are effectively and efficiently utilized.

#4. Possible negotiation

If you are lucky to meet a builder who is yet to build or complete his building project, then you can negotiate with the buyer for better designs. 

#5. Easy financing

Financing a spec home is typically easier than securing financing for a custom-built property. Buying a spec home is a lot like buying an existing house because you can buy it when it’s finished.

Disadvantages Of Spec Houses To The Buyer

The following are some of the cons of buying a spec house to a buyer.

#1. Limitations on customization

Buyers’ exact taste is limited to what the builder believes they want in a spec house. This is because the builder does most of the customization and there is little a buyer can do to modify its structures.  

#2. Inability to design your floor

Well, you will have to deal with the builder’s fixed floor plan. Since you weren’t there to design it yourself. 

#3. Generic Housing

Oftentimes, a spec house cabinets, paint color, and flooring are basic and random styles.

#4. Unwanted Neighbourhood

There is no way for you to choose the location of the spec house because it will already be completed or nearing completion when you see it.

#5. Extra cost for Modifications

Any modification done on the house will be with your own money. The builder will not customize the building to suit your taste.  

Advantages Of Spec Houses To The Seller

Spec house builders enjoy the following advantages;

#1. Ease of selling new homes

As brand-new custom residences, spec homes are easier to sell than existing houses. The reason for this is that they are new and under warranty, thus there are very few issues with them.

#2. It has little or no competition 

To put it another way, there is less competition, which makes it easier to sell these products.

#3. Good ROI

Once you can sell the new spec home in time, you will get your ROI except their economy is in a recession such as during the covid-19 period.

Disadvantages Of Spec Houses To The Seller

Most often, spec house sellers or builders face the following disadvantages;

#1. Difficulties in Locating Buyers

 With no actual buyer involved, you’re running the chance that you won’t locate someone who appreciates your design decisions. Although, the best way to deal with this is to get in touch with real estate agents. 

#2. Late Sale is Usually Not Favorable

You’ll lose money if your spec home is on the market for a long time. You’ll have to pay interest on the loans you took out to finance your project if it doesn’t sell quickly. You may have to cut the price of the house if it’s on the market too long. Your profit margin will be further eroded as a result.

Building A Spec House

If you want to invest in building spec houses, following these expert tips will help you profit from the investment

#1. Late Sale Is Usually Not Favorable

Decide on an initial spending limit and a completion date that you can live with. However, make sure you are realistic while doing this. The cost of materials is variable and as such you need to ensure your budget will go a long way into the project. You may have to pay more than you anticipated for the land or other materials. It’s important to take a conservative approach when calculating your profit potential. Also ensure you include carrying costs, such as taxes, insurance, and mortgage payments.

#2. Assess the Project Development

There are certain things you will analyze here. Some of them are

  • The people living in the environment
  • The area and the king of housing design around it
  • The market
  • demography
  • The land state and so on.

#3. Get Funding

This is necessary if your source of funding is a loan. Some steps must be followed and conditions that must be met before you qualify for a loan. so this means you need to start your application early.

#4. Get Your Spec House Plans Ready

Get the relevant license and authorization as demanded by your county

#5. Start Working as Soon as Possible

You need to start work immediately your finance is ready. The more time you waste the more time it takes to complete the project and sell the spec house. Schedule interviews and hire contractors, finalize drawings and construction plans, and hire your real estate agent in this process for your spec house. You may save time and money by carefully planning and executing these steps at each stage of your project.

#6. Keep Close Ties With Real Estate Agents

Selling your house will be much faster if you keep a close touch with real estate agents. These guys are always house hunting for houses and buyers trust them to get things done in a jiffy.

Spec House Plans

Starting a project without a plan has no guarantee of success in the long run. That is why spec house builders engage several plans in building houses. In erecting a spec house, several plans are put in place. The plans include the building drawing, the means of funding, the cost of building, getting insurance, and other relevant spec house licenses. Every aspect is quite important and should never be overlooked.

Regarding the building plans, spec house builders must pay keen attention to real estate trends to build houses that buyers would love. If you are having issues deciding on a plan, you can go check out builderhouseplans.com, interest, and a whole lot of websites that have numerous house plans.

Spec House Builders

Spec house builders are investors who build houses to sell them to interested buyers. It is a

How Much Does Build Spec Homes Builders Make?

According to everythingwhat.com, spec housebuilders make about 5.9% on average per house sold. This means if you bought a house for $450,000, then the builder made a whopping $26,550 on the bargain.

Buying A Spec House

If you”d love to buy a spec house, these guidelines will be of great help to you.

#1. Make out time to research

Researching will help you make the right decision. But then, where can one get information easily?

  • Spec house builders around your location
  • Local builders
  • browse online
  • Newspaper real estate listing
  • Homebuilders association

#2. Set up an interview with builders

Having found a builder with a spec house you think is okay, schedule an interview meeting with the builder.

#3. Get a real estate agent

Look for a real estate agent who can walk you through the process of purchasing a home. Their knowledge is usually helpful. They save you a lot of time and trouble. They are always in touch with builders and may lead you to the exact house you’d love. 

#4. Get your funding ready

Before deciding to buy a house, you most certainly had thought about the means of funding. This could be your savings or mortgage loan.

#5. Be ready to compromise

Spec houses are designed with the builder plans, not yours. So most times, you’d not find a house with your exact checklist. This means you will need to be flexible and compromise some of your checklists.

#6. Get inspection

Do not just make payment because you love the house, get professionals to inspect the house. When you do this, you’d know the exact state of the house in question.

#7. Know your home warranty

Learn what your home’s warranty covers and how long it lasts. Most companies provide one year of coverage for materials like doors and flooring, two to five years for systems like plumbing and electricity, and ten years or more for serious structural faults like a fractured foundation or collapsing roof. Others provide a 10-year warranty on the entire house.

#8. Negotiate

Most often, builders are reluctant when it comes to reducing the price tag. However, a buyer can ask for an upgrade on the building. That way, you’d get more value for your money.

Conclusion

Customs houses are great because you get to design your house just the way you want it. Unfortunately, it is a rigorous process, therefore, spec houses are always on the rescue.

FAQs On Spec House

What’s The Difference Between A Spec Home And A Custom Home?

A custom house is a one-of-a-kind structure built for a specific client and area. It means working directly with a home builder or architect to plan and pick all of the things you desire for your home. While a spec home is a house built without your ideas, choice design, or style.

When Is The Right Time To Buy A Spec House?

The perfect time to purchase is when they aren’t selling many, such as amid the winter or around important holidays. Your real estate agent can also assist you in navigating the home-buying process and determining the best time to buy in your region.

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