"Speculative" vs. "Custom" Homes
Speculative homes are designed and built without a customer committed to buy it. These are a big risk: I have over a million dollars sitting in two "spec" homes right now and I don't have buyers for them. The other two homes I am working on are valued at the same price but I have buyers for them. They were designed and built for a customer. I usually have a both types of homes under construction at the same time. My cost per square foot is the same for each type of home but in a custom home I let the buyer make the decisions about what they want. For a spec home I make all the decisions about what it will look like until the point where someone likes it and buys it. When they sign a contract they take on the financing and then they start calling the shots (making decisions about the design from then on). There are trouble and risks involved in both types of building. Sometimes you get tired of working with a customer on a custom home because you get hounded. They want changes and have complaints and ...well, that's the part of the business and I guess if you don't like it you get out of the business. But, it sure makes it refreshing to do a spec home because I can make all the decisions. I line it up, schedule it, we get in and out and the home is done. I kind of "catch my wind" when I do a spec home. On the other hand, there is financial risk with a spec home because all the money financing the construction is yours and you are depending on the home selling.They usually do sell by the time they are done, though. Sometimes I have had houses sell when I have only dug a hole and have just laid the foundation. Usually they sell by the time I have the dry wall up. People can really see what it will look like at that point. A lot of people cannot visualize it before then. |
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