Why Is This Scottsdale Home So Cheap?

Cheap Scottsdale Houses

“What’s the deal with this house?  Why so cheap?”

I field some derivation of this inquiry on a fairly routine basis from buyer clients. Typically, they have stumbled across a property listing online, or possibly in the ARMLS portal I have set up for them (provides for user log in and review of all homes currently for sale that fit their specific criteria, rating of the available homes, notes, price adjustment tracking, etc), that appears to be just the anomaly for which they have been hunting. That one desperate seller who has become so fed up with the Real Estate market that he is willing to hand over the keys to his castle for little more than a kind word and enough pocket change to cover the U-Haul.

“Paul, we HAVE to go see this house! It’s 2500 square feet, right in the McCormick Ranch area where we’ve been looking, and get this, only $199,000!”

“Wow,” I respond, though not I’m not really thinking, “wow.”

Truth of the matter is that my cynical little REALTOR mind is already trying to unravel the scam. Even in the foreclosure jungle that is present day Scottsdale, that property simply does not exist. Unless it is a completely unrealistic short sale listing with nary a chance of gaining lienholder approval, a money pit of epic proportion that would make Shelly Long and Tom Hanks blanch or …

“The name of the subdivision wouldn’t happen to be Briarwood, would it?”

“Yeah! How did you know? Whatever, it doesn’t matter. Can we go see this right now before somebody else snaps it up? I can stop by the house to grab the checkbook.”

Next comes the part where I break the bargain hunter’s heart. Built in the shadows of Gainey Ranch, McCormick Ranch, Palo Viento and Paradise Valley Farms, Briarwood is a picturesque little enclave of tile roof homes. Designed and built by local favorite Malouf, the architecture, front elevations, green lawns and killer location make for an outward appearance of grand larceny at the indescribably low prices they command.

So what’s the deal? Poor construction quality? Lawsuits? Was the community built upon ancient burial ground?

None of the above. Briarwood is nothing shy of Pleasantville on the Scottsdale map. The only element lying beneath the surface of this otherwise pleasing neighborhood that some buyers will find sinister is the unanticipated leasehold ownership. Essentially, Briarwood (there are actually several phases scattered throughout Scottsdale) and the neighboring Santo Tomas subdivisions are single-family residences with legal ownership rights that more closely resemble condominiums. It is a rare bird in these parts. While relatively common in some states where land is limited and owners are reluctant to part with it (Hawaii, for example), land lease subdivisions are uncommon to the greater Phoenix area.

With many land lease subdivisions controlled by local Real Estate magnate, the Herberger family, or smaller trusts, homeowners own the private residence and pay monthly rent for the dirt upon which they stand. The 99 year lease terms vary slightly from phase to phase. In Briarwood VI (the phase nearest McCormick Ranch in the 85258 zip code), the monthly land lease fee is 1/10th of 1% of the sales price. So that 300k house comes with a $300/month fee. This in addition to the $110 monthly HOA fee.


Homes For Sale in Briarwood of Scottsdale

Sorry, but we couldn't find any results in the MLS that match the specified search criteria.


One thing that may be disconcerting to a potential home buyer is the uncertainty regarding someone else owning the land under his/her home. It can be a very large mental hurdle to overcome, as the premise runs somewhat contrary to what most find attractive in single-family fee-simple home ownership. Some trepidation is to be expected, even if not entirely rational, as to whether the lease will be extended at the time of expiration, or if terms will become untenable upon renegotiation.  The fact that most have decades before such concerns come into play should not be discounted, but buyers don’t need much to fret about when making a decision so critical as the choice of housing.

When looking at properties that sit upon leased land, a buyer will have to weigh the potential cost savings of the home against the additional fees to see if it actually pencils as a bargain. Financial determinations aside, you have to ask yourself if you are truly okay with your lot having a landlord. This is a personal decision that supercedes the advice of your agent. If you are not comfortable with the setup, the financial consideration is moot. Lastly, financing options will be somewhat limited on leasehold properties. As challenging as the mortgage steeplechase has become, expect a few more tar pits and flaming hoops when shopping non-traditional ownership styles.

A property in a leased land subdivision might very well be a good fit for your particular needs, but I find most people only become hip to the presence of the land lease AFTER they have found the home of their dreams. The unwelcome news often pushes the property out of their price range, breaking hearts in the process.

