What is a spec home you ask? Spec is actually short for “speculative,” and a spec home is a house a builder constructs as the first home in a neighborhood. It will align with the vision the builder has for all of the homes, and will often include all of the extras and luxury upgrades that are being offered in the community. This will be the example house that will be shown to prospective buyers, and is intended to entice buyers into purchasing a lot on which to construct their own home. Once all of the newly built neighborhood’s lots are sold and all of the houses have been built, the spec home will be put up for sale as well. Also, sometimes the spec home is sold when one phase of the neighborhood has been built, while a new construction is used for the spec home in the next phase. Now we’re going to look at the pros and cons of purchasing one of these homes.
What Can You Expect From a Spec Home?
While a spec home has never been lived in, when you purchase one, you are in fact buying a previously owned home rather than a brand new one. The house’s occupants won’t have been a family living in the house full time, sleeping in the bedrooms, cooking in the kitchen and enjoying playtime in the backyard. However, the builder’s sales team will likely have used the home as their local office. This means that they will have treated the kitchen like their breakroom, the living room like their personal office, and the nearest downstairs bathroom like a public restroom. A hired cleaning crew will likely have come in weekly to clean the home in the same way they would a small office, but only the rooms in which the sales team worked. So while the home has never been fully occupied, it is also not something that can be considered new.
No matter how many options are offered by the builder for furnishings such as countertops, cabinet faces, hardwood floor color and appliance packages, a spec home is a case of “what you see is what you get.” When you purchase a spec home, you are giving up any chance that you can make these selections yourself. However, usually the top of the line selections have been made, because the sales team has been showing this home as their “model home” to give the best impression of what any home built in the neighborhood could look like. In most cases, an interior designer on staff with the builder has thoughtfully pulled together a design palette that they believe the typical buyer would appreciate.
Pros to Purchasing a Spec Home
There are many reasons why someone might choose to purchase a spec home. For starters, in a competitive real esartate market, where buyers are jockeying for each every available lot in a new community that is being built, there is usually much less competition for the spec home. You will not be competing against multiple offers because the spec home is usually being offered on a first-come, first-served basis. At the point at which the spec home is made available, the builder is often finished with their involvement in the neighborhood. They are ready to cut their ties and move on to the next project. Because of this interest in off-loading to the remaining property, most builders don’t inflate prices on their model homes, even though they would be able to do so in our current sellers market. If you want a new home but want to avoid the competitive bedding wars that often come about when buyers all descend on the same house, a spec home might be the right choice for you.
A spec home will usually not be the largest and most expensive home in the neighborhood, but it will almost always incorporate mid-range to high-end finishes and design touches. You can be assured that the spec home will not be built using the cheapest possible materials, such as low-quality carpet, cheap light fixtures, or subpar paint. The most popular floorplan will likely be used, and you won’t be left waiting on the dreaded supply chain issues that keep so many buyers waiting for months to be able to occupy their newly built homes. The spec home hits the market when all lots in the community have been sold, not when the houses on them have been completed. So while other lots in the neighborhood are still in the clearing stage or their houses are being framed, your home is fully built and ready to move into.
Why a Spec Home May Not Be For You
If you aren’t willing to give up the freedom to make all of your design choices yourself, a spec home is not for you for obvious reasons. Once you have looked through the home, if there are deal breakers you can’t work around, such as carpet in bedrooms or a laundry room on the wrong floor of the house, you will have move on to the next community or start scouring the resale listings in your desired neighborhood. The builder will be selling the home “as is” as far as layout and design are concerned, and will not be willing to make major changes to the current state of the house.
Another thing to remember about a spec home is that the house may still be a few years old even though it hasn’t been lived in. If you are considering purchasing the spec home in a larger community, you should ask from the beginning how long ago the spec home build was completed. Big communities can take several years to finish, and if the spec home has been used as a sales office for four or five years, some parts of it have been used extensively. This means you may be purchasing a five year old roof, a five year old HVAC system and a five year old water heater. Part of the beauty of purchasing a new home is that you are starting the age clock at zero for all the components of your home that will eventually need to be replaced. You will need to ask yourself if you really want a house that has been heating and cooling a sales team through five winters and summers already. The same concern arises when you think about the appliance package that will come with your spec home. A lot can change in appliance technology over the course of four or five years, so the appliances that will come with your spec home will have a few years of wear and tear on them, and no matter how nice they were when purchased, they will no longer be top of the line models.
Location could also be a factor in your decision whether or not to purchase a spec home. The model home is likely located near the front entrance of the neighborhood. If you prefer living farther away from the main road and the traffic sounds that come along with a home near the entrance, a spec home is likely not for you. Depending on the layout of the neighborhood, a house near the entrance may be far away from things like the community pool, tennis courts and clubhouse. If proximity to neighborhood amenities is a factor in your decision, a spec house could be too far away from where you want to be.
With a spec home, there will be less price negotiation, which could be considered a good thing or a bad thing depending on how you look at this aspect of the home purchasing process. With a spec home, the builder likely has already factored in a profit margin with they list the house for a specific price, and they may not be willing to budge much on this amount. On the other hand, builders are builders generally want to avoid carrying the costs of owning and maintaining an empty property, and are looking to offload the spec home rather quickly. Builders know that the longer a spec house sits on the market, the greater the chance that it will become even more outdated or potentially damaged, which can negatively impact its value.
Do You Need a Realtor When Purchasing From a Builder?
Yes, you should definitely still work with a realtor when purchasing a spec home. Typically, a builder will either have their own realtor or a sales team. It is possible for you to use this person as your realtor for the purpose of purchasing a spec home, but it is not advisable. They will be naturally more invested in the interests of the home builder, and you need someone who is in your corner instead, someone who is working specifically for you. Your realtor may have worked with this particular builder before though, and that established rapport can work in your favor. Your realtor will be an invaluable asset when it comes to understanding the builders’ contracts and advocating for your interests. They can explain what warranties are being offered on your spec home, and assist you with various aspects of the home-buying process.