Experts Weigh the Pros & Cons of Spec and Production Homes [Guide for Prospective Buyers]

In this episode of Your Project Sheeper Podcast, host Curtis Lawson and guest Toner Kiring, formerly of Toner Home Matters and now with Toner Home Performance, explore the intricacies of the home construction industry. They discuss the pivotal rebranding from 'Toner Home Matters' to 'Toner Home Performance' to enhance online visibility and the importance of the term 'performance' in the building industry. They also delve into the differences between speculative (spec) houses, investor-driven spec homes, and production houses. Toner emphasizes that professional spec home builders, who build for profit as part of their business plan, generally provide better quality and warranties compared to investor-driven homes, which often lack long-term accountability. The conversation also touches on the evolution of neighborhoods, the challenges with townhouses, and the significance of understanding what one is buying, especially in relation to warranties and the builder's process. They conclude by advising listeners to be cautious when buying high-end spec homes and to have realistic expectations about the quality of production homes based on their price point.

• Proper planning is likened to the foundation of a house in the context of a successful construction project.
• Emphasizes the importance of meticulous planning in ensuring the success of building custom homes.

"The foundation is proper planning."

• This quote highlights that thorough planning is fundamental to the success of any construction project, much like a strong foundation is critical for the stability of a house.

• The team is considered the left wall of the construction project, indicating its supportive role.
• Stresses the significance of having a competent and cohesive team to carry out a construction project effectively.

"The left wall is your team."

• The quote implies that a reliable and well-functioning team is a key supportive structure in the construction process, similar to a wall in a building.

• Communication is represented as the right wall, signifying its essential role in maintaining the integrity of a project.
• Highlights the necessity of clear and consistent communication among all parties involved in a construction project.

"The right wall is communication."

• This quote suggests that effective communication is another critical supportive element in a successful construction project, analogous to the right wall of a house.

• Proper execution is compared to the roof of a house, symbolizing its role in completing and protecting the project.
• Points out that without proper execution, the other components (planning, team, communication) cannot ensure project success.

"The roof is proper execution."

• This quote conveys that the final delivery and quality of work, represented by execution, are what ultimately cover and complete the construction project, much like a roof completes a house.

• Discusses the rebranding from Toner Home Matters to Toner Home Performance.
• The change was made to improve online discoverability and align the brand name with services offered.
• "Performance" is a term more recognizable to the public, especially when searching for building performance experts.
• The rebranding occurred after seven years, surpassing the suggested five-year interval for rebranding.

"We actually made it about 7 years on the last branding, new website, new videos."

• This quote indicates that the company successfully extended its branding beyond the typical timeframe before deciding to rebrand for strategic reasons.

"The most key term that people do recognize is the term performance."

• The quote explains the reasoning behind the inclusion of "performance" in the new company name, as it resonates more with the services provided and is easier for clients to search for.

• The company faced difficulties acquiring the desired domain due to a previous owner's association with Hewlett Packard (HP).
• After negotiation, the domain was purchased at an agreeable price.
• The new domain is shorter, benefiting the company's online presence.

"I now know how to negotiate for domains and get it down. We got down to a very, very agreeable price."

• This quote reflects the company's experience in negotiating domain acquisition, which resulted in a satisfactory outcome.

• The podcast focuses on the prevalence of spec and production houses in the market.
• Most people are likely to buy resale, spec, or production houses rather than building custom homes.
• Speculative homes, or spec homes, are built for profit on the speculation of market demand.

"Most people out there are going to buy a resale inventory home or if they want a brand new house they're going to go buy a spec house that somebody builds or a production house."

• This quote acknowledges that the majority of homebuyers are more likely to purchase existing homes or those built speculatively by developers rather than opting for custom-built homes.

• Investor-driven spec homes are often associated with more legal and forensic issues due to lower building quality.
• Professional spec home builders are accountable and have a reputation to maintain, which typically results in higher-quality homes.
• Professional builders are concerned with long-term sustainability and warranty, while investor-driven builders may focus on short-term profit and minimize their risk exposure.

"The investor driven spec home...they're going to do the absolute minimum."

• This quote suggests that homes built by investor-driven entities may lack quality as the focus is on minimizing costs and maximizing short-term profits.

