December 9, 1996 PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Dear Sirs: Reference is made to the Underwriting Agreement, dated concurrently herewith (the ``UNDERWRITING AGREEMENT''), among Avalon Properties, Inc., a...

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EXHIBIT 1.2





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                            AVALON PROPERTIES, INC.

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                         Price Determination Agreement


                                                                December 9, 1996



PaineWebber Incorporated
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000

Dear Sirs:

                 Reference is made to the Underwriting Agreement, dated
concurrently herewith (the ``UNDERWRITING AGREEMENT''), among Avalon
Properties, Inc., a Maryland corporation (the ``COMPANY''), and you.  The
Underwriting Agreement provides for the purchase by you from the Company,
subject to the terms and conditions set forth therein, of an aggregate of
2,300,000 shares (the ``FIRM SHARES'') of the Company's Common Stock, par value
$.01 per share.  This Agreement is the Price Determination Agreement referred
to in the Underwriting Agreement.

                 Pursuant to Section 1 of the Underwriting Agreement, the
undersigned agree with you as follows:

                          1.  The public offering price per share for the Firm
Shares shall be $26.25.

                          2.      The purchase price per share for the Firm
Shares to be paid by you shall be $24.94 representing an amount equal to the
public offering price set forth above, less $1.31 per share.

                 The Company represents and warrants to you that the
representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.

                 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.





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                 If the foregoing is in accordance with your understanding of
the agreement between the Company and you, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among you and the Company in accordance with its terms and the terms
of the Underwriting Agreement.


                                        Very truly yours,
                                        
                                        AVALON PROPERTIES, INC.
                                        
                                        
                                        By:      /s/ Xxxxxx X. Xxxxxxxx
                                                 Name: Xxxxxx X. Xxxxxxxx
                                                 Title: Chief Financial Officer 
                                                           and Treasurer




Confirmed as of the date
  first above mentioned:

PAINEWEBBER INCORPORATED


By:      /s/ Xxxxxxxxx X. Xxxxx, Xx.
         Name:  Xxxxxxxxx X. Xxxxx, Xx.
         Title:  Managing Director





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