Many buyers have stopped their home search after writing multiple offers with none being accepted. I've been licensed since 1983 and have never seen such a wild and crazy Scottsdale real estate Seller's Market. Buyers and their agents have had to think out-of-the-box to get their offers accepted. Some of these ideas are not recommended, but if you want to win a bidding war, using one or more of these ideas might be the trick to you getting your Scottsdale real estate offer accepted.
A high offer price will definitely get the seller's attention. But not all sellers consider just the price. I've heard some stories that sellers have accepted buyers who are planning on living in the home vs. big investors that will purchase the home and rent it out full-time. So that might be one positive for buyers, but most sellers only care about the bottom line, which is what they're going to net at closing
You might not be able to compete with cash buyers, even if they offer less, because they won't need to get an appraisal and they can close quickly. Not all sellers want to close quickly though, so a quick close might not be enticing to them, cash or not.
1. Get Fully Approved, Not Just Pre-qualified
Before we ever start our own home search, we get pre-approved. Isn't that the same thing as getting pre-qualified? No!
Getting pre-qualified is when a loan officer will take your information and will run your credit, but they don't actually check your employment or other items. They will normally not run it by an underwriter yet.
Getting pre-approved is where you go through the mortgage application and provide your lender with actual employment forms signed by your employer, bank and tax statements, and any other paperwork your lender requires. Your loan officer/processor will put your approval through the underwriter. Now the only thing needed is an accepted contract on a particular Scottsdale home so the lender can send the appraiser out.
For a seller that does want a quick move-out time, being fully approved can be the next best thing to cash for a seller. The only thing different would be having to wait for an appraisal, and hoping the Scottsdale home for sale appraises for the accepted contract price.
Risk: The only risk would be that you would have to pay for the mortgage application vs. getting a free pre-qual letter. Your pre-approval will have an expiration date, usually 3 months. If you don't find a house within that time frame, you will probably have to pay another fee to keep your pre-approval up-to-date, although it might not be as much as the original application fee.
2. Don't Sleep on It
I realize this is a huge financial decision and you might not be getting everything you wanted in a house. You might like a particular house but you're not in love. But if you like a house, there will likely be other buyers that also like the house. These buyers might have lost out on prior offers and have started using some of these ideas because they don't want to lose another one. If it's a decent house, even if the market is softening a bit, you might not have time to take time to think it over.
Risk: There is a high probability that by the time you've decided that a particular house is the best fit for you, it might have already been sold to a buyer who acted quickly. Once you've found a house that fits the bill, it will be more difficult finding another one that compares.
2. Don't Get Hung Up on Paying More than the List Price
I still have buyers that can't wrap their heads around paying more than the asking price for a home. Some balk at offering the list price. But if you want to have a chance at getting your offer accepted, you have to come in with a strongly priced, competitive offer. Until things really slow down, you're probably going to have to offer at least the asking price. Even if you're the only one bidding on the home, the seller might counteroffer at full price. And while you're negotiating with the seller, another buyer might come in and make a better offer than yours. The seller can accept a better offer while you're trying to negotiate a price you'd be happy with.
Risk: You might have to pay more than you expected to pay, but that's the market today. If you think you're going to get a deal at less than the list price, you could lose the house of your dreams.
3. If You're Searching at the Top of Your Price Range, Lower Your Search Price
Sometimes this is the only chance you'll have. If you've lost out on other buyers able to pay more than you can in the price range you're searching in, then step down to lower prices. That way you'll have more leeway to make a higher offer that might be accepted over those in that price range that can't go any higher.
Risk: Not so much a risk as the fact that you might have to give up some of the amenities you wanted. You might have to purchase an older house than desired or one that isn't updated or needs work.
4. Find a Different Area
It's a fact that not every buyer can afford Scottsdale real estate or other high-priced areas. You might have to find and search in an area that has more affordable prices that will fit into your budget. The bonus is that you'll get more for your money in a lower-priced town.