"Professional spec home builders...they're accountable."

• The quote contrasts professional builders with investor-driven spec home builders, emphasizing the accountability and quality assurance that professional builders provide.

• New homes attract buyers due to their fresh and modern appearance.
• Buyers may not be aware of potential underlying issues and prioritize aesthetic appeal over quality.

"The reason why these things exist, the reason why new homes are popular is because it appeals to the most basic psyche; it's shiny and pretty."

• This quote addresses the psychological appeal of new homes to buyers, who may prioritize visual appeal and the allure of newness over other factors like construction quality.

• Custom homes involve the buyer in the design process from the beginning, allowing for personalized choices.
• Spec homes are built before being sold, with limited customization options available to the buyer.
• The term "custom" is often used in company names but may not reflect true custom home building.
• Semi-custom spec homes offer more customization than typical spec homes but are not fully custom.

"Custom is when you're in there from the beginning, you're working with them to design, pick out everything that you want; that house is being built for you."

• This quote emphasizes the involvement and personalization inherent in true custom home building.

"In a spec house, you might get to pick out the countertops and the tile, but you're not going to have a chance to affect the floor plan or the structure or the Mechanicals."

• The quote highlights the limitations in customization for spec homes compared to custom homes.

• Semi-custom spec homes are a middle ground, offering more choices on finishes than standard spec homes.
• Builders like New Mark Homes, Trendmaker, TriPoint, David Weekley, and Partners in Building offer semi-custom options.
• These builders have set processes and are unlikely to alter the basic specs of the home.
• Semi-custom builders may allow for modifications if they do not disrupt their building process or timeline.

"They do allow you to come in and kind of alter... so it is not true custom but you do get a ton of choices on your fit finishes."

• This quote describes the flexibility offered by semi-custom builders in terms of interior finishes.

• Production builders may offer high-performance structures that match or exceed custom homes.
• Builders are generally open to modifications as they result in change orders and additional revenue.
• Communication of custom requests can be challenging with larger builders.
• Production builders are also involved in building performance design and litigation support.

"Newark already built an extremely high performance structure to begin with; they're probably the best on performance out of any builder in the state of Texas production wise."

• This quote highlights the high-performance standards of certain production builders, comparing favorably to custom homes.

• Clients with urgent needs, such as medical situations, may opt for semi-custom homes due to faster build times.
• Some clients choose to make further modifications after closing to meet specific needs.
• Designers may work with semi-custom builders to create customized homes at a lower cost.

"They went into a semi-custom home... they made some changes... there are further modifications they want to make but they'll do them after they close."

• The quote discusses how clients can still personalize semi-custom homes to an extent, even after purchase.

• Semi-custom production homes can often be identified by their appearance and lack of uniqueness.
• Some designers and clients engage in the practice of customizing semi-custom homes to sell at a higher value.

"You and I can drive down a street, and we can pick out what the semi-custom production guys [built]."

• This quote indicates that semi-custom production homes have a recognizable, less unique aesthetic.

• Speculative builders operate at various market levels, from investment builders to high-end custom-like spec homes.
• High-end spec homes are built for sale but follow processes similar to custom homes.
• The quality of high-end spec homes can vary, and some may not meet performance standards despite their price.

"There are some extremely high-end spec homes and they are built as if they are custom structures and that is totally different."

• This quote differentiates between high-end spec homes built like custom homes and those that are not.

• Customers may have unrealistic expectations about the quality of production homes based on the price.
• Production builders are often among the best, but issues arise when customer expectations exceed the reality of what was purchased.
• Builders may resolve issues by appeasing customers until their concerns are no longer a priority.

"Some of the best builders, if not the best builders, are production builders."

• The quote asserts that production builders can be among the best, despite common misconceptions.

• Contractors often progress from remodels to spec homes to custom homes as they gain experience and reputation.
• Some builders prefer spec homes to avoid the variability and risk associated with working directly with homeowners.

"You go from being a remodeler to throwing out spec houses now, and then you do open houses, people like it, they hire you to do custom houses, and now you're a custom home builder."

• This quote outlines the typical career progression for contractors in the home building industry.

• Builders mitigate risk through strategies like creating an LLC for each house and purchasing warranties.
• Production builders face significant liability due to the volume of homes they build and must practice risk reduction.

