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Spec House, Custom Build or Build on your Lot?

The underlying question one should ask when trying to decide between these three new construction options is quite simple: What do you want?

A Spec House – (Short for Speculative House) is a house that builder builds with the hopes that someone will buy it once it’s complete. The builder owns the lot, the architectural plans and reports to no one but his bank and creditors. A builder takes on a risk whenever they build spec houses in that they could lose money if they can’t find a buyer to buy it.

So why would a builder build a spec house when there’s so much risk? Control. The builder has more control over their costs and schedule. They don’t have to deal with change orders or clients’ demands.

Sometimes, Spec home builders will begin marketing their properties in the very early phase of construction. For the buyer who wants some custom features, the earlier a home goes into contract, the greater the chance the buyer has of negotiating for custom upgrades or finishes. The buyer is not part of the construction process, however.

Custom Build A custom build is where the builder builds what the client wants. The client owns the lot, hires an architect, acquires financing and hires the builder. The builder answers to the client. Custom builds for a builder can be difficult if the builder doesn’t know how to manage their client. And, they can be risky for the client if the builder doesn’t know how to manage their time or money. The reward here is that the client gets a house that truly is their own and is unique. The client is heavily involved in the construction phase and is responsible for selecting their own fixtures and finishes. The client has to be mindful of the budget and careful not to make too many changes to the house during the construction phase; and if changes are made, the client needs to understand how it impacts the budget and the timeline

Build on your Lot Some Spec Home builders provide a type of custom build. They’ll do what’s referred to as “Build on your Lot”. The client provides the lot and acquires financing, usually from the builder’s preferred lender. The client chooses the house plan and their finishes from that which is provided by the builder. Usually the architectural plans are similar to other homes the builder has already built. By controlling the plans and finishes, the builder remains in control of their costs and their schedule for the most part. Experienced Spec Home builders that provide this type of service are very regimented and allow the client to be involved in the construction of the home.

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