So if you see something online that looks too good to be true, it very likely is. That doesn’t make a property with a land lease evil incarnate. It just means that more dollars are being extracted from your wallet than originally meets the eye.


Curious if the home you saw online is in a leased land subdivision? Drop me a line. I’d be happy to let you know, whether you are working with me or not. 

(480) 220-2337 | paul@scottsdalepropertyshop.com

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  • Paul, I’ve never heard of single family homes being built on leased land before. Is this an AZ thing or just something that these particular developers came up with?
    Lisa Heindel´s last blog post ..Thank You for Your Honesty

  • It’s unusual, Lisa. Most share one common wall at the garage, but they are essentially single family homes with condo ownership. Only the HOA fee doesn’t cover the dirt. Separate land lease fee for that. Only a few developments in the area with this type of ownership, and that is why many buyers are confused when they stumble upon what they think to be the deal of the century.

  • Kirsten Walstedt

    Paul, thank you so much for this brilliant and eerily accurate article! I searched high and low for an article online on this very subject and could not find anything. Thank you for answering my question on Trulia and linking to it.

    Apart from not being a realtor I could practically have written this article myself word for word from a buyer’s perspective. You could have knocked me down with a feather when I saw that the home example you showed was the 7309 E Rovey listing that is the very listing that broke my heart! For two weeks I have been freaking out my mother when I suddenly cast my eyes heavenward, shake an upright fist and cry out, “Rovey!” I have been thinking of it as my White Whale, the one that got away with my leg, as it were. Well, not really.

    Although I had already come to the same conclusions on my own your article confirms in gruesome detail the siren call that lure buyers onto the shoals. Since I’m not proud, I will tell you that even after Rovey I blithely made the same mistake once again with a townhouse in Del Monte – 4525 N 66th St unit 63. It hadn’t occurred to me a townhouse would have a land lease.

    Thanks again. I look forward to reading more.

  • My pleasure, Kirsten. Hope it helps moving forward, even if it reached you after the fact. As you can guess by my decision to write about the topic last year, it’s not an uncommon, if frustrating eventuality upon which many buyers happen. Don’t beat yourself up over walking into the same trap twice. There really should be a separate database for such properties in my opinion, or at least more readily available disclosure (it’s a field in the listing details, but not many consumers know to look for it). Let me know if I can be of any further assistance.

    By the way, I think you are the first reader/commenter on my blog to ever use the word “shoals.” Bonus points for you 😉

  • Teri

    Paul, I have recently moved here and was looking at several of these homes. The lease fee is based on the market value or the selling price? This is quite different with these homes that have gone or are going through foreclosure. Also if I were willing to acquire with this additional fee are you suggesting that the resale value is poor for these type of homes?


  • Hi Teri,

    There are different fee schedules for the various subdivisions that are held in leasehold ownership. For instance, some are based purely on purchase price, and are the equivalent of 1/10th of 1% of the sales price. Others are reassessed at periodic intervals based on current market values. To know for certainty what formula the community you are looking at follows, you (or your agent) will need to get a copy of the leasehold agreement from the HOA. As for resale potential, I’m not a big proponent. While some maintain that it doesn’t really matter whether you are paying a land lease or the ground cost gets rolled into your mortgage, I find that many buyers simply aren’t comfortable with not owning the ground beneath their feet and the unusual fee/ownership schedule. It is common for you not to own the ground in condo ownership, but a little strange to most people when you have private yards and homes more on par with single-family, detached living (though some of the subdivisions feature properties that share a common wall). Further, I am always leery about future financing ability. Lenders may potentially shy away from non-standard property ownership, especially in financing standards are further tightened in response to the recent housing crisis, so I’m hesitant to believe there will always be financing instruments for potential buyers for leased land communities. In short, there tends to be (or at least has the potential for there to be) a reduced buyer pool for these homes, and that diminished demand is the antithesis of what I look for in an investment.

    Please note that this is just one agent’s opinion, so take it for what it’s worth. I certainly don’t hold the only set of keys to real estate investment strategy, or I’d be long since retired. 😉

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Paul Slaybaugh is here to sell houses and chew bubble gum. He's all out of bubble gum. More About Me >>>

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