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June 3rd, 2023 at 11:00 am

If you’re in the market for a new home, you may have come across the term “spec home” in your search. Spec homes, short for speculative homes, are pre-built properties that a builder will construct and design without a particular buyer in mind. These homes are created to showcase the builder’s unique work and attract buyers that will be a fit.

One reason for the appeal of a spec home is that it offers a unique blend of convenience and customization. Unlike a custom home, where every aspect is tailored to your preferences, a spec home provides a balance between pre-designed features and the ability to make some choices. It’s like having the opportunity to put your personal stamp on a ready-made canvas.

Whether you’re considering building a spec house or purchasing one that’s already completed, this article will provide you with valuable tips to guide you through the process. 

Building a Spec Home in California

There are several important factors to consider when it comes to spec home building in California. Firstly, California law mandates that for all brand-new construction from the ground up, the home builder and/or developer is liable for major defects to the property if anything happens within the first 10 years.1 This law aims to protect homeowners and ensure quality construction standards. Here are a few more details that potential spec home developers should know:

#1 Understand Construction Defect Policies

In California, construction defect policies typically cover issues related to construction defects, such as foundation or slab cracks, rather than damages caused by natural disasters.1 It’s important to have a clear understanding of what is covered under the policy to ensure appropriate protection for both the developer of the real estate and future homeowners.

#2 Consider Insurance Costs

Developers are required to obtain a 10-year construction defect policy to protect against potential liabilities.2 The full premium cost for this policy can range from $50,000 to $150,000, depending on the size of the property. It’s crucial to budget for this expense and include it in the overall cost of the spec home project.

#3 Review Repair Options

Developers have the right to decide whether they want the policy to cover repairs or if they prefer to handle any arising problems themselves. It’s essential to make this decision before the close of escrow with a potential buyer and clearly communicate it to all involved parties. Considering repair options upfront allows for smoother project management and ensures that potential issues are addressed effectively.

Buying a Spec Home in California

If you are not a developer and instead fall in the category of a home buyer interested in a spec home, there are also a few considerations to help inform your process. Whether you’re a first-time homebuyer or looking to upgrade to a new property, these guidelines will help you make an informed decision:

#1 Work with a REALTOR®

When looking for a spec home, it’s beneficial to work with a qualified real estate agent who specializes in new construction. With this expertise, they can guide you through the process, provide valuable insights, and help you find spec houses that meet your criteria. California realtors have access to a wide range of listings and can negotiate on your behalf.

#2 Research the Builder

Before committing to a spec home, research the home builder’s reputation and track record. Look for builders with positive reviews and a history of delivering quality construction, and ensure the builder is licensed, insured, and registered with the appropriate regulatory bodies. They should have experience in spec home construction and understand the local market. Visit their previous projects or model homes, if possible, to get a firsthand look at the craftsmanship and attention to detail.

#3 Evaluate the Location and Amenities

Location, location, location! It’s an age-old adage for a reason. When it comes to buying or building a spec home, the neighborhood and amenities are essential factors to consider. Think about your lifestyle and what amenities are important to you. Are you a fitness enthusiast who needs a nearby gym? Do you have children who will benefit from proximity to schools and parks? Keep these factors in mind as you search for the perfect spec home.

#4 Review the Floor Plan and Upgrades

The floor plan is the blueprint for your dream home, so it’s vital to choose one that suits your needs. Spec homes often offer a range of floor plans to choose from, each with its own unique layout and flow. Consider your family’s requirements and envision how you’ll utilize the space.  Additionally, inquire about available upgrades and customization options. Determine if the builder offers any flexibility in finishes, appliances or additional features that can make the home truly personalized.

#5 Obtain Financing Pre-Approval

Before embarking on your spec home journey, it’s crucial to have a solid understanding of your financial situation. Determine your budget, including how much you can afford for the down payment, monthly mortgage payments, and other associated costs. Speak with lenders to explore your financing options and get pre-approved for a loan. Having pre-approval in hand demonstrates your seriousness as a buyer and gives you a clear understanding of your financial capabilities.

Weigh the Pros and Cons

Like any major decision, building or buying a spec home comes with its pros and cons. On the bright side, you get a brand-new home without the hassle of starting from scratch. Spec homes also tend to be completed more quickly than custom homes. On the flip side, you might have limited choices when it comes to customization, as some features are already predetermined. Take the time to weigh these factors and decide what matters most to you.

Start Your Search for a Spec Home Today 

Remember, whether you choose to build or buy, the spec home market offers opportunities to personalize a property to your liking while benefiting from the convenience of a pre-built home. So, take your time, do your due diligence, and soon enough, you’ll be settling into your new California spec home, enjoying all the Golden State has to offer.

Ready to get started in your search? The real estate agents at Berkshire Hathaway HomeServices California Properties have years of experience in new construction, spec homes and more. We are here for you to help you navigate the home buying process and find your dream home today!


Reviewed by Chris Fryson
Chris Fryson currently serves Berkshire Hathaway HomeServices California Properties as its VP of Human Resources.  Prior to this role, he was a successful Branch Manager in several offices throughout San Diego and has won several awards in his service to the real estate market and its professionals. 

Sources:

  1. “Construction Defect Law and SB 800 in California.” Stimmel Law, www.stimmel-law.com/en/articles/construction-defect-law-and-sb-800-california. Accessed 19 May 2023.
  2. “Understanding Lender Liability: Avoid California’s 10-Year Liability for Construction Defects in Fix and Flip Properties.” Geraci Law Firm, 17 May 2023, geracilawfirm.com/understanding-lender-liability-avoid-californias-10-year-liability-for-construction-defects-in-fix-and-flip-properties/

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