Don't rely on the real-estate agent to tell you what to do. Even the most wonderful agent isn't exactly motivated to get you the cheapest price. Remember, unless your agent is specifically a buyer's broker or buyer's agent, she will typically be paid a commission—based on a percentage of the sale price—out of the seller's pocket. If an agent helps you to negotiate a lower price, her commission will be lower, too.

So, before you begin shopping, scour the Internet and the local paper's real-estate section. Pay attention to homes in your range; don't track million-dollar manses if you'll be shopping for a $200,000 condo. For at least six weeks, keep a record of how long sold homes were on the market, and whether they sold above or below the asking price and by how much.

If the market data you've collected indicates that homes in your area sell quickly and above the original asking price, then you're in a seller's market. You may have to set your sights on a less expensive home, knowing that you'll end up spending more. Conversely, if homes are on the market longer and sell below asking price, you have the upper hand. If the typical sale price is 10 percent below the asking price, you might start your initial offer at 15 percent below that list price, just to leave negotiating room.

When you find a home you want to bid on, your real-estate agent should be able to give you two or three "comps." These are actual, recent sale prices of comparable homes in the area; the more recent, the better, since they'll reflect current market conditions. Use the comps to check whether the list price is a bargain, reasonable, or outrageously inflated.

Finally, you are nuts if you make a bid without adding a contingency clause that states the house must pass a professional home inspection . If the inspector turns up trouble spots, you and the seller can decide whether (a) the repairs will be made before you buy, or (b) the sale price will be reduced to cover repair costs you'll incur after taking ownership. You want the house of your dreams, not of your nightmares.