What Is a Spec House? Pros, Cons, and When to Buy

Aalto Insights Team
Apr 20, 2023

Buying a home isn’t as easy as it used to be. Even though the market is simmering down, home values have more than doubled in many Bay Area neighborhoods since 2012.

Luckily, many neighborhoods are developing newly constructed, turnkey homes that are often less expensive than other new builds. These are “spec houses,” and they’re rapidly growing in popularity

In this post, we’ll explore what a spec home is, its pros and cons, the difference between a spec home and a model home, and much more.

What Is a Spec House?

A speculative house, or spec house, is a custom-built home designed for potential buyers but without a particular homebuyer in mind. Instead, the spec home builders craft these new constructions to attract a buyer after completion of the property.

Spec houses are homes typically built in new or up-and-coming neighborhoods. Usually, a developer has bought a large parcel of land and wants to build a bunch of new homes to capitalize on the real estate market. These move-in-ready homes tend to follow current real estate trends, including:

  • Open floor plans
  • Popular paint colors
  • Desirable landscaping styles
  • The latest in cabinets and countertops
  • Optimal square feet for the home price

How to Buy a Spec House

What is a spec house: couple lying on the grass

The homebuying process for a spec house isn’t any different from buying a traditional home. You start by getting pre-approved for a loan via your lender, then you make an offer and pay closing costs when the real estate transaction is complete.

In many cases, the process moves faster when buying a spec home than a new construction home or a custom build. This is because, unlike those types of homes, spec homes are move-in ready.

4 Pros of Spec Homes

Even though the end-buyer usually has no say in the custom build, there are plenty of reasons why potential homeowners should consider spec homes.

1. Homes Are Newly Constructed

The housing market can move very quickly, especially in a competitive landscape. If you want to move into a house that no one’s lived in before, spec homes are the way to go! As an added benefit, you can make it happen pretty quickly.  Unlike short sales, which are often anything but short, the entire homebuying process for a spec house can be completed in mere weeks — and sometimes just days.

2. No Renovations Required

If you lack design or construction skills or don’t have time or energy to upgrade your new home, then spec homes are perfect for you! You can move right in without having to worry about making any renovations.

3. Inspections Go Quick

Home inspections help identify potential issues with a property that you may not see right away. Since these are new builds, walkthroughs are typically a breeze.

The appraisal process can also go lightning-fast. These new houses tend to all be made the same way, which makes the research steps easy for professional appraisers. Not only do they not have to worry about the house’s history, but they can compare the home’s value to that of the other residences, all made the same way.

4. No Hassle

While creating your own custom home design can be extremely rewarding, it’s usually a lengthy, stressful, and costly process. Spec homes alleviate the burden of making every decision — big and small — because custom home builders have already made them for you. All you have to do is buy the home and move on in.

3 Cons of Spec Homes

Every house has its cons, and spec homes are no exception. Here are some of their drawbacks.

1. Pre-Made Blueprints

Spec homes come with a fixed floor plan chosen by a builder long before you ever lay your eyes on it. If you like the setup, great! However, that’s never a guarantee.

2. Completely Cookie-Cutter

When looking at spec homes, you might get the “Weeds” theme song stuck in your head because they’ll all look just the same. If you buy this type of home, you will have the same flooring, paint colors, cabinets, and features as other houses designed by custom builders.

3. Designed for Many, Not You

Custom builders draft spec home designs to meet the wants and needs of the many, so while they may be dream homes, they’re not necessarily your dream home. They might be close to the vision you have in your mind, but it’s highly unlikely that you’ll get everything you’re looking for. This doesn’t mean you can’t customize the home after moving in (within the limitations of your homeowners association if you have one). It simply means that your move-in-ready home may require some modifications.

How Much Do Spec Homes Cost?

What is a spec house: group of friends sitting together

Spec houses typically cost less than custom builds simply because you’re not individually designing every aspect of the home. Builders save money by replicating the same design over and over again, and the construction process tends to be smoother as well.

Beyond that, the cost of a spec house depends on many of the same factors as other types of homes, including:

  • Location
  • Square footage
  • Lot size
  • Features
  • Materials used
  • Design
  • Cost of labor

Spec Homes vs. Model Homes: What’s the Difference?

Model homes are to spec homes what car floor models are to the vehicle you buy.

Basically, the purpose of a model home is to showcase what the developer can do. Comparatively, spec homes are built to be sold. Model homes are often only sold after all of the spec homes are already purchased.

Since model homes are essentially the face of the entire development, they are the least customized of all the homes. If you were to walk into a model home and decide to buy a spec home based on the model home’s design, you might be able to negotiate certain features if the house you’re purchasing isn’t fully constructed yet (keyword: might). Although these customizations are nothing compared to if you were to design a home yourself, the little things can help make the home feel uniquely yours.

On the other hand, the construction for model homes is already completed, and the developers almost always sell it as-is. This may result in some wear and tear you wouldn’t experience with a spec home. Also, because they’re the house that gets shown to potential buyers in the development, model homes have probably experienced dozens if not hundreds of potential buyers walking through them.

When Is the Right Time to Buy a Spec Home?

If you’re hoping to negotiate customizations for your spec house, the best time to buy one is while they’re still getting built. It’s unlikely that a developer will make any changes to the house after they complete construction.

Like other homes, the good time to buy spec houses is usually when it’s a buyer’s market. When more houses are available than people are looking to buy, the costs of these homes will likely be less.

And while they’re nowhere near as amazing as they were a few years ago, another opportune time to buy is when interest rates are low. The lower the rates, the less your monthly mortgage payments will be.

Finally, another good time to buy a spec home is likely during major holidays or winter. This is considered the slow season in real estate, and developers aren’t expecting to sell as many homes during these periods.

Buy Your Spec Home With Aalto

What is a spec house: person sitting on a bench

Spec homes make great purchases for first-time homebuyers looking to break into the world of homeownership. They’re usually more affordable than if you were to design your own home and require less work than a fixer-upper. If you decide you want to design your next home, owning a spec home will help you determine what you like and don’t like in a house.

Many people love spec homes because they’re not daunting by design — and neither is Aalto. We’re a self-service real estate platform that exists to make your homebuying experience easy and more affordable. Whether you’re looking to buy your first home or sell your tenth, we’re here to handle the legal work, documents, and negotiations on your behalf, all for a fraction of what a real estate agent will charge you.

Are you ready to take control of your next real estate transaction? Sign up on Aalto today!

Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.

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