I've been a licensed REALTOR since 1983 and I've been in Buyer's Markets, Seller's Markets, and everything in between. 2021 is the wildest Seller's Market I've ever witnessed. I don't remember seeing such low inventory, and it seems to be nationwide, not just in the Scottsdale real estate market. Homes are selling in a day without much, if any, marketing from their agent.
Buyers Definitely Need an Agent
Since most Scottsdale homes for sale are listed in the MLS (Multiple Listing Service), the only other choice for a buyer would be to purchase a For Sale by Owner (FSBO). If you're considering that then you might want to hire a real estate attorney to have some kind of protection. Arizona contracts are lengthy with a lot of paperwork. Would you know how to write up an offer? Are you aware of contract timelines and how important they are? Did you already get qualified, or are you flying blind? Do you think you're the only buyer looking at the few FSBOs that are out there? You will most likely be up against multiple offers. Do you know how to attempt to win a bidding war?
If you think you can view homes that are listed in the MLS without an agent you are wrong. You cannot work directly with a seller if the property is already listed and in the MLS. You have a choice of working with the listing agent, who would then be a dual agent (if their brokerage even allows dual agency), and the agent would not be able to give either the seller or you fiduciary duty. The listing agent might provide you with a form where you agree to no representation at all, but that could be a slippery slope because that agent is still giving the seller their fiduciary duty, but not you. You would probably need to hire an attorney. And why would you want that extra expense? Although there is a debate as to who pays the commission, if you elect to work with the listing agent as an unrepresented buyer, you're not saving any money. Why?
The Listing Agreement is Between the Listing Brokerage and the Seller
Many buyers think they can save money if they go through the listing agent, either via dual agency or being unrepresented. But you did not sign the Listing Agreement. You can't change it. If anyone is going to save money in this transaction, it will be the seller. In fact, sometimes there is a clause in the Listing Agreement that the seller will get a listing commission reduction if the listing agent sells the property without any cooperating selling agent involved. You will not receive that benefit.
So if you're not saving any money, why go in unrepresented? It is rare that a buyer has to pay out of their pocket to their selling agent. Some agents have their buyers sign an Exclusive Buyer-Broker Agreement. Sometimes the agent will write in their minimum commission amount. If a listing you want to purchase doesn't cover that amount, then you would be expected to pay your agent the difference. There are different ways to accomplish this, but in this market, it would be difficult. If you are working with an agent and don't want to have to pay out-of-pocket to cover a cooperating commission discrepancy, then don't sign the form. I don't use this form, and many agents don't. I don't feel the need to make a buyer I'm working with feel like they're stuck with me whether I give great service or not, and I certainly don't want them paying me commission out of their own funds.
If you find an agent that you like and trust, and they don't expect you to pay anything extra, then why would you even consider going it alone? Your agent will negotiate for you, and help you win in a multiple offer situation if at all possible. Without an agent on your side, you will probably learn that in today's market, you'll have an extremely difficult time making a winning offer.
The agent will keep you on track with timelines so you're not in breach of the contract, which could cost you the earnest money you delivered when the contract was accepted. We have kept transactions going when the other side wasn't doing their due diligence. Those contracts would have fallen apart and our buyers wouldn't have closed on the Scottsdale house they loved. You want an agent representing your best interests, and you won't get that if you work with a listing agent. You also won't get it if you go straight through an iBuyer. They are the listing agent and owner.
In Today's Market, Many Sellers Think They Can Go it Alone
I can't tell you how many times I've listed a FSBO house after a seller accepted an offer, and in many cases, it was a high offer. But for whatever reason, the sale never closed. Sometimes it was that the buyer wasn't really qualified to buy. Sometimes the house didn't appraise and proper language wasn't built into the contract because the seller didn't know any better.
There is a good chance that a buyer and FSBO seller will end up angry at each other. The buyer might not follow the timelines set forth in the contract they signed. The seller might not want to make repairs that the buyer has asked for. Maybe some of those repairs were cosmetic in nature and it all left bad blood between the buyer and seller. Because of this bad blood, either the buyer or the seller breaches the contract and it never ends up closing. That can be exasperating for a seller and it wasted time for them since they can't sell to more than one buyer at a time. So the seller's Scottsdale home was off the market while issues were occurring.
