#518 - Building a Custom House as Spec House

The Second Studio Design and Architecture Show

David Lee and Marina Bourderonet of FAME Architecture & Design explore the complexities of designing a custom home with the intention of sel

Key takeaways

• Custom house design and documentation typically require 10-12 months due to the necessity of client communication and revision cycles.
• Spec house design can be completed much faster, potentially in under four months, because there is no client feedback loop to manage.

Main topics

• Spec vs. Custom vs. Production housing
• Financial risks of amateur development

Notable quotes

You can't just play developer. You have to actually become one.

Conclusion

Homeowners should approach custom projects with realistic financial ex

Transcript preview

Speaker 1 (0:00) This is the second studio hosted by the Architecture and Design Office fame. My name is David Lee and with me is Marina Bourderonet. The two of us are architects, partners at the office, and of course hosts of the show. And today it's the two of us and we're going to talk about another common question we get from clients, which is, can I build my custom house as a spec house? I Speaker 2 (0:24) don't even know if it's a question they ask. I think it's a preconceived idea that a lot of them have. Speaker 1 (0:30) Yes. And so in summary, the idea is that they want to make sure that the money they put into developing the house, the remodel, the addition, or the new construction, new house, is going to increase their property value by more than what they spent on the architect, designer, engineers, and construction. right so they want to be they want to play developer they think they can raise the property value so that way when they live there um they're going to enjoy the house and if they need to sell the house or they want to sell the house in the short term or long term they're going to make a profit from the work that they've done and we're going to talk about the challenges of that approach when it works and when it doesn't work and all the nuances with it right yeah Sponsors. Speaker 2 (1:19) Architects, design leaders, founders redefining the industry. If you want to shape not only buildings, but the businesses behind them, this is your moment. 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Use the Programma web clipper to build a centralized specification library for your studio. Share always up-to-date specifications and product schedules with clients, trades, and colleagues by generating beautiful, branded live links and client dashboards. Programma's clean, minimal interface allows your work to shine. Start for free. and save 25 % on annual plans at programma.design.com. This Speaker 1 (2:47) is The Second Studio with myself and Marina. Here we go. I Speaker 2 (2:50) think before we dive into that topic, right, we should probably clarify what is a spec house, what is a custom house, and if there is any other types of house. Speaker 1 (2:59) Yeah, so I think the terms spec house and custom house... are probably at least in our spheres the most common terms to properly describe these two different types and a spec house means that it's a house that's going to be built for profit so the intention is to build it to make to sell it to make money or to rent it afterwards to make money and also that therefore you don't have a specific user in mind you have a market user in mind, right? Oh, this is for a family of four. This is for a millennial generation, like whatever kind of general buyer market, but it's not for a specific person or a specific family. That's different from a custom house in that it is designed and built for a specific person or family or, you know, specific tenant, like a specific set of people. And Speaker 2 (3:48) I feel like, I mean, based on that description, a spec home and a custom home. Sounds pretty different to me, right? Yeah, Speaker 1 (3:54) they do. And to clarify too, it doesn't mean a spec house is not a custom design for the property. Speaker 2 (4:01) Yeah. So Speaker 1 (4:01) there are another set of houses called production houses, which again, broadly speaking, means that it's a pre-designed house. It's like a tract home is another term for this type of thing. So a lot of suburban neighborhoods and probably across the world, but especially the United States, it's the same exact, you know, floor plan and like 90 % of the same house that's repeated throughout the entire neighborhood. The Speaker 2 (4:24) cookie cutter one you see around the five freeway. Yeah, exactly. Speaker 1 (4:28) Those are production houses. And, you know, those are also oftentimes spec houses in a way, right? Because they're going to be... Specific Speaker 2 (4:36) market. Speaker 1 (4:37) Yeah, they're for a market of people. They're not for a specific family. But they're pre-designed. And then you get into like more kind of shades of gray, which is like a semi-custom, semi-production house where, let's say if I'm a big developer and I do production houses, but maybe in a certain neighborhood I offer... uh buyers the ability to have some control over the design very very very minor like what are the appliances you like what are the finishes or maybe the facade but um you know if i have a floor plan uh option one two and three and then each floor plan has different materials one a one one b and one c two a two b so so that's like a you know semi not i wouldn't even call it semi-custom it's like you have some more options on a Speaker 2 (5:21) card Speaker 1 (5:22) but in the space that we're in which is newly designed houses for properties. The two kind of routes are again, spec, like it's going to be sold for profit or it's custom, meaning to say it's an end user design oriented projects. So Speaker 2 (5:38) why would a client think that they can mix, match and