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What Exactly is a Spec House

What Exactly is a Spec House

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What Exactly is a Spec House? A spec house, short for “speculative house,” is a property that a builder or developer constructs without a specific buyer in mind. These houses are built with the intention of being sold upon completion. Builders invest in spec houses, hoping that they’ll attract buyers with their modern designs, popular features, and prime locations.

The Cost of Spec Houses

The cost of a spec house can vary significantly depending on factors such as location, size, and finishes. According to data from the National Association of Home Builders (NAHB), the average cost to build a single-family home in the United States was $296,652 in 2019. However, spec houses can often be priced higher due to their desirable features and prime locations. For example, a spec house in a popular suburban area with high-quality finishes and a spacious layout might cost anywhere between $350,000 to $500,000 or more.

When considering the purchase of a spec house, it’s essential to compare the price with other similar properties in the area and to keep in mind the potential resale value. Additionally, don’t forget to factor in expenses such as property taxes, homeowners’ insurance, and maintenance costs to get a complete picture of the overall investment.

What Determines the Price of a Spec Home?

The price of a spec home can be influenced by several factors. First and foremost, location plays a significant role in determining the value of any property. According to Zillow, the median home value in the United States was $256,663 in 2020. However, this figure can vary greatly depending on the area, with prices being substantially higher in sought-after neighborhoods and cities.

Other factors that contribute to the price of a spec home include the size of the house, the quality of materials and finishes used, and the overall design, layout and paint a house. Furthermore, market conditions such as supply and demand, as well as economic factors like interest rates, can also impact the price of a spec home.

Can You Negotiate the Price of a Spec House?

Yes, it is possible to negotiate the price of a spec house. Builders are often more willing to negotiate on the price of a spec home, especially if it has been sitting on the market for a while. According to a 2019 survey by the National Association of Realtors, 73% of sellers were willing to negotiate on the price of their home.

When negotiating the price of a spec house, it’s important to research comparable properties in the area and to be prepared with a well-reasoned argument as to why the asking price should be reduced. Additionally, consider hiring a real estate agent with experience in negotiating spec home prices, as they can offer valuable advice and guidance throughout the process.

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How to Buy a Spec Home?

Buying a spec home involves several steps that are crucial for making a well-informed decision. Here’s a simple guide to help you navigate the process:

  1. Research: Start by researching the housing market in your desired location. Websites like Zillow and Realtor.com can provide valuable insights into current prices, trends, and available spec homes.
  2. Define your budget: Determine how much you can afford to spend on a spec home. According to the Consumer Financial Protection Bureau, it’s a good rule of thumb to aim for a home that costs no more than 2.5 times your annual income.
  3. Get pre-approved for a mortgage: Before house hunting, get pre-approved for a mortgage from a reputable lender. This will give you a clear idea of your purchasing power and make you a more attractive buyer to sellers.
  4. Hire a real estate agent: Consider working with a real estate agent experienced in spec home transactions. They can help you find the perfect property, negotiate the price, and guide you through the entire process.
  5. Tour spec homes: Visit spec homes in your desired area, paying close attention to the quality of construction, finishes, and overall design.
  6. Inspect the property: Before making an offer, hire a professional home inspector to identify any potential issues with the spec home.
  7. Make an offer: If you find a spec home that meets your needs and budget, work with your real estate agent to make a competitive offer based on market conditions and comparable properties in the area.
  8. Close the deal: Once your offer is accepted, work closely with your real estate agent, lender, and a real estate attorney (if needed) to finalize the paperwork and close the deal.

