Money Magazine -- Do I need a buyer's broker to help me buy a house?  By Lisa Scheer  

It's as if you'd found a new best friend.  Your real estate broker chauffeurs you around town, hangs on your every word, and takes pains to flatter your family at every turn.  But don't let the fawning fool you.  That broker is working for the folks who are selling the houses, not for you.  A traditional real estate broker, or listing broker, earns a commission -- usually around 5% to 7% of the sale price from the seller, no matter who buys the house.  That means it is in the broker's interest to jockey prospective buyers around to get the highest possible price.

There is an alternative. A new breed of broker, known as an exclusive buyer's agent, acts as your advocate. Like a traditional broker, an EBA steers you toward attractive homes and helps you scout out banks or mortgage companies, where you can borrow what you need to make the purchase. Unlike a traditional broker, however, the EBA guarantees to protect your interests in negotiations with the seller on the price of the house and any necessary repairs.

Sound too good to be true? Consider this:

An exclusive buyer's agent will help you find the house you need at the best price possible. Most of these specialized buyer's brokers generally get paid only if you -- the client -- purchase a home. Here's how it works: Buyer brokers typically split the sales commission with the selling broker, so they do get more money at a higher sales price (though you can occasionally negotiate to pay a flat or hourly fee). On the other hand, it's in their interest to pay attention to your needs. Unlike the listing broker who gets paid no matter who buys the house, you broker gets paid only if you buy.

A few years back, Sprint, the big long distance telephone company, studied the costs of relocating its workers. Sprint found that employees who used buyer's brokers paid an average of  91% of the asking price for houses, compared with 96% for folks who used regular brokers. On a $120,000 house, that adds up to an extra $6,000 in savings.

An exclusive buyer's agent will save you money and time. Your agent can save you money by haggling on price, pressing sellers to fork over the costs of home repairs in the closing contract, or asking lenders hungry enough for your business to shave points or cut fees such as document preparation charges. For instance, Stephen Israel, president of Buyer's Edge, an exclusive buyer's brokerage in Bethesda, Md., recently saved one buyer an estimated $11,000 by convincing the eager sellers of a $140,000 brick Tudor home in Washington, D.C. to make needed repairs. The sellers replaced the roof, refinished hardwood floors, installed a new electrical system, and bought new kitchen cabinets and appliances as a condition of the sale, says Israel. "They agreed to do it, but we had to pull some teeth." Remember, closing costs are often negotiable, but as Israel puts it, "If you don't ask, you don't get."

If you cant find an exclusive buyer's agent, consider a single-agency broker. If there aren't any EBA's available in your area consider hiring a single-agency broker.  These are usually traditional real estate agencies that accept listings and represent sellers.  But when acting as a buyer's broker, these agents sign a contract that legally obligates them to put a buyer's interests first.  Since single agency brokers never represent a buyer and seller in the same deal, you can feel comfortable that their loyalties will not be divided. When you talk to candidates and you should interview more than one -- ask for referrals, from past clients, and check those references before you hire.

Cast of Characters

Listing broker. When a house goes up for sale, a listing broker typically signs an agreement with the property owner to market the house for a commission -- usually between 5% and7% of the selling price.  It's in the listing broker's interest to get the highest possible price for the home.

Selling broker. Once a house is ready for sale, the listing broker alerts all of the selling brokers in the area through a database called the Multiple Listing Service. If a selling broker brings in the home's eventual buyers, he or she splits the commission (called a co-op) with the listing broker. However, both brokers work for the seller.

Exclusive buyer's agent - works for an exclusive buyer's broker.  An exclusive buyer's agent works for and is paid by the buyer (which is typically no cash out of pocket from the buyer - since the co-op usually pays the buyers fee .)  The agent has a responsibility to work on the buyers' behalf to find a house that suits their needs and price range.

Single agency broker. Some real estate brokers straddle the fence, representing sellers in some deals and buyers in others. In the absence of an exclusive buyer's agent, a single agency broker is an acceptable substitute.

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