intertwine spec and custom home? Like what's the... Because I feel like the end user is pretty clear in each of these options, right? So why would people want to try and merge the two or combine the two when they seem like completely different approaches? Speaker 1 (6:00) Well, it's financial. So let's say the client for us is a person who wants to do a custom house because that's like the majority of our clients. It's a financial gain or way of looking at things. So I think there's a few ways into the conversation. There's like the... how the design thinking and design approach is different between these two paths, the financial differences and the schedule differences. But maybe another way to answer your question is the reason why people think that they can approach their custom house this way is because they're uninformed as to how difficult it is to turn a profit when you're developing a property with a single family house. Speaker 2 (6:45) And I think that probably comes from the fact you know, like what the real estate market is like in the United States, right? Like everybody who buys a home knows and hope that when they sell it, they're going to sell it for more than what they bought it for. Speaker 1 (6:58) Sure. Right. Speaker 2 (6:58) So everyone in a way hopes to be a mini developer and, you know, make some profit when they sell their property. And I feel like overall, there is a huge weight on homeowners to... kind of almost like a burden to always be thinking about potential resale, potential buyer, right? And as much as it should, I think it becomes sometimes a little too heavy on their shoulders and the way they approach thinking about what their house should be, Speaker 1 (7:31) which Speaker 2 (7:32) is important because if you're going to live in a house for two years, you know you're going to sell it, then yeah, you could think about the market because the market is going to be here tomorrow for you, right? So I think... You probably should design for the market rather than design for yourself in this case. If you're going to live in a house for 10, 15, 20 years, who knows what the market is going to be in 20 years? I feel like that burden should not be present today in the way they approach it. The Speaker 1 (7:55) timeline is a really critical one or how long they're going to live in the house for sure. And if you are in a major city that historically does well, Los Angeles, San Francisco, those are the main places that we're in. places like that, if you're talking about 10 years down the line, unless you're doing a ultra high end house that you're spending thousands and thousands of dollars a square foot, if you're not at that end of the spectrum, you're not spending that much money, 10 years from now, your property value is going to go way up. Speaker 2 (8:31) So Speaker 1 (8:31) at some point, I think what's challenging is that clients and owners they have they have this idea but it's very vague and despite it being vague they do a lot of to kind of bleed into the thinking about the custom house project to your point like too much yeah Speaker 2 (8:50) and Speaker 1 (8:50) so for us like we because we are getting into the development world and know a lot more about it now um when you're a developer you have to be very specific well you should be very specific and real i say should be because you'd be amazed people listening how many developers do not know what the hell they're doing and they just they just they don't know what they're doing that's a different conversation um so You don't want to be vague. And one of the vaguenesses that takes place is the timeline. It's like, well, how long are you going to be here? And that also is sometimes tricky for owners because they're like, well, I don't know. Maybe I have kids. Maybe it's just a new job. And maybe I could be here for five, ten longer. I'd like that. But I don't know. Maybe my job takes me somewhere else. Speaker 1 (9:38) In a project, for all decisions, not just like this kind of financial conversation, but for all decisions, it's the vague gray area when the client doesn't have, they don't know what they want or they don't know what it's going to be. That's always the part where we have, everyone has problems, right? But yeah, so if a client knows they're going to be there for 10 years, then I'm like, then why are we even talking about resale value? That's like two administrations from now. That's two and a half administrations from now. Who knows what's going to happen in 10 years? You know, if it's shorter term, then it's a different conversation. But yeah, again, I do think people underestimate what it takes to actually turn a profit doing a spec house. Speaker 2 (10:16) Yeah, so I think there is kind of like two sides to the financial aspect of thinking about a home, right? There is the resale financial aspect of like, I'm buying this house for X much, I'm sending it in X amount of years, and I'm hoping it's going to sell for that price. And then there is like how much I'm putting in. into doing the work to make today the house that I own the house that I want. Yeah. Right. And I think there is also maybe a misconception that custom homes are always very expensive or that spec homes are like super cheap. Speaker 1 (10:51) And Speaker 2 (10:51) I think it really, again, it really depends on the equation between how much money you're putting in, how much money you're going to get out. where you're putting that money into. If you're putting a bunch of fancy, expensive finishes and it doesn't make sense for where you're at, you're not going to get that back because it's tailored to you and the market doesn't care about gold doors or gold toilets. That's money down the drain. You're not going to get that back. Speaker 1 (11:15) Around the drain. Around the drain. Yeah. No, I think it's true. So let's