Definition of "Spec house"

Anna Granger real estate agent

Written by

Anna Grangerelite badge icon

1st Choice Properties , Inc

Are you speculating what a spec house means?

(sorry for the lousy pun)

The textbook spec (or speculative) house definition is “one built on an experimental basis, without an order on the books.” People often refer to spec houses as move-in ready homes. Also, you might encounter the term model homes that virtually mean spec real estate, yet with distinctive floor plans.

How do spec houses work?

Here’s the idea behind spec houses: typically, the future homeowner hires a building company or contractor to build their home exactly like they envision, right? Spec houses are not that customized. They reverse the modus operandi, its conception, and building. More specifically, a construction company will build the home with their funds instead of receiving payment from a future homeowner. They speculate that buyers like and are prone to buy these new residences. It takes approximately a year to build such a home.

Once they have finalized the house – or anytime between starting and ending construction – they sell it to potential homeowners. House-hunters can inspect the spec property beforehand and get to know what they’re about to buy.

A spec house is a more challenging undertaking.

Why is this interesting for building companies? It’s a more substantial real estate investment that can pay off better than just the construction. Instead of just selling the land to someone else, they can build a spec house on it and profit more. Sometimes contractors and building companies negotiate a deal with renowned real estate developers to take a cut out of their service in return for a piece of land.

Why is it interesting for homeowners? You get a brand new home instead of an already built one without the hassle of going through construction. The problem with a spec house is that they might not make it to your specific needs. But sometimes, even though a constructor didn’t design and complete the property tailored to you specifically, it meets everything you need and becomes a great investment opportunity. It features modern utilities and boasts the latest real estate decor trends.

Should you choose a custom home or a spec house?

You have two options to purchase an “untouched’ house from a builder. 

Choose what your home looks like with a custom home!

A custom home implies that you, as the future owner, can select (almost) every aspect of your real estate. The proprietor will work with builders, designers, architects. In fact, a “dream team’ will assemble to create and customize to your demands within a given budget.

Building these presupposes a much larger time frame. Dare we say, don’t expect finishing a custom home anywhere within a year. Consequently, we don’t recommend you go with a custom home if you have to relocate to the area quickly.

Spec homes limit your building and design input. 

A spec home is a plan an architect has just set in motion or already started building. The builders were already familiar with and have gone along with the plans. As a result, you won’t have too much wiggle room to alter the property’s fundamental elements defined in the master layout or blueprint, such as the square footage, floor plans, or the bearing walls. 

Occasionally, constructors might grant you the freedom to select a building plan yourself. You can pick the lot if you plan on building a whole subdivision. Later, you can choose the interior design elements, such as the floor and cabinet colors. 

Our final verdict is that you should opt for a spec house if moving to a new home is a time-sensitive issue. Keep in mind that a spec home is a modern construction with new finishes that will still require minor adjustments and customizations. Furthermore, nobody has ever lived there before!

 

Real Estate Advice:

Have a local real estate agent by your side when going about spec houses. Some constructors might suggest going without one as a way to lower the price for you – taking the real estate commission out of the way – but there are several negotiation aspects that will escape you if you don’t have professional and experienced help.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

An individual or business that buys someone else's equity in property but may not assume any responsibility for a loan balance. ...

In any field, from the corner store or long-term rentals, the potential gross income is the expected revenue earned from a sale or the rendering of services. The potential gross income ...

The maximum depth to which the ground normally becomes frozen in a given geographic area. The depth of the frost line is an important consideration when placing or installing pipes or any ...

Lease agreement having level payments during the contractual period. It does not have an escalation clause to allow for increased costs due to increases in inflation, taxes, or other ...

In real estate terms, many consider having corner influence an extra financial advantage when it comes to transactions in most cases. Usually, enjoying a corner influence brings an ...

Created by law usually for the right to travel to landlocked parcel of land ...

Analysis of the risks and rewards to an individual in making a particular property investment. Investment analysis considers the cost of the original investment, the investment return over ...

A legally transferable debt instrument by which the issuer agrees to pay the payee within a certain time period. Note usually pay a specified rate of interest tied to the market rate of ...

Unincorporated combination (roll-up) of limited partnerships in a real estate together as a group. It is usually more comprehensive, financially sound, and marketable than individual ...

Popular Real Estate Questions