# Custom Home Builder vs. Spec and Tract Builder



## renet (Nov 3, 2008)

Below, are some thoughts on the difference between different types of home builders. Please elaborate from your viewpoint on the differences between them.

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In the Real Estate Industry especially related to Home Building - terms are used but not always defined such as: custom home builder, tract home builder and spec home builder. Home Buyers seeking to purchase a home may want to have a new home built. But, they are not sure what type of home builder to call upon. This is because there are several terms for home builders and my goal is to define the different terms. The goal of this article is to define the different types of home builders.

Custom Home Builder, Tract Homes & Spec Homes are 3 terms in particular to define. The goal is to help a home buyer understand which type of home builder to call on to discuss their home building questions.


There is a distinction between these different type of homebuilders but on occasion the line is not so clear. Sometimes the terms can be interchangeable.

Custom Home Builder

Custom Home Builders build homes that are unique. Generally, the homeowner or home builder decide on variables for the home that will make it different than other homes. It will usually be customized to the new owners tastes and desires for amenities, features, size, creative touches, style and etc... 

A custom home might be a very large, medium or even a small sized home.
It could be very standard in many ways but still be a custom home. People often think of a custom home as being an elaborate gorgeous large palatial estate. While that is often the case it is not always.

For example, a retired couple may want a custom home built that is only 1500 square feet and has 2 bedrooms with and 2 bathrooms. The floor plan might be a U in shape with the kitchen on one end, living room in the middle and 2 bedrooms on the other end. The garage will not be attached. The wood trim package will be a stain grade 
brazilian hardwood and the wood floors will be the same. So, a large estate or small estate could both be custom homes.

Spec Home Builder

Spec Homes are built and than sold. The builder speculates that he will make money from this transaction of buying a lot and building a home on it.
It may be sold during construction but the idea is a builder buys a parcel of 
land and builds a custom or semi-custom home on the lot and than sells it. 
Spec homes are not always a large custom home. Oftentimes the home is 
a medium sized home with custom features and styles.

The spec home builder decides the floor plan rather than the homebuyer
since it is not sold yet. In a sense it is a custom home since it is not a 
standard run of the mill home in a housing tract. However, it could be a 
very plain home or it could be a high end decorated estate. Either way 
it would be thought of as a Spec Home.

Tract Homes

Tract Homes are built by home builders or developers who own a large piece (tract) of land that is divided into many smaller lots upon which to build homes. The tract home builder has model homes chosen which will be the homes built on these lots. For example they may have chosed 4 floor plans of various sizes and shapes and will put 25 of each model
on the 100 lots of this subdivision.

So, the tract home builder begins building the homes and advertising the houses for sale. They usually have an open home and several model homes for the prospective buyers to walk thru and the homes are decorated very nicely to give the homebuyers an idea of how nice the home is all furnished. The faster they sell the tract homes the faster they try to keep building them to keep up with demand. These homes are generally sold by real estate agents and real estate brokers. The model homes are usually staffed by a licensed real estate agent.

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Well, these are my thoughts on this topic - I certainly look forward to your replies.













Thus, you can understand how the terms can be interchangeable. There are even housing tracts that are built by custom home builders and the housing tract will probably all be custom homes in a custom home subdivision. This builder is also a speculate home builder hoping people buy all the homes just like a standard housing tract. Unless, of course, all the homes are pre-solds simply meaning the home is sold before it is built.


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## TBFGhost (Oct 9, 2008)

lol....yeah, I always read those terms as meaning the same damn thing....To me it just developers trying to not to look like developers....like Toll Brothers...those guys know how to mess up some **** when they build...taxs, roads, schooling....it all goes to hell...


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## wackman (Nov 14, 2005)

I'd agree with your definitions. I'm primarily a spec home builder but I do customs as well. Not so many right now, although I do have two customs awarded and we're just waiting for them to acquire financing. 

The main difference that my banks talk about between Spec and Custom has actually nothing to do with the home. It has to do with who gets the construction loan. If it's me and I plan to sell then it's spec. If the client is the one who gets the loan and we're just the builder then it's a custom.

There are middle grounds for all that as well. Often I buy a piece of land, develop it and advertise it for sale with the intention of us building a house on it. We'll usually end up building one of our plans but if they have a decent one from somewhere else we'll build it as well. The banks like to call these pre-solds. I found, bought and developed the land and I'm the builder of the home, but they're the ones who actually get the construction loan. It's a way to limit my liability.

I'm no where near big enough to do any tract building yet or even a sub division so don't know as much about those areas.

Hope this helps to add to your definitions. 

Wack


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## thom (Nov 3, 2006)

I'm a spec home builder. Even though each of my homes is unique, they are technically not custom. 

A custom home is one that is designed the constructed for a specific client. The home ceases to be a custom home when that original client sells it. At that point, it could be considered a spec.


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## renet (Nov 3, 2008)

It is nice to read this thread the viewpoints of other members. wackman - we're neighbors! Do you also build in Vancouver?


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