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How to Find Great Deals on Spec Homes
The last thing new homebuilders want is to have unsold homes. It doesn't make them any money, and if they sit for two or three months they certainly lose their appeal. Sometimes it's the result of someone putting a deposit down on a piece of dirt before the project has even begun and changing their mind, or someone putting a deposit on the spec home during its construction and then backing out. Either of these will cost the builder money as the home sits and no one buys it.
An Investor's Dream
A spec home is one that a builder has built "on speculation" that someone will buy it though it is not under contract to a specific buyer from the start. For the investor, the prospect of buying a spec home is appealing. After two or three months of paying unplanned financing costs for what he has in it, the builder is surely happy to get rid of it at a reduced price. After all, every day the home sits without being sold, the more money he is losing. In spite of the fact that the other homes are finished and should be drawing higher prices as usually happens once a subdivision is finished, with an unsold spec home, it can hurt the value of the other homes in the area.
What to Look For
The key is to watch the area and wait until what seems to be the right moment and then approach the builder with a deal. You are likely to find him quite receptive to your offer as long as you are willing to close on the deal in his time frame.
Once other homes are built and sold, the builder wants to move on to another area and cut ties to that neighborhood other than necessary follow-ups. He wants to be able to say the homes are completely built and sold, which he cannot do if any spec homes are still unsold. As an investor, what you are looking to do is buy a house that has remained unsold for a period of time and resell it at the market rate for other homes in the neighborhood. That requires you to watch what is developing around the area and seeing what is happening with other homes so that you know exactly when to approach the builder.
Investors are not the only ones who can take advantage of spec homes. Potential home buyers can also find great deals on brand new homes by following the building of new neighborhoods. Just like the investor, you watch the progress of the neighborhood and take your cues from what you observe.
For the investor and new home buyers, the best deals can be found by approaching new homebuilders who have homes that are not yet sold. Making a deal with a new homebuilder is one of many ways an investor or potential home buyer can make a great deal on a new home. The key is in being in the right place at the right time and knowing when the builder is ready to negotiate on your terms in order to sell his spec homes. You learn that by following the trends in the neighborhoods that are of interest to you, and making your move at the right time.
Content contributed by Colorado's Boulder real estate experts, Automated Home finder.
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