What Is a Spec House?

Are you looking to buy your dream home? Consider a spec home if you want high-quality finishes and a new, move-in-ready home. A spec house or speculation house is a sample home developers build to sell short-term and as a sample for other properties within the development. Everyone from real estate investors to first-time homebuyers looking for a better price can consider a spec home. 

The many advantages of a spec home range from lower costs to immediate move-in dates. Below, you'll find the details of what a spec house is and the best time to buy one.

Understanding Speculative Houses

A spec house, short for a speculative house, is a home that a developer or builder builds without having a specific buyer in mind. It is built to sell it as a completed, move-in-ready property.

Speculative houses earned their name because developers build on the speculation that home buyers are looking for similar properties. For example, spec houses may be part of a planned urban development with amenities like a pool, gym, gardens or community center. These homes may include popular amenities or trending upgrades like certain kitchen or bathroom styles, layouts or flooring.

If you're looking for a spec home in a competitive market, you may need to offer more as these homes are designed to appeal to buyers and sell quickly. In some cases, builders create spec homes as initial properties within a development with the idea of selling potential homeowners on customized upgrades. 

How Is a Spec House Different From a Custom-Built Home?

A spec house differs from a custom home because it's already built. You won't be able to choose the floors, kitchen fixtures or other finishes. In contrast, in a custom-built home, you can add personalized touches at every stage. Of course, this has pros and cons because many buyers prefer the ease of a stylishly designed spec house over the decision fatigue, wait times and unexpected expenses of a custom home. 

Why Do Builders Construct Spec Houses?

Builders construct spec houses as an investment and business strategy. They assume the financial risk associated with building a house in the hopes of making a profit by selling the property. They may also construct spec houses to sell lots or build contracts for further development, thereby leveraging the investment in the spec house into further development. 

How Much Does a Spec House Cost?

How much a spec house costs depends on various factors, from the location and finishes to market competition. You'll generally pay less per square foot for a spec home than a similar customized home. 

Developers and builders focus on spec house-building plans that will appeal to a wide range of clients and use finishes trending in the real estate market. The goal of spec houses is to give buyers a good deal on a solid property. It's a win-win: Buyers get a great deal, and builders turn a profit while building their reputation. 

Factors that can determine the price of a spec home include:

• Size (square footage)
• Lot sizes
• Location
• Amenities and upgrades
• Neighborhood amenities
• Home design 
• Material quality
• Buyer demand

Advantages and Disadvantages of Buying a Spec House

Spec houses have both pros and cons. While you could get a high-quality, move-in-ready home, if you work with an unknown builder, you could also buy a property with poor construction or finishes. Here's an overview of the pros and cons. 

Pros

• Move in fast: You'll get a shorter construction timeline and the ability to move into a completed home without waiting for the construction process to finish.
• Low-cost new build: Opportunity to buy a newly built home at a potentially lower price than custom-built homes.
• Desirable amenities: Many spec homes are built as part of a development or growing area with excellent amenities like schools, offices, shops, recreation and more. 
• Upgrades: Even though spec houses are complete, you may be able to add upgrades or finishes.
• Extras: Because spec houses are designed to sell, they may come with additional features you won't get in a new build, like landscaping or furnishing. 

Cons

• Quality: If you don't work with a reputable, reliable builder, you could purchase a home with trendy, low-cost finishes that wear out quickly and cost more. 
• Limited availability: Developers typically only build a few spec houses at a time. In a seller's market, you may have to compete with many other buyers to secure a spec home and pay more. 
• Other construction: If you buy a spec home in the early stages of a development, you may have to live through years of neighboring construction before all amenities are available. 

How to Buy a Spec House in 7 Steps

Buying a spec house is the same as buying any other home. The unique step is locating a spec house opportunity. Here's what you need to know to buy a spec house:

1. Start researching spec house opportunities in the area you plan to buy. You can speak with local Realtors and search online to locate possible spec houses for sale. You can also check with the National Association of Home Builders. 
2. Apply for mortgage prequalification from multiple lenders and compare offers so you know how much you can afford to offer on a home. Consider different types of mortgages based on your financial situation and the property location to maximize savings on interest and fees. 
3. Work with a real estate agent to search for spec homes and compare comparable spec home prices. 
4. When you find a home you like, work with your real estate agent to make a competitive offer.
5. After the offer is accepted, follow through on contingencies, including finalizing the mortgage and any due diligence, inspections or appraisal required by the lender. 
6. Once all contingencies are met, prepare to close on the home.
7. Congratulations! You're ready to move into your new spec home. 

Buying Your Dream Home

A spec home can offer many high-quality finishes and customized upgrades of a custom-built home at a lower cost. You'll be able to move in fast and enjoy the amenities of a brand-new home without the hassle or expense of overseeing construction. A spec home can be an excellent solution if you dream of a new home with the latest features. Ready to get started? Get more tips on how to make an offer on a house, then find online mortgage lenders or learn how to buy a house in cash without a Realtor. 

Frequently Asked Questions