What your agent will do
Real estate agents traditionally represent the seller, not the buyer, and they get a percentage of the sale price. Therefore, it's in their interest (and the seller's) to set as high a price as possible. The higher the sale price, the higher the agent's take-home pay.
This system works wonderfully when you're the seller, but it's not always the best arrangement for the buyer. A buyer's agent helps tilt the transaction back toward balance by giving the buyer a professional representing his or her interests.
And the help you get is not just about the money. Seller's agents will do everything within the bounds of the law to get you to buy a house. There's nothing wrong with that. In fact, it's their job. But that also means that every home they sell will be a "flawless gem in mint condition." A buyer's agent will help you get a more realistic picture of the home, the neighborhood, and the price you should pay.
Not so fast
Sounds great, right? But before you put a buyer's agent in charge of your homebuying decisions, keep in mind what this professional cannot do.
A buyer's agent can help you get a fair price, but he or she cannot promise you a bargain. Often, the buyer's agent has just as much a stake in the price of the home you buy, since he or she typically gets paid a percentage of the sale proceeds, just as the seller's agent does. That doesn't automatically create a conflict of interest, but it does mean that your agent really wants you to buy a house.
If you want to avoid this situation, try to negotiate a flat fee that you pay yourself. You may also find that different agents use different commission structures that may be more appealing to you.
A buyer's agent cannot absolve you of the responsibility of understanding your mortgage and buying an affordable house. Agents will often defer to lenders' decisions about the amount of money you can borrow and the monthly payment you can afford. In the worst case, an agent will take advantage of that information to sell you a home at your maximum price, with monthly payments that you can afford now but not later, when the mortgage rate adjusts.
It's up to you to make sure you're comfortable with your mortgage's current and future monthly payments. Just because you can buy a million-dollar home -- just because the bank will lend you the money -- doesn't mean you have to. You're the expert in your personal finances. After all, you pay the bills, not your agent.
A buyer's broker also cannot promise that if you take a less-than-optimal mortgage to get into a home, you'll be able to refinance later. That decision's up to the lenders.
Overall, having a buyer's agent can be very helpful. As long as you understand what a buyer's agent can and can't do for you, you'll feel more comfortable about the process -- and potentially get a better deal in the end.
For more on buying and selling a home, read about