Buying New Construction: Is it Better to Build or Purchase a Spec Home?
March 14th, 2024
Buying New Construction: Is it Better to Build or Purchase a Spec Home?
Are you considering moving to a new area and debating between building a home or purchasing a spec home? Here is everything you need to know about building a home or purchasing a spec home.
Starting your home search may bring along much stress and excitement. There are tons of factors to consider, from home style to size to location. However, buying a home will be one of the biggest investments of your life, and you'll have to go over each decision carefully.
Many homebuyers are searching for ways to save extra cash throughout the home-buying process. Whether that means foregoing a home in a prime location, purchasing a new-construction home, or starting from scratch by building a home, ensure your next home fits your budget, lifestyle, preferences, and family size.
Both building a home and purchasing a spec home will have their advantages and disadvantages. Luckily, there is no right or wrong answer; it'll all depend on what is best for you and your family.
No matter why you are moving, there will be many things to think about. Before you make the decision, let's quickly go over the pros and cons of building your own home and purchasing a spec home.
Keep reading to learn all about if you should build a home or purchase a spec home.
Chapters
1. What is a Spec Home?
Before we dive into the pros and cons of your options, first, you should understand what a spec home is. Although it has many names, this type of home is mostly called spec home, short for speculative house. This is a new-construction home that a home building constructs on the speculation that it will sell easily.
A spec home is typically move-in-ready, and some home builders even build multiple comparable homes in the same area. These homes are built to include what most home buyers are searching for. This can include popular amenities, upgraded appliances, and more.
Spec homes are generally less per square foot compared to customized homes. Good home builders usually choose floor plans that will fit the average buyer. A spec home is built to be attractive for the average home buyer. These are perfect for buyers who need a quick move-in process.
2. Pros of Purchasing a Spec Home
Buying a spec home comes with many advantages; depending on your situation and needs, this type of home might be perfect for you. Before making the decision, look over these pros and cons to ensure you make the right decision to purchase a spec home.
1. Quick move-in process
One of the biggest advantages of a spec home is the fast move-in process. As a result of the homes being built to fit the needs of a buyer, builders try to make the process fast. Spec homes are usually put on the market about 2-3 months before the building process is finished. This is great for buyers who quickly sold their last home or are moving out of a rental into their first home.
Some spec homes even come furnished, which not only will save you money but also make the move-in process extremely fast and easy. Keep in mind this is not all spec homes, so make sure to talk with the builder and your real estate agent to confirm.
2. Home Inspection
When buying a new home, you should always get a home inspection to ensure you are making an informed decision as to what you're putting your money towards. However, the home inspection on a new construction home will typically be a faster process.
After buying a new construction home, you will most likely do a final walkthrough where you should ask for the home inspection. Keep an eye out for the most common inspection issues like roofing issues, electrical wiring, plumbing, and structural issues. Ensure you also know how to negotiate repairs after the inspection.
3. Hands-off
Since spec homes are built for the average buyer, the builder has already made the major decisions. This is perfect for a buyer who doesn't have time or doesn't care for the minor details like the countertops, paint colors, and landscaping. All of the decisions will be made for you; all you'll need to do is move in and decorate.
3. Cons of Purchasing a Spec Home
Like any decision, purchasing a spec home will come with some disadvantages. It'll be up to you to decide if the cons outweigh the pros.
1. Limited Customizations
One of the most obvious cons of a spec home is the limited ability to customize. You can decorate your heart out, but you'll be limited on other major changes. When it comes to the layout and home design, this is completely up to the builder. Although spec home builders create homes based on the average buyer, this doesn't mean you will love every decision they make.
2. Floor Plan
The basic layout of a spec home will be fixed and decided by the builder. You most likely won't be able to add any extra rooms or change the layout to fit your family. This means a spec home isn't the best option for growing families.
If you have specific requirements in mind and the spec home doesn't meet all of them, you most likely won't be able to change them.
3. Basic Layout and Design
As a result of building for the average buyer, the builder doesn't add any personal touches for you. Typically, spec homes can seem generic and don't have unique finishing touches. After buying the home, you can always make changes.
If this is your first home, you can still decorate using interior design tricks, no matter the layout. Simply painting, considering lighting, and furnishing appropriately can go a long way.
4. Pros of Building a Home
If you want more freedom to create a unique home, building a home might be the best option, especially if you want a home that is handicap accessible. This option will allow for a lot of creativity and personalization on your part. Building a home is becoming increasingly popular, with over 1,416,000 new residential construction houses in January 2024 across the country, according to the U.S. Census.