Risk: Unless you can only afford to live in a high-crime area, the only risk is that you won't be able to live in the area you really wanted, at least not now.
5. Put Up a High Earnest Money Amount
This is showing the seller that you really want their Scottsdale home for sale. You aren't just putting some skin in the game with a few thousand dollars, you're putting a large amount towards earnest money. Earnest money is an upfront deposit that will be credited towards your down payment at closing.
Neither the seller nor their brokerage will hold the earnest money. It will be held by whatever title company has been agreed to on the contract for sale.
Some buyers are making their earnest money deposit non-refundable, sweetening the deal even more. Many sellers don't care about the earnest money that much, but if you make it non-refundable, that could make the seller look at your offer more seriously.
Risk: You could lose your earnest money if you breach the contract, and will for sure if you make it non-refundable. If you don't feel you should lose it you'll have to either mediate with the seller or hire an attorney and sue the seller in court. This will take time, so your earnest money will be held up until an agreement is made or the judge makes a decision. This might halt your ability to purchase a different property until a decision is made on whether you will get your deposit returned. By the time this is all figured out, interest rates and prices could continue to increase, leaving you with less buying power if and when the earnest money is released back to you.
6. Waive the Home Inspection
The Scottsdale real estate purchase contract has a section to protect the buyer by allowing a home inspection paid by the buyer. With the active seller's market we've been through, some desperate buyers were waiving an inspection.
Some were just not having an inspection done at all (which is what is usually expected by the seller and their agent), or you're asking to be allowed to have an inspection done but you will not ask the seller for any repairs. Allowing the buyer to have an inspection isn't the best choice for a seller. They still have to vacate the Scottsdale home for sale (if they live there), for hours on a specific day while the inspector is doing their job.
If the inspection scares the buyer then they might take the chance of losing their earnest money and void their offer. That is why a seller prefers a buyer to completely waive the right to have a home inspection.
Most agents are uncomfortable having their buyers waive a home inspection. Most are making their buyers sign a separate waiver holding the agent harmless from the buyer's choice not to inspect the Scottsdale home for sale.
Risk: Not only will you not have knowledge of defects that the seller hasn't disclosed and can't be seen by walking through the home, but if something major comes up after you close on the home you have no recourse. You might be able to sue the seller for not disclosing an issue, but that isn't easy since you would have to prove that the seller knew of this deficiency and willfully didn't disclose it. There is no telling what a judge would say if a buyer elected not to have a home inspection.
If the seller allows you to have the inspection with your promise not to ask for anything to be fixed and something comes up, you are still expected to go through with the purchase. Based on waiving an inspection, you have agreed to purchase the Scottsdale home for sale no matter what comes up with the inspection. If you decide to void the contract, you could lose your earnest money since you are breaching the contract and going against what you agreed to.
7. Offer to Pay the Difference in an Appraisal Deficiency
Some people call this "waiving an appraisal", but if you need financing your lender will require an appraisal. So you can't actually waive an appraisal if you're getting a mortgage.
What you can do to sweeten your offer and make it more competitive is to pay the difference between the appraised value and the accepted contract price. That sounds reasonable if you really love a house, but you won't know what that difference is until the property is appraised.
Unless you don't cap the amount you're willing to pay, then it doesn't matter what the appraisal deficiency is - you'll be expected to pay it. If the listing agent feels the difference could be a high amount, they're going to request "proof of funds" from you to show the seller that you can afford all closing costs, the down payment, plus any appraisal deficiency.
Many buyers will cap the amount they're willing to pay. But then they're still up against other buyers that will fully waive any deficiency or have a higher cap than you do.
Why would anyone pay more for a Scottsdale home for sale that doesn't appraise? Because buyers are tired of losing out on their offers in a bidding war.
