One of my goals for 2025 is to simplify life by selling a rental property. A key decision in this process is whether to hire a top-tier real estate agent, who charges a higher commission, or opt for an average agent to save on costs.
By “top-tier real estate agent,” I’m referring to an agent in the top 10% of sales volume or transaction numbers within their local market. These agents are often part of the Top Agent Network (TAN), bringing more experience and extensive connections to the table compared to an average agent who isn’t in the top 10%.
This is a common dilemma for many homeowners. To start, I’ll share my situation. Then, I’ll wrap up the post by outlining the pros and cons of each option to help all of us make a more informed decision.
The Backstory: Why I Waited to Sell
I’ve held onto this property, instead of selling it when I vacated it in October 2023, partly because I’m bullish on the San Francisco real estate market, one of the cheapest international cities in the world. The resurgence in tech stocks and the rapid growth of AI make me optimistic about demand.
Further, there are a tremendous number of local economic catalysts on the west side of San Francisco. Like stocks, the longer you can own your property, generally the more profitable.
But I also waited for another reason: the National Association of Realtors (NAR) price-fixing settlement, which I anticipated would lead to lower real estate commission rates.
True to form, commission rates have started to decline—from the standard 5% to 4% in some cases. As a seller, this is good news, but it adds a layer of complexity to my decision.
How much more is a top-tier agent really worth compared to one charging a lower commission?
The Difference In Real Estate Commission Is About 1%
Based on all my interviews, top-producing real estate agents typically aim to maintain a 5% commission rate—2.5% for themselves and 2.5% for the buyer’s agent. In contrast, average agents are more willing to charge a 4% commission to win business, taking home between 2% and 2.5% themselves.
After the NAR settlement, what the seller pays the buyer’s agent is now highly variable, ranging anywhere from 0% to 2.5%, depending on the offer the buyer’s agent presents. This shift makes it essential for the buyer’s agent and their client to have a clear understanding of the buyer’s agent compensation before working together, as no agent will work for free.
Is paying an extra 1% commission to a top agent worth it? To put this into perspective, here’s a breakdown of the additional cost of going with a top-tier agent (or savings if going with a mid-tier agent) by property price:
- 1% of $500,000: $5,000
- 1% of $750,000: $7,500
- 1% of $1,000,000: $10,000
- 1% of $1,500,000: $15,000
- 1% of $2,000,000: $20,000
- 1% of $2,500,000: $25,000
- 1% of $3,000,000: $30,000
- 1% of $3,500,000: $35,000
- 1% of $4,000,000: $40,000
- 1% of $4,500,000: $45,000
- 1% of $5,000,000: $50,000
As property prices rise, so do the stakes. The higher the property value, the greater the financial impact of that 1% commission difference.
My initial reaction to seeing these higher commission costs is reluctance—I simply don’t want to pay them. Let’s explore some of the reasons why.
Technology Has Revolutionized Property Discovery
Before the rise of the internet and platforms like Redfin, Zillow, and other property websites, finding properties to purchase was a time-consuming process. Today, nearly everyone starts their property search online, exploring neighborhoods and homes from the comfort of their devices.
For sellers, a competent real estate agent ensures their property is well-presented online by uploading high-quality photos, detailed descriptions, and all necessary disclosures for prospective buyers to review.
Personally, I’ve discovered all of my properties either online or simply by walking through neighborhoods and inquiring. As a result, the value of a real estate agent’s role in marketing a property or helping buyers find one has diminished significantly. Consumers now have the tools to handle much of the process themselves.
Technology Simplifies Submitting and Reviewing Offers
People who have never bought or sold real estate before might feel intimidated by the transaction process. However, with tools like DocuSign and other digital platforms, submitting offers is now a breeze.
After the terms are finalized, it takes less than five minutes for you or your real estate agent to send an offer electronically and get the pages signed. As a seller, you can also review and sign such documents directly from your phone or laptop, or counteroffer with minimal hassle.
A competent real estate agent ensures that all necessary documents and disclosures are prepared for buyers to review. They’ll also verify compliance with local ordinances to ensure a smooth sale. While these documents are largely standardized across listings, the devil is in the details. And a skilled agent will pay attention to the nuances that matter most.
Selling A Property Should Be Easier Today If Properly Marketed
Thanks to the efficiency of modern technology, a well-listed property should sell for whatever the market dictates. Buyers now have instant access to all relevant information, making the process faster and more transparent than ever.
