Buying a home is one of the biggest financial, and emotional, decisions a person makes. That's why it's critical to pick the right type of real estate agent to help you buy your home, and that you use a financial planner to help make sure your home buying decision fits your financial circumstances.

Many home buyers (and for that matter, home sellers) don't realize that there are several kinds of real estate agents, and that they need to understand the differences among the types in order to choose the one who best represents their interests.

Traditional agents. The traditional real estate transaction involves two agents (or real estate brokers in some areas). The listing agent supplies information on the property to other agents on behalf of the seller. A cooperating agent, sometimes called a subagent or seller agent, matches a buyer with the seller. The listing agent and the cooperating agent then split the sales commission, which is paid by the seller. In some cases, the listing agent does both jobs, but not all real estate companies allow that.

The important point here is that regardless of whether you work directly with the listing agent or with a seller agent, their fiduciary obligation is to the seller, not to you, the buyer. They should answer honestly all questions that you have about the property, but if you divulge information that's relevant to the seller's interest, they must pass that information on to the seller. For example, they would have to pass on to the seller a casual remark by you that you're willing to pay $5,000 more than your current offer. Thus, always insist on a written disclosure as to whom the agent represents and whether your communication with that agent will be confidential.

Buyer agent. The last decade has seen the emergence of buyer agents, though they still make up only a modest percentage of real estate agents. As you might surmise, a buyer agent represents the buyer, not the seller. Thus, if the seller divulges relevant information to the agent, such as a willingness to sell at a certain price below the asking price, the agent must pass that information on to the buyer. And the agent must negotiate, fairly, in the buyer's interest,not the seller's interest.

Some observers argue that because the buyer agent sometimes is paid from the listing agent's commission, the buyer agent may not negotiate solely in the buyer's interests. In most states, however, the nature of the agency relationship is defined by contract and not by which party pays the commission.

Sometimes the buyer pays a retainer fee to the buyer agent that's credited toward the final commission, or forfeited if you don't buy at all, though the fee is often negotiable or eliminated. This raises another advantage of buyer agents. Because they are not working for a seller, they can conduct a more comprehensive search, including properties not listed such as sale-by-owner homes or even new homes. In these cases, you may have to pay their commission or an agreed-upon fee if the seller doesn't, but it can be well worth it.

Transaction agent. One aspect of working with an agent that home sellers and buyers often don't realize is that they can be legally liable for the actions of their agent. For example, they might be liable should the agent misrepresent the property or fail to disclose material information. One way to avoid this liability is to hire a transaction agent (the name varies from state to state), whose job is to work to complete the action with no fiduciary obligation to either party.

Dual agent. To confuse matters, some agents act as dual agents, legally representing the interests of both the seller and the buyer. Because of what is perceived as an inherent conflict of interest, this is seldom used.

 Regardless of which type of real estate agent you use, be sure to get in writing where the agent's legal obligation lies. You also can strengthen your hand by working with a Certified Financial Planner professional who will work solely for your interests. Buying or selling a home can have significant tax, budget, insurance and investment implications that you will want to explore with the planner before you commit to the transaction.

 This article was produced by the Consumer Affairs Dept. of The Financial Planning Association and provided to you courtesy of Nigel B. Taylor, CFP, Santa Monica, California. If you have any questions or concerns regarding this, or any other financial topic and are a resident of Southern California, please call me at 1-800-444-2237 (California residents only please), or click on the "MORE INFO" button to arrange for a free initial consultation in the comfort of your home or office.