Spec homes can be an excellent value depending on the market. In depressed markets (buyers market), where home sales are slow, builders will often sell these homes at reduced prices in order to clear the lien or free up any mortgage monies that may be owed on the home.  Often smaller home builders may have 4-5 homes in finished status with money owed on each home.  The builder may be paying an interest only loan until the home sells.  Once the builder reaches his credit limit with the bank, he cannot build anymore homes and cannot afford to employ laborers. His cash flow is reduced to zero.  In selling a home just above cost, he can free up his credit line to borrow more money.  The home builder can then use this credit line to borrow money for salaries to build other homes.

In quick moving markets (sellers market) spec homes may provide an opposite effect. The home  builder may have the luxury of pricing the home at a high price and waiting for the right buyer to come along.  Some home buyers prefer new homes rather than existing homes, and many prefer to buy immediately.  In many strong housing markets where land values and housing values are steadily increasing a home buyer will find there is not much wiggle room with regard to asking price.  Whereas, in markets where housing prices are falling a home builder may be more motivated to sell.

Spec homes are not only built by home builders and may be built by real estate agents or brokers.  In a buyers market, keep in mind that your real estate agent may steer you to homes owned by their broker.  Other homes offered by builders may be overlooked or avoided.  In extremely depressed markets, some builders may try to market the home themselves to avoid a broker fee and allow the builder to break-even on construction costs.  If a spec home is right for you and you find a neighborhood you like (under construction), don't be afraid to explore on your own and contact home builders directly.

You may find deeper discounts on spec homes during the fall and winter when markets are traditionally slower