Yes, some top real estate agents have access to coveted off-market properties they only share with other top agents or people they like. However, it’s uncertain whether selling a property off market will command a premium or discount. It’s a case-by-case basis.
This leads us to the next key financial question: How much more value can a top-tier real estate agent deliver compared to an average agent? Is a top-tier agent better at negotiating and generating demand to secure the highest possible price for your property? That’s certainly the hope.
The ultimate comparison comes down to estimating the added value a top-tier agent can provide versus the higher commission they charge.
Unfortunately, it’s impossible to test selling the same property simultaneously with two different agents. However, we can examine various factors and considerations that might influence your decision.
The Case for a Top-Tier Agent at a 5% Commission
While saving on commission is important, here are some additional factors to weigh:
1) Higher Sales Price Potential
Top-tier agents often have a proven track record of selling homes at or above market value. They typically come equipped with advanced negotiation skills, market knowledge, and a network of connections that can drive competitive offers. For instance, if your home is worth $1 million, even a 2-3% higher selling price could offset the extra 1% commission fee.
Example: A top-tier agent might sell your home for $1.03 million, while a mid-tier agent sells it for $1 million. That $30,000 premium more than covers the $10,000 difference in commission fees.
Even if you sell at a disappointing price, you might rest easier knowing that you hired the best agent possible to get you the best possible price at the time. A mid-tier agent would unlikely have done better.
2) Agent Responsiveness and Effort
A hardworking and responsive agent can make the selling experience much better. Paying a higher commission may be worth it if your agent is hustling for you, addressing concerns promptly, and working harder than someone who takes days to respond.
3) Greater Peace of Mind That Everything Will Be Handled Properly
Selling a home is stressful, especially if you’re juggling work, family, or other commitments. Top-tier agents often have dedicated teams or assistants who handle the details—from staging consultations to scheduling showings—allowing you to focus on your priorities.
If you value convenience, you can hand over the keys and trust them to manage everything. I’ve met plenty of competent agents who sell properties even when their clients are traveling overseas.
4) Industry Reputation
Top-tier agents tend to have better connections and are well-regarded in the community. Selling is a relationship-driven business, and buyers’ agents may trust a respected agent more, increasing the perceived value of your property.
5) Knowledge and Savvy
Working with a knowledgeable and experienced agent is a pleasure compared to dealing with someone less competent. They can anticipate potential issues and provide strategic advice. Such advice could be worth more than the extra 0.5% – 1% in commission they charge compared to a mid-tier real estate agent.
6) Service Quality Matters More as You Grow Older and Wealthier
As we age, paying for premium service becomes more appealing. Think of it like paying for Apple products: you pay a premium for ease of use, reliability, and excellent support. It’s comforting to know you can just go to the Apple Store to get your device fixed. Similarly, you may be willing to pay extra for a real estate agent who can deliver a seamless experience.
7) Expertise in Tough Markets
In a slow or declining market, a top-tier agent’s experience can be invaluable. They’re better equipped to navigate pricing strategies, buyer objections, and market dynamics to ensure your property doesn’t languish unsold.
The San Francisco market is heating up, partly thanks to enormous tech wealth that has been created and the increase in return to office. Therefore, it should be easier to sell in such a market compared to when tech was falling apart in 2022 and more people were working from home.
Cons Of Hiring A More Expensive Real Estate Agent
After everything I’ve written, hiring a top-tier agent for 5% might now sound like the preferred choice. But wait, there are some cons to consider as well.
1) Higher Cost
The obvious downside is the 5% commission rate. On a $3 million home, that’s $150,000 compared to $120,000 with a 4% rate. If the agent doesn’t deliver a higher sales price or faster sale, you’ll end up paying $30,000 more for the same result.
Like with most transaction costs, thanks to the internet, they should come down. If you still end up paying a 5% commission rate to sell your home, despite technology and the National Association of Realtors price fixing ruling, you might forever feel bad for your decision.
2) Potential for Overpromising And Underdelivering
Some top-tier agents rely heavily on their reputation to secure listings but may overpromise on what they can deliver. They might quote an unrealistically high sale price to win your business—much like a general contractor might offer the lowest bid to secure a project. Once you’ve signed with the agent, you’re locked into the listing agreement for its duration and have to think about sunk costs.