When we bought our home in 2020 the appraisal was $30,000 off. This was just prior to when the market got crazy hot. We got the seller to agree to go half, so we had to come up with $15,000 above the agreed-upon purchase price. I had never paid more for a property than the appraisal, and I was left feeling uncomfortable about it, but we really wanted this house so we agreed. We also knew that we were lucky not to be in a bidding war, so we didn't want to have to find another place.
I'm feeling that we paid too much for the home. But then everything went even crazier in the market with less supply and high demand, causing buyers to pay $100,000 and even higher to win a bid. $15,000 didn't sound so bad to me, especially when I could see how the equity of our house was quickly increasing. Our value increased around 34% in one year! So that $15,000 over was no longer an issue.
Although we don't expect prices to crash in the Valley, we don't foresee 34% increases with today's higher interest rates. Decent houses in popular areas should continue seeing equity increases but at smaller percentages. Unless you're thinking of selling within a year or two, you should be able to continue building enough equity to be in a good spot when it is time to sell.
Risk: If you offered to waive an appraisal deficiency and end up changing your mind after the contract has been accepted, you could lose your earnest money. No matter how knowledgeable your agent might be, they cannot predict what an appraiser will do.
8. Not Having a Contingent to Sell or Close on Your Current Home
I haven't written a Contingent on Sale offer in many years. We've been up against multiple offers for several years now. Even with an anticipated slowdown because of rising mortgage rates, nice homes in good areas will most likely get multiple offers. It might be 2-5 offers vs 20+. But you will probably have competition with other buyers.
You might think because it's an active Seller's Market that coming in with a Contingent on Sale offer should be accepted or at least considered. The seller should feel confident that your house will sell quickly, right? No.
If the seller has multiple offers without a contingent to sell or close on another property, your contingent offer will go to the bottom of the pack. It's just putting more risk to the seller that they don't have to accept in a bidding war.
A contingent on the close of your home (where you have an accepted contract from another buyer and they have gone through their inspection and appraisal and are just waiting to close) might be considered, but there is still a risk to the seller. So unless you have an otherwise strong offer that competes with any others, you might be one of the last offers a seller will accept.
If you don't want to have to sell first, consider Knock financing. This will allow you to make an offer without any type of home-selling or closing contingency.
Risk: If you don't use any kind of contingent on sale or close information in your offer, and your house doesn't sell or close per the contract dates on the house you're buying, then you could lose your earnest money. If you're lucky enough to get a contingent on sale or close offer accepted and can't close by the contract date, you could lose the house and all or part of your earnest money. If you want to use the protection of having to sell or close first, then you might not get your offer considered.
9. Offering the Seller Post Closing Possession
Many buyers are allowing sellers to continue living in their Scottsdale homes for sale after the closing for a specified amount of time. This could be more important to a seller than a higher price.
Prior to our current Seller's Market, the majority of buyers wanted possession at closing. If the sellers asked for extra time to move, they usually were expected to pay the buyer an amount equal to the buyer's full mortgage amount, pro-rated on a 30-day term. Sometimes, a deposit was demanded from the sellers up front (at the closing). Another popular feature was that the daily rental amount was doubled after the accepted possession timeline to entice the sellers to move out at the date they agreed upon.
Now buyers are offering sellers to stay in their homes for months vs. days. Because of this frenzied seller's market, post possession is the opposite of a seller using a contingent on sale or close of their home disclosure on their purchase. Because sellers have all the control, this allows them to sell prior to finding a home for themselves. Most sellers asking for months of post possession are building new construction. This could backfire for a seller if they can't find a home quickly enough and many builders are taking much longer to finish new construction than the timeline they've promised. Then the seller will be expected to move out before they have a place to move into, but at least they got some time to live rent-free.
Risk: This could be risky on both ends, but a buyer giving a long post-possession agreement to a seller has now become a landlord, but in many cases without receiving any rent! So if you have agreed to this, you are making the mortgage payments without getting any money back from the seller, who is now your tenant.
