Sizzling Market Breeds
Some Frustrated Buyers

Question: Real-estate prices in my area have skyrocketed 70% to 200% in the past year. For example, the average 1940s bungalow sold for about $110,000 last year, but similar homes are now on the market at $179,000. Some upscale homes that sold for $279,000 last year are now listed at $659,000. I am tortured by these nosebleed price increases and my inability to buy a home I can reasonably afford. Wages in the area have decreased and so has unemployment. Local real-estate agents have fueled the frenzy by listing homes with teasers like "no showing until (a certain date)" and "all offers will be entertained on (a certain date)." They create a courthouse foreclosure auction-like frenzy that is making potential buyers panic. Some agents say prices will never drop! Are these agents acting legally and in a reputable manner? Is there any group to which I can report these individuals?

-- Mark, Eureka, Calif.

Mark: When the market is hot, all sorts of strange activities occur -- some unethical, some even downright illegal. However, keep in mind that agents don't make the market; buyers and sellers do. If there wasn't a frenzy to buy and few properties for sale, none of what you describe would likely happen.

Generally speaking, all offers must be presented to a seller as they are received. However, if the seller refuses to look at offers until a certain date, there isn't much the agent can do about that. On the other hand, it is probably unethical for an agent to suggest that a seller wait until a certain date before looking at offers, as those offers usually have expiration dates -- and by waiting, the seller could potentially lose out on a good deal.

Since you are in California, if you suspect an agent of unethical or illegal activities, you can report him or her to the California Division of Real Estate in Sacramento, which may conduct an investigation. However, before doing this, I would certainly be sure I understood what the agent had done and whether it smacked of unethical or illegal conduct. Check with the local real-estate board for an opinion. It will probably be glad to assist you. Also, check with other agents. It might just be that your complaint isn't with the agent, but with market conditions.

As to your statement that some agents are saying real-estate prices will never drop, just remember that "never" is a very long time. Prices dropped an average of around 30% in California between 1992 and 1998. No one knows when, but they could drop as much -- or more -- at some point in the future. No market always goes up.

-- Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent books are "How to Get Started in Real Estate Investing" and "How to Buy a Home When You Can't Afford It" (McGraw-Hill, 2002).

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