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
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.
Going Into Labor ...
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
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
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.
It's Still About Location
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.
Spec Home Being Built
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
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.