You might have to purchase a different type of home insurance since you own the property but you're acting as a landlord. If the seller isn't going to leave on the move-out date, you'll have to start a legal eviction.
The seller no longer owns the home and they might treat the home differently as a tenant. The bottom line is, doing this can cost you money and headaches.
10. Paying Some or All of the Seller's Closing Costs
Believe it or not, some desperate buyers are doing this! They are paying some or all of the seller's closing costs, including the commission to be paid to the involved brokerages. I'm not sure if these buyers are doing any or all of the above in conjunction with this, but just when you think you'd never see a buyer do any of the above things, you find out some buyers are offering to pay seller closing costs. That's crazy!
Risks: This can cost you a lot of money, especially if you combine it with any of the above.
11. Use a full-time, experienced Scottsdale real estate agent
This is not the market to use a part-time or new and inexperienced agent. If you're not able to get into a Scottsdale home for sale the day it hits the market (and sometimes before), you might not even have a chance to make an offer.
When I'm referring to a part-time agent, I mean an agent that has another job, usually a full-time job and they just do real estate on the side. They might not be available to get you into a home the same day it is listed. Or you might have to wait until they get off work and it could be sold by then. And if they can't take calls or texts while working, they might not even be aware that you want to see the property until their shift is over. The sellers might have already had a bunch of people through their house and are going over multiple offers already. Or there might be appointments already lined up for that evening and you won't be able to get in.
A new or inexperienced agent might not protect you by not fully understanding the sales contract. They might not know the tricks I've mentioned, and they might not be knowledgeable about the area and the home values there. And they might not know how to negotiate in your best interests.
Why are Buyers Doing These Things?
Some buyers have to buy for a lot of reasons. It could be getting married or divorced, having a growing family, or really wanting to downsize (some of the downsizers might be cash buyers that you'd be up against if you need financing). There are job transfers and Scottsdale gets a lot of out-of-state and foreign buyers. Rents are getting so high that some renters have realized that they'd be in a better financial position by owning a home instead of paying their landlord and getting nothing in return but a roof over their head.
Once a buyer gets into viewing Scottsdale real estate, they are caught up with the desire to buy a place. Some of them stop trying when they've been beaten out multiple times and either stay in their too-small property or continue renting. But that might not be the best thing to do because interest rates and rental prices might continue going up, and prices are expected to continue rising, even if not at the double-digit rates we've been seeing. So if you don't get in the market when you can, you might not be able to down the road.
Two things I haven't mentioned are:
1. A buyer's letter - some listing agents won't pass on a letter from the buyer to the seller. They feel that by doing so they can be accused, along with their sellers, of violating fair housing laws. These letters have been deemed illegal in some states, but Arizona still allows them.
2. Escalation clauses - some listing agents request not to make an offer with an escalation clause. Many agents simply don't understand how they're supposed to work and/or have a difficult time getting their sellers to understand them. Many think you've just shown the highest price you'll offer and instead of accepting your escalation clause, they will just give you a counteroffer at your highest price. That's not really how an escalation clause is supposed to work, but many agents treat them this way and you're either willing to pay that top price or you're not. Some agents and their sellers feel if you'd be willing to pay that highest amount, why didn't you just offer that to begin with?
You don't have to do any of these things, and hopefully, the market will slow down enough where you don't have to. But if you fall in love with a house and have the knowledge that you'll be up against other offers, you might want to use one or more of these ideas. You just have to understand the financial risks you might be taking.
If you have any questions or are ready to start looking at some Scottsdale homes for sale (or other areas in the Valley), give me a call or text at 480-877-1549. I am a full-time agent that has been licensed since 1983 and I try to educate my buyers on the current market. I've been through buyer's markets, seller's markets, and more even markets. I've been through several recessions, including the Great Recession when the real estate bubble broke. This particular seller's market is the craziest I've seen in all the years I've been licensed.
Posted by Judy Orr on
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