The terms Custom Home Builder, Spec Home Builder and Tract Home Builder sometimes can be used interchangeably. However, this is not always the case as each one has different functions therefore constructing different types of residential structures..
Custom Home Builder
These build unique homes. The architectural style, size and amenities will conform to the buyers needs and wishes. Generally, the homeowner or home builder decide on variables that will make it different from others. Usually, lot’s of planning and time are involved and many revisions until the “perfect” design is achieved.
It might be small, medium or large in size. Perhaps has standard features or high end luxury features. They are not always elaborate gorgeous large palatial estates. 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 unique.
Spec Home Builders
These are built to be sold. The builder speculates that he will make money from this transaction of buying a lot and building 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 large & spacious. They could just as well be medium sized with average features.
The builder decides the floor plan rather than the home buyer since it is not sold yet. In a sense it is a custom home since it is not a standard run of the mill house in a tract subdivision. However, it could be very plain or it might be a high end decorated estate. Either way it would be thought of as a Spec Home.
Tract Home Builders
Usually referred to as “subdivisions”. Tract homes are built by developers who own a large piece (tract) of land that is divided into many smaller lots upon which to build homes. The land is often warehoused until the economy is favorable to new subdivisions. The developer has model homes chosen which the customers can choose from. For example they may have offer 4 floor plans of various sizes and shapes and will put 25 of each model on the 100 lots of this subdivision.
Once the models are built the builder begins selling them. They usually have an open home and several model homes for the prospective buyers to walk through which are tastefully decorated to give the buyers an idea of how nice their new home could look all furnished. Usually the subdivision is built in phases and once the 1st phase is nearing completion and all sold out than a next phase will begin according to demand. They are generally sold by real estate agents and real estate brokers. The model homes are usually staffed by a licensed real estate agent.