Kiplinger's Personal Finance Magazine

Take The Hint – house prices too high

Take The Hint – house prices too high – Brief Article

Elizabeth Razzi

HOMES | Real estate agents are asking some buyers to admit that they’re PAYING TOO MUCH.

THE HOUSING market has hit a new high–or low–in California’s Silicon Valley. Some real estate brokers are actually asking buyers to sign a statement acknowledging that the price they’re paying may have little grounding in reality. “Things are happening that are frightening,” says June Barlow, vice-president and general counsel of the California Association of Realtors.

If agents are scared, maybe you should be, too. While markets elsewhere haven’t gotten as nutty as California’s tech haven–where the median home price is $418,570, up 25% from last year–home buyers in other parts of the country are skirmishing over scarce listings.

Some Bay Area brokers are handing buyers “market-condition advisories,” warning that a bidding war may drive the price above fair market value. “Real estate markets are cyclical, and what goes up may well come down,” says one alert.

Doug Gass, a broker with Re/Max Valley Properties in San Jose, says he has had trouble lately coming up with an answer when buyers ask him what he thinks a house is worth. “I’ve told them, `You’re not going to be able to get it for what I think it’s worth.'”

Brokers worry that if the market sours, buyers might sue for being led into a bad deal. And price isn’t the only issue. To get a leg up on other bidders, some buyers have skipped the usual precautions, such as property-inspection and mortgage contingencies. Without the latter, a buyer who does not qualify for a mortgage could lose thousands of dollars in earnest money put up with the offer.

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