I've seen FSBOs list way too high, and I've seen them list too low. Many buyers stay away from FSBOs because they want an experienced Scottsdale real estate agent to represent them in such a large financial purchase. They want an agent to help them with timelines so they don't accidentally breach the contract, which could cost them money and lose the house.
On the other hand, a lot of buyers that are attracted to FSBOs know that they're not paying a commission, and the buyer thinks they should win that shortfall. Those buyers are less likely to offer full price or over.
In this crazy Seller's Market, you could have a bidding war, but do you know that by trying to save the listing commission with a brokerage you could actually lose money in the long run? As I mentioned, most Scottsdale real estate buyers are working with an agent. They don't want to go it alone. That means they won't see your house.
These buyers are usually better educated on the current market than buyers not working with an agent. If they have lost a few offers, they are ready to get serious and there have been offers of $100,000 above list price in this market! Do you want to lose out on that opportunity just to save some money on a commission?
Won't You Benefit From Using an iBuyer?
Because of the competition among iBuyers in the Scottsdale real estate market, they were making some high offers to sellers. However, I have actual testimonials on how they have also reduced those offers, sometimes days before the closing was to take place. At that point, the potential seller might have already written an offer on a Scottsdale home that they fell in love with, so they unhappily went along with that price reduction.
Did you know that Zillow shut down its iBuyer department? They were losing so much money since they were competing with other iBuyers that they decided to stop further purchases. Also, some iBuyers will not accept homes at higher price ranges, so you wouldn't be able to work with them even if you wanted to. Even the more popular iBuyers have yet to turn a profit, and we all wonder what will happen to them in a downturned market. As it stands, Zillow still has vacant properties in their inventory that they're working on or trying to sell at an "As-is" discount just to get them off the books.
iBuyers charge a fee higher than most brokerages, sometimes as high as 15%. I network with other agents nationwide, and I've heard stories where an agent told their potential seller to go with the iBuyer because even in the current market the agent couldn't guarantee such a high price. As a current seller, you wouldn't care as long as you get paid and it closes. But most of us feel these iBuyers are just riding the wave of this crazy Seller's Market until it changes. And most of them are lowering their offer prices, especially now that Zillow is gone.
Whether You're a Buyer or a Seller, You Could Actually Save Money Working With an Agent
Your agent will explain the market to you so you'll be prepared on how to make an offer as a buyer or how to negotiate offers as a seller. We sold one of our properties in 2020, right at the beginning of this crazy market. We had buyers lined up in front of our house and they weren't happy. We ran out and bought water bottles that we put in coolers while they were waiting.
We had 18 offers and you'd think that would be fun. It wasn't. My husband had to create an Excel spreadsheet so we could go through all of them so we didn't miss out on the best offer. I had other agent's buyers calling me directly, begging us to sell to them. They were very emotional because our house and yard were big and had updates and was clean and in move-in condition.
We had so many agents calling, texting, and emailing us about their offers (or if they should even bother since their buyers couldn't afford to pay more than what they were offering), that we had to review all of the offers in between the calls, texts, and e-mails. We shut down showings the next day around noon to allow agents and their buyers in that couldn't make it the day the listing went live. We had enough offers over the list price that we said "enough"!
We chose the top offer (there were actually five at the same price). How did we choose one? We chose the buyer that was fully approved, not just pre-qualified. We did receive cash offers but they weren't as high, and to me, a pre-approved buyer is almost as good.
If you were an unrepresented buyer you wouldn't have had a chance to buy our place. Since we were the agents and the owners, we weren't allowed to sell our own house. So if you had wanted a chance, you would have had to have your own agent.
Give us a call if you're looking at Scottsdale homes for sale, or Carefree, Cave Creek, North Phoenix, or Paradise Valley. We will go out of those areas so call us even if the area you're interested in isn't listed. We would love to give you the representation that you deserve.Posted by Judy Orr on