To avoid this, always verify their recent performance, not just their historical reputation. A true top-tier agent will underpromise and overdeliver. The challenge for these agents, however, is finding the balance—underpromising too much risks losing business altogether.
3) Less Personal Attention
If the agent is managing multiple high-profile listings, you might find yourself competing for their time and attention. They may not even show up for your open houses, sending an associate you’ve never met instead.
I’ve encountered plenty of associates at open houses who couldn’t answer basic questions like the lot size or when the roof or water heater was installed. This lack of knowledge reflects poorly on the property and can make buyers hesitant to submit an offer.
If the top-tier agent works with a team, it’s crucial to meet all the members who will be involved in selling your home before deciding to hire them.
Selling a Home Can Be Incredibly Stressful
I sold a home in 2017, and it was one of the most stressful experiences of my life. You can read about the challenges I faced and why I sold. Despite using a top-tier agent, the process was difficult because:
- It was my first sale.
- I had just become a father in 2017.
- The house’s total value represented a significant portion of my net worth, about 40%.
Fast forward to today, things are different. The house I’m considering selling now represents less than 15% of my net worth. I’m a more experienced seller, having gone through four additional real estate transactions since 2017. Further, I’m no longer a sleep-deprived, anxious father.
With experience comes clarity. I feel like paying extra for a top agent after all that’s happened seems unnecessary. On the other hand, knowing that a highly competent agent is in your corner can be incredibly reassuring. I can afford to pay more for peace of mind.
Another Reason I’m Torn About Hiring a Top-Tier Agent
When I bought this house, I decided not to use a buyer’s agent. Instead, I worked directly with the listing agent, and we bonded over hours of conversation during the height of the pandemic. He’s a nice and honest person.
Ultimately, this listing agent advocated for the seller to accept my offer, even though it was lower than another competing offer. My offer was clean, with a significant 40% down payment. From the seller’s perspective, my offer was also attractive because it allowed them to avoid paying a 2.5% commission to a buyer’s agent.
For example, if the property was listed at $1 million and the seller agreed to pay a 5% commission ($50,000), my offer—though $25,000 less—would still net the seller the same amount. This is because they wouldn’t owe a $25,000 commission to a buyer’s agent. Plus, the lower sale price reduced the seller’s capital gains and transfer taxes. It was a win-win, thanks to the dual-agent setup.
My Mid-Tier Agent Has Some Shortcomings
However, when it comes to selling the same property, I’m unsure about working with this agent again. While he knows the house well and helped save me money during the purchase, he has some shortcomings:
- He’s not part of the Top Agent Network, therefore, doesn’t have the extensive connections
- He doesn’t specialize in this neighborhood, though he’s handled a few transactions here.
- He’s not particularly responsive and misses some details.
- I’m not sure how great of a negotiator he is given I felt like I got a good deal as a buyer
I place a high value on effort and communication, so his lack of a detailed game plan and proactive updates leaves me feeling uncertain. That said, he’s offering a 1% lower commission to 4%, which is tempting.
Despite some shortcomings, which we all have, I also feel a sense of loyalty since he fought for me as a buyer and helped me secure this home. Additionally, his familiarity with the property could be a potential advantage.
With these thoughts in mind, let’s move on to explore the pros and cons of hiring a mid-tier agent who charges a lower commission rate.
The Case for a Mid-Tier Agent at a 4% Commission
1) Cost Savings
A 4% commission can save you a significant amount of money. On a $1 million sale, that’s a $10,000 difference compared to a 5% commission. For sellers with tight margins or who have already invested heavily in repairs or upgrades, this savings can be crucial.
2) Good Enough for Straightforward Sales
If your property is in a hot market with frequent bidding wars, priced competitively, and doesn’t require extensive marketing, a mid-tier agent can get the job done without the extra bells and whistles. For example, in desirable neighborhoods where homes sell quickly, the agent’s network and marketing resources may matter less.
3) Potential for More Personalized Service
Mid-tier agents often have fewer listings than their top-tier counterparts. This can translate to more hands-on attention and faster communication.
4) You Are An Experienced Seller Who Needs Less Hand-Holding
If you’ve been through multiple real estate transactions, you likely don’t need as much handholding or guidance to sell your property. You’re already skilled at crafting compelling real estate love letters, compiling detailed logs of home improvements with before-and-after photos, and understanding the market dynamics inside and out.