"I don't like risk; that's why I don't do spec."

• The quote reflects a personal preference for avoiding the financial risks associated with building spec homes.

• The quality of a newly built home is influenced by the builder's choice of subcontractors and materials.
• Builders aim to maximize profit, which can affect the selection of features and materials.
• The quality of a home can also be determined by the building process, including design, engineering, and inspections.

"They're only as good as the worst subcontractor."

• This quote highlights that the overall quality of a home can be compromised by the weakest subcontractor employed in the construction process.

"They're not going to choose the best feature of every feature that can go into the structure from mechanical through the flooring."

• This quote suggests that builders may not always select the highest quality features for every aspect of the home in order to manage costs.

• The amount of house one can get for their money varies significantly by location.
• Houston is highlighted as a place where buyers can get more house for their money compared to places like Austin, San Antonio, or Dallas.

"The amount of house you get for $500,000 in Houston is ridiculous."

• This quote underscores the exceptional value for money in the Houston housing market compared to other cities.

• Potential buyers should inquire about the builder's process, including design origins, engineering, permits, and inspections.
• It's important to understand that building codes represent minimum standards, not necessarily optimal performance.

"What types of questions should you be asking and what types of things should you be looking for?"

• This quote introduces the idea that buyers should be proactive in asking specific questions about the construction process to assess quality.

• Building permits and inspections vary by location, with less oversight outside major cities.
• A thorough understanding of the construction process and building standards is crucial for assessing the quality of a spec house.

"Just because they're permitted doesn't mean they're being built better."

• This quote emphasizes that compliance with building codes does not guarantee high performance or quality in construction.

• A common misconception is that fast construction leads to lower quality; however, experienced builders with reliable trades can construct high-quality homes quickly.
• Production home builders benefit from repetitive builds, allowing for the refinement of the process and quick identification and resolution of issues.

"Fast build yields low quality and I don't think that's the case."

• This quote challenges the notion that speed in construction necessarily results in lower quality, suggesting that efficiency can coexist with high standards.

• New technologies, like pre-cut framing packages, are being used to improve efficiency in home construction.
• Large national builders often incorporate these technologies to manage profit margins through various means, including financing and marketing.

"Like from BFF they've got this pre-cut framing package too to where like they can deliver a whole house the framer never cutting the studs for it."

• This quote describes an innovative approach to construction that streamlines the building process and reduces the need for on-site modifications.

• Production builders play a significant role in maintaining housing affordability through lobbying and participation in rebate programs.
• They have a vested interest in controlling material costs, benefiting the entire housing market.

"The production builder is the person that keeps affordability in housing."

• This quote identifies production builders as key players in ensuring affordable housing through their influence on material costs and market dynamics.

• Post-purchase service and warranty management are critical aspects of homeowner satisfaction.
• The quality of after-sale service can vary greatly between individual investors, spec builders, and production builders.

"Maintaining the house and that relationship afterwards is key."

• This quote emphasizes the importance of ongoing maintenance and customer service following the purchase of a new home.

• Third-party inspections by engineers or building performance specialists can provide an additional layer of quality assurance.
• Production builders are more likely to have robust inspection processes compared to smaller spec builders or investors.

"What person on your team or what team members do you have that are doing third party inspections?"

• This quote suggests that involving third-party inspectors is a sign of a builder's commitment to quality and accountability in the construction process.

• Luxury vehicle owners often maintain their vehicles better than owners of volume products.
• Owners of volume products tend to use the product without much concern for maintenance.
• Production neighborhoods can look ragged after 5-10 years due to lack of maintenance by owners.
• Maintenance rate and quality dictate the condition of a house at year 10.
• A strong Homeowners' Association (HOA) is necessary to maintain neighborhood appearance.
• HOAs in new developments are initially controlled by the builder and take time to transition to homeowner control.
• HOAs may struggle with enforcement and establishing their role.
• Some communities, like Cinco Ranch in Katy, Texas, maintain their appearance well due to effective HOA management.
• HOAs can decline over time, and maintenance costs can increase, affecting the condition of production homes.
• Investment homes can deteriorate quickly due to lower quality exterior finishes.
• Cheap materials, like low-quality quartz countertops, may look good initially but deteriorate over time.
• Inexpensive building materials can lead to unexpected maintenance issues, such as pool damage from roofing granules.

