CUSTOM HOME: A home designed jointly by builder and buyer, which is then built to the buyer's specifications.
SPEC HOME: A home designed by a builder, and built speculatively by the builder, who then works to find a buyer for the completed home.
Back in the height of the housing market (a.k.a. housing boom)....
- Builders were building spec home after spec home, and buyers were snatching them up as quickly as they were built --- or before the construction process was anywhere close to completion.
- Buyers were more interested in having a finished home, soon, rather than going through the "tedious" selection and customization process.
Now, after the market has cooled off quite a bit (a.k.a. housing bust?)....
- Builders are much more hesitant to build speculatively -- in fact there are very few spec homes on the market, depending on the location and price range.
- Buyers are more interested in having the ability to customize their new home to their specific preferences. They often don't want a spec home as it does not have the floor plan modification and finishes that they would have selected.
Thankfully, these desires actually coincide. There were lots of spec builds in the height of the market, and lots of buyers to buy them. There are very few spec builds now, and very few buyers to buy them.
Given the givens, here is some guidance for today's market....
Builders --- if you're going to build speculatively, put a good deal of thought into the floor plan and make sure it is going to be an attractive layout for a wide spectrum of buyers. Also, consider finishing the house through the drywall stage and then marketing it to find a buyer that can make their own selections for interior finishes.
Buyers --- talk to your lender early to know what will be possible for you. Buying a lot, obtaining construction financing, and building a custom home is quite a different financial transaction than buying a finished home with a traditional mortgage.
