What Is a Spec Home?

What is a spec home?

A spec home or house or is a new, move-in-ready home, built according to a pre-determined layout and features. The builder "speculates" that they'll be able to sell this home to a buyer upon completion.

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Buying a home is one of the biggest decisions of your life. Not only is a house a huge expense, but most people buy with the intention of spending a long time in their new home. Unsurprisingly, many people want to have some control in what their home looks like, rather than just choose from the finite, pre-existing options on the market.

For this reason, new construction homes are more popular today than ever before. Home builders understand that people want to have some say in what their homes look like, which has led to a rise in the popularity of move-in ready homes, often referred to as spec homes.

In this piece, we’ll examine what a spec home is, and discuss some of the pros and cons of buying this type of property. If you’re not sure whether you should buy a new construction home or a traditional home on the market, we’ll help you figure out what makes the most sense for you.

What is a spec home?

Spec is short for “speculative." In many parts of the country, builders buy tracts of land where they think people will want to live and begin building homes there. Most often, rather than selling the land and building a custom home for individuals, building companies will build homes based on their own designs before they have buyers. In this regard, they’re building “speculative” homes with the expectation that people will one day buy them when they’re move-in ready.

When you purchase a new home from a building company, you often have two options. You can choose each element of your home before it’s built, designing it to your exact specifications. Or, you can choose a spec home, which typically comes built according to that builder's plans. It's a bit like buying the clothes off the rack. Sometimes, a home builder provides options for various features of the home, and buyers pick what they like, streamlining production while still giving them some control over the home design.

Spec homes strike a balance between amenities and reliability. Builders can show a model of a spec home to give potential buyers an idea of how their new home and community will look. They offer customers the security of knowing exactly what they’re buying while giving them a new home that nobody has ever lived in before. 

Despite their growing popularity, spec homes sometimes have a less-than-stellar reputation. Perhaps due in part to pop culture representation from shows like “Arrested Development,” spec homes have the reputation of being cheap or poorly made. While spec home construction is fast and efficient, it’s not necessarily true that they’re “bad” houses. For people looking to live in a brand new home and don’t want to wait six months or longer to design and build their dream home, spec homes offer a unique opportunity to build something brand new in just a few months.

Pros of spec homes

Homebuyers owe it to themselves to weigh all the options available to them. If you’re considering a spec home, there are a number of pros to consider.

1. Availability

Spec homes are very common these days with new developments springing up almost every day. There’s a good chance you can find a development in the early building phases, giving you a chance to work with the builder to customize many elements of your home. Plus, given how common these types of developments are, there’s a good chance you’ll find an excellent location.

When you work with a developer, it’s much faster than custom building. You can find a spec home that’s already under way, bypassing the costly and time-consuming efforts of working with an architect and navigating the bureaucracy involved with building your own house. They’re already on a building schedule, have a timeline, and regardless of the choices you make, will complete construction faster.

If you’re committed to custom building, you can complete a walkthrough and purchase the home in a day, and move in just a few weeks later. You can’t get that kind of expediency in other home buying experiences.

The housing market is unpredictable and availability of different types of real estate ranges, often contributing to significant price increases. Spec homes may be less impacted by the rest of the real estate market as they’re often creating brand new communities that don’t have real price comparisons.

2. Affordability

As mentioned before, spec homes have a “cheap” reputation. That’s in part garnered by the fact that they are more affordable than pre-built homes. But rather than being a drawback, that’s one of their greatest advantages, especially in a hot market.

Spec homes are more affordable not because of construction materials or quality, but due to construction efficiency. Quality home builders invest time in blueprints and design plans that are easy to execute and result in sturdy, reliable homes. The repeatable nature of this construction plan cuts down on costs while builders have an incentive to sell properties fast to recoup their investment, keeping prices low in the early stages of development.

3. Reduced risk

Property is one of the biggest investments a person can make. Regardless of whether or not you see a home as a financial asset, it is. You want to buy a house that will appreciate in value rather than depreciate to help secure your future.

While older homes can and do appreciate, they also require more maintenance and may come with unseen costs. Replacing older appliances, fixing old structures, and unforeseen complications that only come up in a home inspection can incur significant maintenance expenses and could lower the sale value of your home. All of these expenses put a dent in your return on investment.

When you invest in a spec home, you have the peace of mind of knowing your home, its appliances, and all components are brand new and designed with current tastes in mind. It has a better chance to appreciate without any additional investment than older homes.

4. Good amenities

Depending on where and what you buy, you may have to make some big decisions about amenities and appliances. Most of the time, when you buy an older house, you buy the appliances with it, which may not be top of the line. Between making upgrades to the house or adding desired amenities like a patio or pool, the costs of an older home often don’t end when you move in.

Spec homes benefit from home developer experience. Builders make all the important decisions regarding appliances, countertops, styles, and more based on what they know customers have liked in the past. As such, a spec home not only comes with brand new features, but with styles and designs that are trending, so you won’t have to spend more money to make changes.

Cons of spec homes

Besides the unwarranted “cheap” reputation, there aren’t many cons to spec homes. It really is a matter of individual preference. Some people just prefer older homes, and vice versa. That said, there are a few downsides to spec homes to consider.

1. The stale factor

The biggest con of spec homes is the lack of control over construction and design. Yes, you can choose certain elements of the home but the final product will look a lot like everything else in the neighborhood. You’ll have a reliable, well-built, modern home, but it will also look like everybody else’s home in the neighborhood. 

You can spruce up your home with interior design and make some exterior changes (depending on the agreements you sign to live in the community), but that may defeat the purpose of buying a spec home in the first place. Why buy a planned home when you plan to spend a bundle on changes?

Unless you manage to find and purchase a home before the builders begin work, you’ll wind up with a home that looks like everybody else’s. That’s not a problem for everyone, but if you want a home with unique character, a spec home might not be for you.

2. Location

Home developers spend a lot of time researching locations for new construction. Finding a spec home in a desirable area isn’t hard, but you may not have much choice in where your home is in the development. If you want to be close to a main street, the developer may not have a home like that available. If you’d like to be at the end of a cul-de-sac, same deal. While you can always choose the general location of your spec home, you have less choice when it comes to the specific location.

3. Builders will look to sell quickly

If you want to take your time and think a lot about your purchase, a spec home might not be for you. Most builders have several projects going at once and they’re trying to sell as many homes as possible in as little time as possible. With buyers lining up, they want to sell fast and won’t have much patience for potential buyers waffling and weighing their options.

Likewise, if you’re having difficulty selling your current home, you should get close to finalizing a deal before looking into a spec home. Spec home sales happen faster than regular real estate deals so you may wind up paying two mortgages by mistake. That said, with proper preparation and research, a spec home may be a good option for people looking for a new, semi-custom home without the hassle or expense of building from scratch.

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