You have a few different choices when you buy a house from a builder. You can choose each aspect of your house so that it is exactly the way you want it (custom home.) Or you can choose a speculative home (spec home) where the builder has planned how the house will be built. People often choose a spec home because they can see what they are going to get, it usually takes less time to build and it is significantly cheaper.
A spec home is a new home constructed by a builder without a particular buyer in mind. In other words, the builder has chosen the amenities and features of the home and the buyer has limited customization options. They are also called move-in ready homes, and potential buyers get to know what they are getting before they buy it.
Let’s go over the different types of homes you can get from a builder to better understand what a spec home is. Then, we’ll list the advantages and disadvantages of spec homes and what you should know when you are looking for a spec home.
Differences Between a Spec Home, a Model Home, and a Custom Home
There are some important distinctions between these three types of homes that we didn’t know when we built our new home in Lewes, Delaware.
Speculative or spec homes are homes built based on what builders think buyers are likely to buy. Once the land has been purchased, construction typically starts before any buyer has even shown interest.
Sometimes buyers may approach a builder before construction has been started. They then may have the option to choose some features and finishes of the home, but the choices are limited.
Model homes are very similar to spec homes. They are essentially spec homes with different floor plans. You usually see model home choices in subdivisions and other types of communities.
Both spec and model homes offer limited customization, if any, which is not the case for the following type of home you may choose, custom homes.
You can think of a custom home as a unique house with a specific design for a particular client. The more customization the house has, the more money you may have to pay.
When we built our new house in Lewes, we didn’t have these points clear. We were building a spec house with a particular floor plan (a model home,) but we thought we had more say on the details of the house.
We were wrong! Every time we wanted to make a change, the builder reminded us that it was not a custom home. We couldn’t understand at the time, why was so hard to buy specific material to make changes. We now know that new materials not purchased in bulk are more expensive. Labor costs may also increase because the new building choices may require more expensive specialized labor.
Disadvantages of Buying a Spec Home
The biggest, and perhaps obvious disadvantage of spec homes is that what you see is what you get. Someone else has designed the house and if you don’t like it and that is a deal breaker for you, you can always go custom. But be ready to pay for your unique taste.
And it is not only the overall design, spec homes come with specific paint colors, lighting, appliances, and kitchen and bathroom fittings. Sometimes you can make some changes for free. Most often, when changes are allowed, you have to pay more.
Advantages of Buying a Spec Home
For the average consumer, spec homes have important advantages. Once you get over the lack of customization –and it may take a while, you’ll see that it was worth it.
One of the benefits of buying a spec home is that you can save money. The builders are building the home from scratch, but they don’t need new designs or blueprints. They also know the type of material and how much they need beforehand. All this results in lower costs of material and also labor for the builder, which should translate into a lower price for buyers. Assuming you choose a reliable builder, there shouldn’t be hidden surprises once the home is built.
Another benefit is that you get a new home that is ready soon after you are ready to move in. When people have to build a custom home, they may have to wait as long as a year for their homes to be ready. It is possible to do a walk-through, buy the home, and move in within weeks when you buy a spec home.
Get Reasonable Value
There are all kinds of builders out there, but if you find a reliable builder, you should get the right value for the price of a spec home.
Since the builder buys in bulk, you know that you are not paying more than you should for the amenities included in a spec home. With custom homes, it is easy to choose expensive features that look great but add no value to the home. Some features can even add to the maintenance expense of your home.
All other things being equal, a spec home is likely to be a sound investment when compared to a custom home or a used home. Budgeting for a custom home is difficult and you won’t really know the final price until everything is completed. Used homes often come with hidden costs that you don’t find out about until you move in. You may have to make expensive repairs or replace appliances unexpectedly.
When you buy a spec home, your initial budget should not fluctuate much. And since you know that everything is brand new you shouldn’t have any unexpected expenses in the short run because everything will still be under warranty.
What to Know When You Are Looking for a Spec Home
Do Your Research
When you look for a spec home, it is a good idea to research spec home builders in the area. You can get a lot of information on the builder by searching social media, looking at their websites, and checking reviews with the Better Business Bureau. Then, you can get references from the spec builders and find out other people’s experiences with them.
Real Estate Agent and Mortgage Lender
You should consider using a real estate agent to help you through the process. It is a good idea to choose your own real estate agent and mortgage lender, even though spec house builders often have options that they will provide for you.
It is also important to be flexible when you are looking. You won’t find a spec house with all of the features you want, but you can ask about possible modifications if there is something you need. You can often change the floors or the wall coverings and light and plumbing fixtures.
What Can You Negotiate?
Normally, builders do not reduce the price of spec homes, so what they ask is likely to be the price. When they reduce the price, it reduces the value of the entire neighborhood, which hurts them, other buyers, and those who have already purchased homes in the neighborhood. Rather than trying to negotiate the price, you can try to negotiate upgrades, which adds value to the house without reducing the purchase price.
Get an Inspection
Finally, you need to have an inspection done, even though it is a brand-new house. You should choose your own inspector so that you get a completely unbiased assessment, and you can have confidence in the home. Make sure that you understand the warranty and what it covers. Different features will be covered for different periods of time.
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