What is a Spec Home?
In today’s market, many buyers will compromise on the property size and even on the location, in favor of a brand new construction where they will be the first owners.
A spec home, as the name suggests is built by the builder on speculation (hence a spec home). The builder builds a home with features, floor plans, and materials that he/she believe will appeal to most buyers in a particular marketplace.
Buyers expect to be able and customize certain features, colors, and materials when buying a newly constructed home. Depending upon the level of completion at the time of purchase, buyers may have more or fewer options to customize.
As part of the selling terms of a spec home, most builders will require a “non-refundable” deposit against the special customizations to be done specifically for that buyer. Typical customizations may be special paint colors in bedrooms, special stain color of the floors, a particular tile type/size color of the kitchen backsplash, a requested change of layout, etc. These are all options that are frequently requested by buyers when purchasing a spec new construction.
For example, not everyone has the same taste – the color one buyer loves may not appeal to a large group of buyers. Consequently, the builder may have to repaint the home if the buyer fails to close the sale.
In each case, the buyer has to pay an additional non-refundable deposit. If the buyers close, those deposits count as part of their downpayment. If it doesn’t close, the deposits are kept by the builder.