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What is the Difference Between Custom Homes VS Spec Homes VS Production Homes?

Building homes can vary in different types. Some houses are built based on personal preference, while others are made for broad and large-scale buyers. Meanwhile, many are built just in the middle ground.

Alongside this preference are varying factors, like design, target buyer, location, and prices to build a home.

When remote job opportunities increased in 2020, many homeowners considered relocating to their dream destination. This involves a lot of decision-making, especially in choosing the type of home builder.

Let’s go over them one by one.

Custom Homes vs Spec Homes vs Production Homes: A Comparison

It’s pretty easy to see the differences between custom homes, spec homes, and production homes. However, it can be difficult to decide which is right for you. Knowing them extensively will significantly influence an informed decision.

1. What Is a Custom Home?

If you want complete control over how your home is built, a fully customized home is for you. A custom home is specifically designed and built to meet your unique preferences.

Unlike other types of homes, this one, in particular, requires a great degree of personalization. Building a custom home typically involves working closely with a custom home builder.

They are your partners in creating a set of plans that reflect your vision. From the selection of materials, finishes, and features to other unique design elements, they tailor everything to your needs.

While a custom home offers homeowners a truly unique living space, it can also be a complex and time-consuming process. Moreover, it requires a significant investment of time and money.

As one of the most desirable areas to live in the US, custom homes prices in Colorado have increased in the last two years. This is a result of the high demand but low inventory in home sales. 

In addition, the huge price hike in building materials drove building costs up like never before. Working with a cost-plus custom home builder can make the most out of your buck. On a brighter perspective, the increase in interest rates slowed home-building sales. Consequently, this brought the inventory back up and lowered the cost of building materials.

The question now is, how much does it cost to build a house in Colorado today?

There are a lot of factors to consider in calculating the cost to build a house. The calculation of cost in custom homes also depends largely on land prices and the following:

  • Build budget

  • Infrastructure costs

  • Site costs (e.g. lot clearing, tree removal, etc.)

  • Design and architecture

2. What Is a Spec Home?

A spec home or “speculative home” is the middle ground between a custom home and a production home. This could be a safe option if you’re torn between the two.

A spec home is built without a particular buyer in mind. Instead, the builder constructs the home with the intention of selling it as a speculative investment, hoping that it will attract a buyer once it's completed.

With the high cost of land,  it can be expensive to start building a home from scratch. However, building your dream home to your exact specifications can be very encouraging. Unlike custom homes, spec homes are constructed based on the builder's plans and design choices. The floor plan and features are set to appeal most likely to a broad range of buyers.

Basically, the builder is taking a risk by building a home without a specific buyer in mind. With this said, they may offer incentives, such as upgrades or a lower price, to attract buyers. Spec homes can also be more convenient for buyers who can’t wait for a custom home to be built. You must be willing to compromise on some of the design choices if this is the road you’ll take.

3. What Is a Production Home?

Production homes or “tract” homes are basically the ones you see in subdivisions with similar designs and features. It’s called “tract” because builders use a tract of land and subdivide them to build hundreds of homes.

Although building your own home is a dream come true, being cost-efficient is wise. Since production homes are built using economies of scale, you can buy a house at a lower cost compared to a custom home.

Production homes are typically built using pre-designed floor plans and materials chosen by the builder. This means you may have limited customization options.

Depending on your contractor, you can still choose from a range of design packages and finishes. But generally, production homes are built to have a market. There’s no point in building a house if it’s not sellable.

Tract builders assess the market through consumer survey efforts and “mystery shoppers” during house visits.

They can have pretty basic floor plans and little design. The pro list is production homes have generally quicker turnaround times than custom or spec homes.

Which is Which?

Deciding on the type of home you want to live in involves a lot of different factors. The budget, style, location, size, and even your lifestyle are great influences on your decision.. Thus, it's important to consider your financial situation when making your decision.

The cost to build a home may be something you can afford, but the cost of living in that area can have long-term effects on your financial capacity. Yet, costs can differ depending on which state you want to build your home.

Similarly, you want to make sure the location of your home is accessible to your daily routine amenities. Some people may prefer to live in a bustling city center, while others may prefer a quiet suburban or rural area.

Moreover, you also have to factor in matters like style and maintenance. While building a home is a matter of personal preference, it can also affect its value, maintenance, and resale potential.

In choosing a home that’s right for you, take these factors into account. Come up with an informed decision that best meets your needs and capacity.


Guest Contributor: Daniel Martin