talk about some of the design differences. Speaker 1 (11:23) So we get the question a lot in design. I want to make sure that when we're creating this house, I am thinking about potentially selling it. I'm in that kind of category where I don't know. We're talking about a shorter timeline. I want to make sure that we're not designing something that's too specific to me. Or really, that's not actually the question. Designing something that the market is not going to like. And I would say for the average person or family, the average user, there's like a 90 overlap between what they will want and or rather what they will feel really good in and also what everyone else that's a human being in this cultural region will feel good in right um so there's actually a lot more commonality than people think uh the the parts of the design where things get quirky you know we can pluck stuff out like fixtures finishes you know that that layer the the aesthetic layer to the project is definitely something like if you're into a dark moody scheme throughout the entire house well that's definitely not for everybody i also don't think it's great to go too far the other end of that spectrum and say well i'm going to do something super vanilla we see on zillow all the time Because I think there's a blandness to it that would not command a high resale value. So there is threading the needle. And I also think, too, that getting even bigger picture design-wise, it's like, what is the architectural style? Are you doing something that's more avant-garde, like a lot of modern contemporary forward-thinking architects like to do? Is that something you should build, quote, for the market? Speaker 1 (13:02) again, going back to the idea of vagueness or gray area, there's not a math equation for this. And so it's a series of kind of judgment calls and conversations with, you know, with us, with builders, with developers, with real estate agents, like the homework that we do to talk to the people. But they're just conversations. No one has like hard mathematical data about, okay, if you do this Eve detail, what does that mean numerically in terms of percentage, the chance of resale? Like that doesn't exist. Speaker 1 (13:31) But it's what anyway so my original point was that I do think there's actually more overlap than people think I Speaker 2 (13:36) agree and I think you know You know like when we do for example remodel projects, right? A lot of it is fixing the floor plans because there is some quirkiness So it's inefficient or like doesn't make sense for like a family of four to live in that space, right? So if you know you start your project and you have a good floor plan that That, you know, if you have X number of bedroom and bathroom, it flows well, it's well proportioned. They're located where it makes sense on your property. Like those are things that the buyers would respond to. Like that's, you know, now if the room is pink and they don't like pink, well, before resale, you repaint it. I mean, I think there is also like what makes sense for you and what you like, what's easily fixable if you were to sell the house, which paint. It's not that expensive and you can easily like transform a room by just changing the color, right? But I think also what's oftentimes, so there's kind of like checking the boxes on Xero, like X number of square feet, X number of bedrooms and bathroom. Is there like dark rooms, pink room, white rooms? But then I feel like people often underestimate the importance of, is the home special? And if someone comes and visit this house versus the next three houses for sale down the street, Speaker 1 (14:45) would Speaker 2 (14:46) they prefer and remember this one or would they go with the other one? And why would they go with the other one, right? Is it, are you asking for too much money and this one is too expensive? So they're going to look at the other two or are they going to remember only this one? Because it was a unique moment in the house that everyone was just like, wow, this is incredible, right? And I feel, and those are not necessarily. features that are easily listed in a database. Those are more like emotional responses that people have when they experience a house. And I feel like... you know that should be in a custom home for sure because you're you're you you want the design you're paying for the design but that should also be in a spec home because that's what's gonna make the house stand apart from the other ones listed in the neighborhood yeah Speaker 1 (15:34) so I was talking to a developer colleague the other day we might might work with and he was asked he's not he said it doesn't have a designer architecture background he was asking like what would you do how would you design a spec house successfully so that it sells well And I'm like, well, first, there's like the basic check boxes, like you mentioned, like, okay, for this area, what size of house is selling? How many bedrooms? How many bathrooms? Are there, again, this cultural region, are there specific other amenities? Like in other places, courtyards are huge. Other countries here, maybe not interior courtyards, not so much, but powder rooms are common. Pools are common. You know, so all that kind of like basic program. There's that. And I would cross check that with real estate agents we know and say, this is what we're thinking. Like, let me know if I'm way off here. But I told them, I said, the other thing too is like, we got to have good feeling spaces and good light. And then we want to create. intelligently meaning cost effectively and efficiently one or two wow moments or you walk through the front door and you're and you're hit with this moment of awe and you want to do that you know a couple more times in the project maybe you turn the corner and there's this we had a vista that's lined up perfectly