"The buyer who's buying more the volume product is generally not, I'm making a big generalization, they're going to be the ones who are just using the product; they're not as concerned about the maintenance of it and that's also why our production neighborhoods five 10 years later look really ragged."

This quote emphasizes the general trend that owners of mass-produced or volume products are less concerned with maintenance, leading to a decline in neighborhood appearance over time.

"I want to have a really, really strong HOA who's on people's ass about making sure that the neighborhood looks good."

The quote suggests the importance of having an effective and proactive HOA to ensure the maintenance and aesthetic quality of a neighborhood.

"Cinco Ranch broke up the HOA by phase not by the entire development because it was going to be what, 28,000 houses or something like that when it's all said and done."

The quote explains a strategy used by Cinco Ranch to manage their HOA effectively by dividing it into phases, accommodating the large number of houses in the development.

"The cheap resin in it, and so they start talking like crap after a few years."

This quote refers to the use of low-quality materials in construction, specifically cheap resin in quartz countertops, which leads to discoloration and degradation over time.

• An attorney specializing in HOA issues can be critical for resolving disputes and understanding what buyers are getting into.
• Houston, Texas, has areas with and without HOAs, affecting property maintenance and neighborhood appeal.
• The HOA's role in maintaining property values and aesthetics is crucial, especially in new developments.

"I have a really great attorney who resolves HOA issues."

This quote indicates the speaker's recommendation of having legal assistance for dealing with HOA-related problems.

• Pool maintenance can be affected by the quality of building materials used in the house, such as roofing granules filling up pools.
• Poor quality roofing materials can lead to additional costs, like damage to pool equipment.
• Forensic analysis can be used to prove the source of damage, similar to matching a bullet to a gun barrel.
• Pool builders may face issues not of their making and have to navigate warranty and repair scenarios.

"We actually in order to prove that the damage to the pool was from the granules off the roof we took a sample of the roof granules out of the pool then we took a sample off the roof and then we sent it out."

This quote details the investigative process used to establish the cause of pool damage due to poor roofing materials.

• Buyers should inquire about the builder's process, team, and third-party inspections.
• Understanding the builder's warranty program and financial arrangements is crucial.
• Some builders may use LLCs to avoid providing warranties on new homes.
• Renting out houses for a certain period can nullify warranty obligations.
• Buyers should consider their lifestyle, location preference, and quality of housing when choosing between city and suburban living.

"If you're buying it you're buying it from a secondary LLC with no associated warranty."

This quote warns potential buyers about the practice of builders selling houses through a secondary LLC to avoid warranty obligations.

"I would say go to the suburbs and buy a new production home."

The quote reflects the speaker's personal preference for purchasing a new production home in the suburbs, based on their experience and the value it can provide.

• Lifestyle preferences, such as proximity to city amenities or suburban schools, play a significant role in housing decisions.
• Buying in the suburbs can be a good financial decision, especially if planning to stay long-term.
• A good realtor can help buyers prioritize their needs and find the best house in the best location for their budget.
• Sacrificing space for better location amenities can be a wise choice.
• Established builders with a good track record and proper inspection processes are preferable for buying a high-end spec house.

"It's really prioritizing what's important to you."

This quote highlights the importance of aligning housing choices with personal lifestyle preferences and priorities.

"I would say sacrifice space over amenities, your proximity to your school, restaurants, the really nice H-E-B, right? That kind of stuff."

The quote suggests that when making housing decisions, it's often better to choose location amenities over larger living spaces.

• Avoid investor-built townhouse developments in the city, as they often have quality issues.
• When buying a spec custom house, choose an established builder with a strong brand and track record.
• For production homes, have realistic expectations about the quality and performance of the house based on its price point.

"Stay away from townhouses that the investor built townhouse developments in town. I think almost all of them suck."

This quote advises buyers to be cautious of investor-built townhouses in the city due to potential quality issues.

"Buy from an established company that you can look at their track record of building this type of product to know that they're still going to be there five years if you have a problem to stand behind it."

The quote recommends purchasing from well-established builders with a proven history of quality construction and reliability for future support.