"We had made an offer on a house and were told by the listing agent that another contract for a higher price had come in. The agent advised us to raise our offer. But how do we know that the other contract really exists?"

An ethical real estate agent will not lie about material facts. The existence of another registered contract is a material fact. But the question illustrates an important point. Trust in their agent is critical to home buyers. After all, buying a home may be the most important financial decision of a lifetime.

Buyers once had reason to be wary. All real estate agents worked for the seller, including the agent who showed houses to the buyer. Today, home buyers can choose a buyer agent to represent their interests and have confidence that the agent is working for them.

There are two kinds of buyer agents: Those whose firms also take listings and represent sellers; and exclusive buyer agents, who only represent buyers.

A conflict of interest can arise when a buyer is interested in a home listed for sale by the same firm whose buyer agent represents him. Using an exclusive buyer agent avoids the potential conflict because they do not represent sellers or list homes for sale.

Multiple contracts are advantageous to the seller as an opportunity to get a higher sales price for the property. A good listing agent will encourage the seller to respond to every bidder with a counteroffer as long as it is in the seller's best interests to keep the negotiations open.

A good buyer's agent will do his best to avoid multiple- contract situations. But despite his best efforts, a good house may generate multiple offers. Therefore, if you decide that this is the house of your dreams, and you wish to participate in bidding on this house, here are some tips to help you make the winning offer:

-- With your agent, carefully study the comparables, the other houses that have sold recently in your neighborhood. This helps you to determine the top price that you should offer on the house.

-- Get pre-approved, not just pre-qualified, for your financing. This usually will give you an edge over the other prospective buyers.

-- Discuss pricing options and strategy with your agent in advance.

-- Instruct your agent to present your offer to the seller in person. This will help your agent determine if there really are other offers on the house. It also can make the difference that gets your offer accepted, because your agent can negotiate on the spot.

-- Determine your top price in advance, and be prepared to withdraw if the price exceeds your limit.

-- Be available by phone so that your agent can reach you at any time during the negotiation process.

-- Stay cool, do not get emotionally tied to the house before you actually buy it.