Additionally, if you have a robust network or a large platform to reach potential buyers, hiring a mid-tier real estate agent or even a real estate attorney for a flat fee might be sufficient.
Cons Of Hiring A Less Expensive Mid-Tier Real Estate Agent
1) Lower Sales Price Potential
A mid-tier agent may lack the negotiation skills, market knowledge, or network to secure top-dollar offers. If they sell your home for $980,000 instead of $1 million, the $20,000 shortfall far outweighs the $10,000 commission savings.
2) Limited Marketing Budget
A 4% commission leaves less room for robust marketing efforts. This could mean fewer professional photos, limited online exposure, or less aggressive advertising, all of which could affect the final sale price.
3) Risk of Longer Time on Market
If the agent isn’t as proactive or effective in attracting buyers, your property could sit on the market longer. This not only delays your plans but will likely also lead to price reductions. Having an agent price your properly correctly from the get-go is crucial to prevent a stale fish listing.
4) Fewer Resources
Mid-tier agents often operate as solo practitioners without a support team. This could mean delays in scheduling showings, handling paperwork, or addressing buyer inquiries. That pretty customized website you want may not be available.
Final Factors to Consider When Deciding Who to Hire
We’ve covered many aspects to help decide which type of real estate agent to hire. Here are three final factors to weigh before making your decision:
Your Timeline
If you need to sell quickly due to personal or financial reasons, a top-tier agent with a strong network and extensive resources can expedite the process. If time isn’t a pressing factor, a mid-tier agent might achieve similar results at a lower cost.
In my case, I don’t need to sell quickly. My mortgage rate is locked in at a low 2.125%, and my 7/1 ARM doesn’t reset until mid-2027. If the property doesn’t sell for a reasonable price, I can always look for tenants during the robust summer rental season. I’m confident I can rent out the house at a higher rate to a stable tenant for more semi-passive income.
Your Property’s Condition
Homes requiring significant repairs or staging often benefit from the expertise and connections of a top-tier agent. They’re better equipped to guide you through the process and make the property market-ready. A mid-tier agent may lack the same level of resources or experience.
Fortunately, my property is in pristine condition. I’ve meticulously maintained and updated everything, with detailed records to back it up. It’s move-in ready, which should make it easier to sell since buyers often prefer avoiding lengthy remodeling projects.
Your Comfort with Risk
Are you willing to take a chance on saving money with a mid-tier agent, knowing there’s a possibility of a lower sales price or a longer time on the market? Or do you value the peace of mind that comes with hiring a proven top-tier professional?
For me, the property’s total value (not just the equity) accounts for less than 15% of our net worth, so I’m less stressed about maximizing every dollar. Plus, my stock-heavy retirement portfolio and the fact that I walked away from a multiple six-figure job in my 30s show I’m comfortable taking calculated risks.
Ideal Scenario: Negotiate Your Top-Tier Agent Down on Commission
The ideal solution is to hire a top-tier agent at a reduced commission rate. In today’s market, 5% feels excessive. Aim to negotiate the rate down to 4.5% at most, striking a fair compromise for both sides.
The best way to do this is by setting up an incentive-based commission structure. The higher the price your agent can secure, the higher their commission rate. This aligns the interests of both the listing agent and the seller. As the seller, you’ll feel better about paying a higher commission rate if it results in a higher sale price.
If an agent is truly top-tier, they should be open to a performance-based compensation structure.
Example of an incentive-based pricing commission structure:
- $1,000,000 and under: 4%
- $1,100,000 – $1,200,000: 4.25%
- $1,201,000 and up: 4.5%
For a 0.5% premium, I’d likely choose the top-tier agent, especially since selling a home is a stressful process that most people don’t navigate often. Plus, you’ll sleep better knowing you took every step to prepare and market your property effectively.
However, if the commission difference is 1% or more, the extra fee doesn’t feel justified. With standardized documents and the ease of marketing through real estate websites and the internet, the value of paying significantly more diminishes.
Ultimately, it’s important to thoroughly vet your options. Interview multiple agents, request references, and evaluate their recent sales performance. Whether you choose a top-tier or mid-tier agent, finding the right fit for your needs will ensure a smoother, more successful selling experience.
Readers, which type of agent would you choose to sell your property, and why? How has your experience been with selling through your agent? What did you appreciate most about them, and what could have been better? Lastly, what other factors should potential sellers consider before hiring a real estate agent?
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