First-time home buyers: How your Realtor can help you win

May 30, 2022 - 7 min read

Do I need a Realtor to buy a house?

You’re not legally required to work with a Realtor when you buy a house. But it usually makes sense to do so — especially if you’re a first-time buyer in the current market.

Your Realtor will help you craft the right offer to win in a competitive bidding war. And keep in mind that as a buyer, you won’t pay your Realtor out of pocket; the seller typically pays all agents involved in the sale.

If you’re still on the fence, learn more about what a real estate agent does and how yours can help you succeed in this historic housing market.

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Benefits of having a Realtor or real estate agent in today’s market

Anyone who’s shopping for a home knows it’s a historically tough market.

Until recently, home buyers have enjoyed near-record-low interest rates. But today, they face a housing environment with rapidly increasing rates and scarce supply. Suppressed inventory levels in most parts of the country caused home prices to increase by nearly 20% between April 2021 and April 2022.

If you want to win a home in these conditions — and be sure you’re making a sound investment — a great Realtor can be your biggest asset.

Having a knowledgeable agent on your side, knowing exactly what to offer in a bidding war, and how to structure the offer, could be the difference in whether or not you win the home of your dreams.

How your agent works for you

Regardless of the market, buying a home is complicated. It involves expert negotiations and familiarity with contracts and extensive paperwork.

A good Realtor will have a thorough understanding of the market. This includes providing a comprehensive report known as a comparative market analysis (CMA) to help you understand market trends and determine what price to offer. CMAs will also provide you with the important “need to know” facts such as how long the home has been on the market and whether the price has gone up or down.

This information can be incredibly valuable when it comes to evaluating whether a home is a safe investment and worth the price you’ll pay for it in today’s market.

In addition, there are often small problems with initial negotiations and paperwork that, if unnoticed, can put your entire transaction in jeopardy. Your Realtor or real estate agent will work with you closely to ensure nothing falls through the cracks.

“I have seen many people try to go in without a Realtor and then later hire one as the negotiation process is so tedious and difficult to understand on their own,” says Jon Meyer, licensed loan officer and The Mortgage Reports loan expert.

Finally, your agent will help structure your offer so it’s attractive to sellers and competitive against other buyers. This is an indispensable skill — especially if you’re a first-time buyer who can’t pay in cash or make a huge down payment.

Verify your home buying eligibility. Start here

How Realtors can help first-time home buyers

Prior to even entering today’s volatile housing market, first-time home buyers tend to have more challenges.

Often, first-timers are younger, which can potentially mean lack of credit history and/or lower credit scores. In addition, younger buyers’ employment history is often shorter; their income may be lower than older, more established home buyers; and they’ve had less time to save for a down payment.

All of this leaves first-time buyers less competitive in bidding wars, less likely to secure a loan, and sometimes less appealing to sellers.

Fortunately, having the right real estate agent in your corner can make up for a lot of these challenges.

  • Realtors bring in specific expertise. Not only do most first-timers not have this same level of expertise, they typically don’t know just how important it is to have in today’s market
  • A good local Realtor is going to help you prepare an impressive offer, making any of those other first-time buyer shortcomings far less significant to sellers
  • Good agents are going to know the areas in which you’re searching. Usually, they know your search area far better than you — it’s their job to know this

Let’s say you’ve been eyeing a particular neighborhood but it’s just outside your price range. Your Realtor is an expert at knowing the ins and outs of every local neighborhood. They are pros at being able to direct you toward a home in your price range that you may have overlooked, maybe even in that sought-after neighborhood you thought you couldn’t afford.

All these skills are indispensable not only to finding a home you love but to winning a bidding war, too.

Real-life story: How an agent can help you compete in this market

Just over a year ago, Mark and Cindy Mueller, newly married millennials in Canton, Georgia, excitedly made the decision to purchase their first home. (Names have been changed to maintain privacy.)

Thanks to record-low mortgage rates, affordability was in their favor. “Even with home prices rising, with rates in the 2’s, we never considered the possibility of not being able to compete in this market,” Cindy explained.

After jumping head-first into the house-hunting game, Mark quickly became discouraged after several failed attempts at getting one of their offers accepted. “We submitted lots of offers over the course of two months. We would either get outbid by higher offers, or our offer would get passed over for cash offers being made by investors,” he said.

