Spec Homes

Spec homes have advantages and disadvantages for both the builders and the buyers. For the builder, there is a certain risk and reward ratio that many are willing to accept since the upside in most normal markets far outweigh the downsides in regard to financial rewards.

For the buyer, there is also a risk reward ratio in regard to the cost of the spec home and its quality that is also attractive to most. Let's start with the builder first, however.

Some of the advantages of building spec homes (as opposed to custom homes) is that they are based upon well known and well vetted sets of specifications. The contractor does not have to worry about changes to the blueprint or putting an English Garden in the back of the house.

Another advantage to the contractor is the relative low cost of building spec homes. These houses have been designed in such a way that they are made from low cost quality materials that are readily available and the homes can be constructed quickly.

Since labor is one of the largest costs in constructing any dwelling, spec homes usually take smaller crews and less hours, meaning more profit for the contractor. Because the blueprints have been well vetted and the contractor knows where every electrical outlet, sink, beam, and load-bearing wall goes this also adds to the time savings.

But, there is also another aspect to the well-vetted spec home plans and that every plan has been tested thousands of times around the country, so the most popular models are known along with estimated price for labor and materials. This takes out much of the guesswork of putting up spec homes and hoping they will sell later.

The disadvantages of spec homes for the builder are being caught in the wrong side of a housing bubble and the changing tastes of the consumer. If the contractor chooses the wrong location to build the spec homes this can also mean financial disaster.

For buyers there are also several advantages and disadvantages of buying spec homes. First, the advantages. Spec homes are by far cheaper than custom built homes. Because the builder can put up a spec home quickly using known, quality materials and familiar blueprints, this cost savings is passed onto the consumer.

In real estate it is all about location, location, location. Many years ago spec homes were built in beach communities for reasonable prices. Because of the location and today's desire for beach homes, many modest older spec homes are going for extraordinary prices.

Because the blueprints and models of spec homes have been standardized then repairing the house is also much cheaper than having a contractor scratch his head on where the electrical and plumbing is supposed to be as in a custom home.

Now, a few of the disadvantages of spec homes for buyers are the same as for builders. If a buyer picks a spec home in an undesirable area that never does become desirable to other home buyers then the house won't appreciate much over time.

If spec homes are put up in a community, then they all make look the same which is unappealing to some people. This lack of uniqueness may also mean that spec homes won't appreciate as much as custom homes.

Buying a spec home in a community that goes bust because the builder has not finished all of the homes and the market is on the downside of a bubble can be a bummer for some homeowners. A promised school or library may not be put up since they are based upon population growth in a certain area and if the area doesn't develop then children may need to be bused longer distances to older schools.

So, to sum up, spec homes are speculative to both builder and seller. But, the fact that spec homes are built to standard specifications and usually in desirable locations, this keeps the costs down, the quality up and the guesswork to a minimum.