Not sure if you can read this without being a member, but my friend had a similar issue on his E36 http://ohiobimmers.com/forum/showthread.php?t=3776&page=2
It sounds like a possible HG to me??
Also, how many miles are on it?
If I were you, I would pay to have a PPI done before you buy it because there are lot of other things that would need attention that typically need refreshed on the E36 engines and chassis.
Things to check/ask:
Last time the cooling system was replaced/updated (rad, tstat, waterpump)
Rear Trailing arms bushings-have they ever been replaced? (aka RTAB's)
Rear Shock Mounts- same question (aka RSM's)
This is a lot of reading, but gives you a good idea of everything to check for: This is specifically for an M3, but alot of similarities with the 97 328
http://www.m3forum.net/m3forum/showthread.php?t=300562
Again, I would get a PPI (pre-purchase inspection) done and make sure you don't have a pandora's box you're about to buy.
If you need advice on a good shop, John over at Best Motor Werks is a great shop for this. Tell him Kale sent you, and he'll take good care of you.