Pros and Cons of Buying a Spec House

When considering the purchase of a spec house, it’s important to evaluate both the advantages and disadvantages of this type of property. Here’s a closer look at the pros and cons of buying a spec house:


  1. Move-in ready: Spec houses are typically built with modern designs and features, making them appealing to buyers seeking a move-in ready property. According to a 2020 survey by the National Association of Home Builders, 63% of buyers prefer a new or recently built home.
  2. Less waiting time: Since spec homes are already built or near completion, buyers can move in much sooner compared to waiting for a custom home to be constructed.
  3. Lower maintenance costs: Newer homes tend to have lower maintenance costs due to the use of modern building materials and techniques. A study by the Joint Center for Housing Studies of Harvard University found that homeowners of newer homes (built in the 2000s) spent an average of $8.50 per square foot on maintenance, compared to $12.00 for homes built before 1960.
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  1. Less customization: One of the main drawbacks of buying a spec house is the limited ability to customize the property to suit your specific needs and tastes.
  2. Higher price: Spec homes can sometimes be more expensive than comparable pre-owned homes due to the builder’s need to recoup their investment and make a profit. A report by Zillow found that new construction homes were 20-30% more expensive than existing homes in 2021.
  3. Potential for lower-quality construction: In some cases, builders may cut corners or use lower-quality materials to maximize their profit margin on a spec home, which can lead to issues down the road.

By carefully considering the pros and cons of buying a spec house, you can make an informed decision that best suits your needs and budget.

What’s the Difference Between a Spec Home and a Custom Home? Which Should I Buy?

When deciding between a spec home and a custom home, it’s essential to understand the key differences between the two and consider which option best aligns with your needs, preferences, and budget.

Spec Home:

  • Move-in ready or near completion
  • Designed and built by a developer or builder without a specific buyer in mind
  • Limited ability to customize finishes and features
  • Faster move-in time compared to a custom home

Custom Home:

  • Designed and built to the specific preferences of the buyer
  • Offers a high level of customization and personalization
  • Typically takes longer to build and move into compared to a spec home
  • Can be more expensive due to the cost of custom materials and features

When deciding which option to choose, consider the following factors:

  1. Budget: Custom homes can be more expensive due to the cost of custom materials and features. However, spec homes can also come at a premium due to their modern designs and prime locations.
  2. Timeframe: If you need to move into a new home quickly, a spec home may be the better option as they are often move-in ready or near completion.
  3. Customization: If having a home tailored to your specific tastes and preferences is important, a custom home may be the better choice.
  4. Maintenance: Newer spec homes tend to have lower maintenance costs compared to older homes, while custom homes can offer better energy efficiency and higher-quality construction.
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According to the National Association of Realtors, 11% of buyers purchased new homes in 2020, with custom homes accounting for 3% of sales. Ultimately, the decision between a spec home and a custom home comes down to your personal preferences, budget, and timeline.

When is the Right Time to Buy a Spec House?

Determining the best time to buy a spec house involves considering several factors, including market conditions, your financial situation, and personal preferences. Here are some key aspects to consider when deciding on the right time to purchase a spec home:

  1. Housing market trends: Keep an eye on the housing market in your desired location. Look for trends such as increasing home prices or low inventory levels, which could indicate a strong demand for housing. According to Realtor.com, the median listing price of homes in the United States increased by 15.4% from 2020 to 2021, signaling a seller’s market.
  2. Interest rates: Mortgage interest rates can significantly impact the overall cost of purchasing a spec home. Lower interest rates can make buying a home more affordable. The Federal Reserve lowered interest rates to near 0% in 2020, resulting in historically low mortgage rates. However, it’s important to remember that interest rates can fluctuate over time, so it’s wise to monitor them closely.
  3. Seasonal factors: The housing market often experiences seasonal fluctuations, with more homes for sale during the spring and summer months. This increased inventory could provide you with more spec home options to choose from.
  4. Personal finances: Assess your financial situation to determine if you’re financially ready to purchase a spec home. Factors to consider include your credit score, job stability, savings, and debt-to-income ratio.
  5. Lifestyle and preferences: Your personal preferences and lifestyle should also play a role in deciding when to buy a spec house. If you’re planning a major life event, such as a job relocation or growing your family, it may be a good time to consider home purchasing a spec home.