Like many would-be home buyers, Mark and Cindy reluctantly decided to re-sign a lease and try again next year.

The affordability challenge

Enter 2022, where interest rates are rising at their fastest pace in nearly three decades.

Making matters worse, Mark and Cindy discovered more than half of the homes listed are selling above their list price. And they found out that multiple offers resulted in more bidding wars in the month of January 2022 than any other month during the pandemic.

All of this meant that the very same mortgage payment Cindy had budgeted for is now 20% higher than just a year ago.

Where a buyer’s agent comes in

Fortunately for the Muellers, they had a highly qualified buyer specialist on their side.

You see, the Muellers’ Realtor made it her mission to thoroughly know the local market.

Knowing her market, and having access to exclusive sites with even more listings than the Muellers could see, she knew of any new housing inventory that hit the market in their price range. The moment a new home within in their search criteria hit the market, she contacted them immediately.

After receiving word that the Muellers really wanted one particular home, she sprung into action.

Like many great real estate professionals, the Muellers’ Realtor understood the importance of having relationships with just about everyone who could possibly help in the home buying process.

She immediately contacted the listing agent with whom she had worked previously. She then contacted a top local home inspector to ensure there weren’t any unforeseen surprises associated with this particular home.

Thanks to the help of their great Realtor, the Muellers are thrilled to be under contract on their dream home.

Who pays for real estate commissions?

Like many first-time home buyers, you may think that if you’re buying a home without an agent, you’ll save the 3% commission that would normally go to the buyer’s agent.

That’s not how most real estate transactions work, however.

Importantly, buyers don’t need to pay their agent in cash out of pocket. And that can make the prospect of hiring a real estate agent a lot less daunting.

The contract between the seller and the listing agent typically agrees to pay the seller’s agent a commission between 5–7%. The seller will usually pay a portion of this commission to the buyer’s agent (usually split between both agents).

Technically, it’s more accurate to say both the buyer and seller end up paying real estate commissions. The total price of the home accounts for both agents’ commissions. The seller’s profit is deducted by the agreed-upon commissions. And for the buyer, they’re paying for the agent as part of the home price.

But importantly, buyers don’t need to pay their agent in cash out of pocket. And that can make the prospect of hiring a real estate agent a lot less daunting.

How to choose a great real estate agent

In a “normal” market, buying a home can be a stressful experience. In today’s housing market, this is compounded.

It’s no wonder that 87% of home buyers purchased their homes with the help of a real estate professional.

But what is the best way to find a great buyer’s agent?

  • Ask friends and family for recommendations. According to the National Association of Realtors, forty-seven percent of home buyers used an agent that was referred to them by a friend, neighbor or relative. Previous home buyers are one of your best methods for finding an agent, as they can speak about their own personal experiences
  • Search online for local, active, and experienced agents. Social media and online searches are a great way to find an agent that matches your needs. You can read agent reviews and discover whether they work primarily with buyers or sellers. Many agents brand themselves as specializing in first-time home buyers
  • Speak with more than one agent. By talking to several agents, you’ll be able to compare and contrast strengths and weaknesses that could have a major impact on your home buying experience. Be direct about your wants and needs. Ask plenty of questions to determine which agent will be the best fit for you and your situation
  • Don’t overlook the importance of the right personality. Finding the right agent is about more than just someone who’s been in the business for decades. Don’t overlook the importance of choosing a Realtor with whom your personality fits. You’ll be spending a lot of time together. It’s important to work with someone whose company you enjoy, and who you feel truly understands your needs and goals

Working with the right agent can be the difference between a good or not-so-good home buying experience.

Home buyers should work with a Realtor

Prior to Covid, the housing market was already struggling with low inventory and high prices. The pandemic took an existing challenge and made it worse.

Whether you’re a first-time home buyer or a seasoned homeowner who’s purchased many homes, it’s never a bad idea to work with an experienced real estate professional when you are buying a home.

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Craig Berry
Authored By: Craig Berry
The Mortgage Reports contributor
With over 20 years in mortgage banking, Craig Berry has helped thousands achieve their homeownership goals.