1. Freedom
The number one reason home buyers are deciding to build a home instead of purchase one is the freedom to personalize how they see fit. You will have complete control over the home. You can add any features you want, from a beautiful inground pool to that reading nook you have always wanted.
Most home buyers will have to make many compromises when looking at homes that are already built. If you build your own, you will have the freedom to be intentional with your home. Ensure you are working with trustworthy architects and contractors to create the home of your dreams.
2. Avoid Bidding Wars
The housing market in 2024 is projected to be competitive, but it is also extremely hard to predict. If you build your own home, you'll get to avoid bidding ways all around. The process may be stressful, but you will start with buying a piece of land.
Buying land is typically much easier when the undeveloped land does not attract the same quantity of buyers as developed land. This is a great option for buyers who want to live in a more rural area with open land.
3. Market Appeal
One of the best parts of building a home is creating a space that you love. However, when it comes time to move, a custom-built home may give you a wider market appeal. Many homebuyers are attracted to unique finishes, which are not usually seen in spec homes.
5. Cons of Building a Home
Building a home will be a strenuous process and can bring on a lot of stress. However, it is usually all worth it in the end. Nevertheless, building your home will come with its own disadvantages.
1. Longer Process
Compared to buying a spec home, building a home will be a long process. According to the 2019 Survey of Construction (SOC) from the Census Bureau, the average completion time of a single-family house is approximately 8.1 months. Make sure you are in the right stage of life to start this process because it will take up a good amount of your time.
The longer process coincides with more costs. This doesn't even account for the rent you may be paying for your current housing and any extra costs along the way.
2. More Decisions
Along with the extra freedom comes important decisions, and there will be a lot. These decisions may take time, and if you're busy with work, family, or life, it can be hard to find the right balance.
3. High Budget
While there are many hidden costs when buying a home, building your own will be no different. Most likely, you'll start the process with a budget in mind, but be prepared to surpass it. It is recommended to have extra savings for the expenses you didn't anticipate.
Methodology
We used information and data from several different sources, as well as our own data, to determine if you should build a home or purchase a spec home. Most of the data was sourced from the following sources:
FAQ: Is it Better to Build or Purchase a Spec Home?
Here are some commonly asked questions about whether it is better to build a home or purchase a spec home.
Is building a spec home a good investment?
Building a spec home will have its own risks and returns. On the one hand, the profit margin can be high, but it may take patience to see the return on your investment. However, you will need to have a good sense of finance and real estate to make your money back.
Do builders negotiate on spec homes?
Builders usually construct many spec homes with comparable sizes. This means each home will most likely go for the same amount, and they will not want to negotiate with you. However, you can always try, and depending on the builder and your real estate knowledge, you may be able to negotiate on a spec home.
Is it better to buy a house or build?
This is not a one-size-fits-all answer, and it will be completely up to you which would be better. On average, it is cheaper to buy an existing home, and a home loan is much less risky.
Why do builders build spec homes?
Spec homes are typically used to showcase a builder's specific skill set that attracts the most buyers. Most buyers are also attracted to spec homes because they offer a blend of convenience and customization.
What is another name for a spec home?
A spec home can also be known as an inventory, showcase, or feature home. No matter the name, they are all new move-in ready homes.
New Construction Pros and Cons - The Bottom Line
The best part about making this decision is that there is no right answer; it's completely up to you. All you need to do is think about your needs and preferences, which will point you in the right direction.
North Carolina is becoming a hot sport for new-build homes, with a total of 10,903 new homes built in the Charlotte area in 2021 alone. Don't miss your chance to live in a beautiful NC home.
If you're in the market for a move-in-ready home or considering building your home, make sure to get in contact with a real estate agent to help you through either process.
As you are searching for your next home in Raleigh, NC, which is one of the fastest-growing areas in the country with many beautiful homes for sale, you'll have to act fast if you want to buy your next home in one of Raleigh's best neighborhoods.
Before you buy your next home in the Triangle, feel free to contact one of our helpful real estate specialists, as they are eager to help you find the perfect home. We know that buying a home can be overwhelming, so make sure you are prepared beforehand.
Ryan Fitzgerald
Hi there! Nice to 'meet' you and thanks for visiting our Raleigh Real Estate Blog! My name is Ryan Fitzgerald, and I'm a REALTOR® in Raleigh-Durham, NC, the owner of Raleigh Realty. I work alongside some of the best Realtors in Raleigh. You can find more of my real estate content on Forbes, Wall Street Journal, U.S. News and more. Realtor Magazine named me a top 30 under 30 Realtor in the country (it was a long time ago haha). Any way, that's enough about me. I'd love to learn more about you if you'd like to connect with me on Facebook and Instagram or connect with our team at Raleigh Realty. Looking forward to connecting!
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