One of the most celebrated insights in management theory, by Peter Drucker, a visionary who changed the corporate discourse in 1973 with his book The Practice of Management, stated that a company has a single purpose: to create a customer. In 1973, Drucker was ahead of his time. In 2023, real estate agencies are the same as they were in 1973. They created not a customer, but a consumer: the real estate agent, offering incentives that have not evolved according to current circumstances.

These incentives contribute to the current housing crisis and to the confusion, lack of direction, and poor service experienced by thousands of professionals in the sector.

This article will address four essential questions to uncover them:

• How do real estate agencies operate in practice?
• How do they generate speculation?
• Why are commissions so high?
• Why do most clients feel that the service adds no value?
• Why are there so many (and poor) real estate agents?

Disclaimer: There are certainly professionals committed to principles and methods different, or even opposite, to those described. There are exceptions, as well as clients aligned with and satisfied by different approaches to work, which is why diversity is healthy. This text is not a critique of any specific model or company; it is rather a discussion of common incentives in real estate brokerage agencies in Portugal, known to those inside the sector, and a perspective on their effects on the real estate market and housing.

If we observe a typical real estate agency, its incentives are almost all based on: scarcity, competition, lack of transparency, conflicts of interest, focus on the profits of the agency and international brands, quantity over quality, agent turnover, rankings, stress, uncertainty, low investment in the client versus high investment in the brand, frustrated expectations, speculation, irresponsibility, instability, and dissatisfaction. To sustain this system of deep scarcity, brands heavily invest in advertising and recruitment. The “numbers manager” does not care whether it works for people, only whether it works for the machine. This scarcity is fueled through incentive schemes that serve only the brands while exploiting clients and agents, with significant social costs. Agents feel they respond not to their own goals and expectations but to those of their managers. Their managers, in turn, are people who speak only in numbers. How can a team be inspired when numbers and rankings are prioritized over human emotions?

In general, agents work in agencies with high commissions, attracted mainly by the money they can earn. These high commissions are necessary to compensate for the uncertainty, inefficiency, and stress to which agents are subjected and to provide brands with high profits and the ability to reinvest in motivation campaigns, brand positioning, and continuous recruitment. After all, the business of international agency networks is to sell “dreams,” through training designed to mold agents into pursuing the brand’s objectives and selling branded marketing products. Their consumers are the agents, not the buying/selling clients.

Each agent is incentivized to achieve results that depend on acquisition and prospecting goals using methods that instill fear in clients: fear of losing money by not knowing how to price their property, fear of missing the moment, fear of missing opportunities, fear of being deceived by the other party. Once an agent captures the attention of a client who simultaneously has a need and fear, the agent must show the client that their brand is well-known and will make them a lot of money. It is a manipulation tactic to reinforce brand power and diminish the client’s authority. Often, this creates a power game between agent and client—a negotiation between the two—rather than a relationship of trust, commitment, and service.

This power game is what the agent is trained to execute by their brand to secure a property in a highly competitive market. The agent must compete with thousands of others like themselves, including colleagues within the agency, which generates anxiety and is counterproductive. Some clients even accept the idea of “healthy competition.” Competition can never be healthy or beneficial in a service that requires personalization, trust, importance, and integrity, given its impact on people’s lives. In this game, the agent yields to the client’s unrealistic desires and may propose a listing price far above the true market value, claiming to have international buyers and promising a higher price—knowing that the property may later have to sell for much less, without concern for the market’s expectations.

It is from this first incentive that real estate speculation arises, and the entire market suffers, except the agencies, which often end up selling below the optimal price when the client runs out of time. The fact that the agent receives a percentage of the final price is not enough to protect the price—not only because they are rarely able to do it correctly, but also because the potential loss from not closing the deal and receiving their commission outweighs a few hundred euros more or less. This incentive causes stress and dissatisfaction in clients, who simply want to finish the process and start a new chapter in their lives. There is a perception that the agency was a necessary evil and that the stress stems from the other party. The client’s lack of personal authority leads them to choose brands that convey power, even if this image masks significant fragility. The stronger on the outside, the weaker on the inside.

The second incentive of the traditional model is the fallacy of commission-sharing between agencies. Agencies allow themselves to charge the client for work done by two distinct agencies, deciding if and how much the other agency will receive. Not only is this principle extremely arrogant, but it also fails and frustrates transactions, forcing negotiations between agencies that are not always aligned, thereby eliminating potential property viewings from the start. This system shifts the agent’s focus from selling the property to spending time on emails and partnership protocols, which are merely parallel transactions. Instead of debating a fair percentage, each agency should charge its own client, eliminating conflicts of interest. It is essential that each agency can independently select properties for its buying clients, charging them for its service. Failure to do so indicates that the buyer does not recognize value in the service or is unwilling to trust that agent. This raises questions of credibility and service quality, which the client evaluates and chooses based on the value proposition presented. Moreover, commission-sharing with license-holding individuals or entities legitimizes obtaining a license solely for earning an intermediary commission, without providing mediation services.

To maximize profit, the agent is also incentivized to keep the full commission, known as a “pleno” in agency slang. If they can earn double for the same deal, moving closer to revenue goals that motivate them, why accept half? Client interests are immediately compromised, with no benefit to the property owner, who pays the same 5–6% regardless of distribution. After this double-commission incentive, the agent is motivated to retain the commission within their agency, improving rankings and gaining awards. This is the third incentive.

While the client expects the agent to do everything to sell their property at the agreed price, the agent is already focused on acquiring more listings to meet their number targets, knowing that some over-priced properties sell while others do not. No agent can provide quality service to more than three or four clients simultaneously. Any agent who attempts this is merely waiting for leads. Leads from other agents are blocked by registration barriers—firstly due to the third incentive, and secondly because agents contacting them have no aligned incentive to properly qualify a buyer. On the other side are usually “scratch-card” agents—those without a solid relationship with potential buyers, registering them in their name to claim a commission if they buy a property from another agency.

We reach the fourth incentive: registering “their client” via the last four digits of their phone number with other agencies. The sharing system is not limited to real estate agents; it extends to all kinds of intermediary parasites, people who attach themselves to buyers without adding value, sometimes without the client knowing their intent. Some buyers support this practice, helping a friend earn a commission, thinking they lose nothing because “the seller pays.” Illusion. The contacted agency will still strive to secure the “pleno” and check if the potential buyer is in their database, even if months or years have passed. These agents generate process entropy due to inexperience, insecurity, and communication difficulties.

In this game, clients are assets, speculated upon and traded for future gains, not human beings with needs.

These incentive models were established when information was less accessible, and agents had to visit agencies to establish contact remotely. Agencies and agents were professionalized, with long tenure and proper training. In 2005, when I began in real estate brokerage, I took an exam to enter the profession and considered the requirements and difficulty level too low. Today, the only requirement for a license is an annual fee of €265 and liability insurance costing less than the license itself. Why is there no requirement for a structure and training truly useful to clients, covering technical, financial, procedural, and legal areas? Base training in real estate networks remains mostly commercial, focused solely on acquiring listings and closing deals. How can IMPIC justify licensing for legitimizing a (shared) commission from an occasional deal? The lack of entry barriers is the fifth incentive.

Currently, there are 9,472 active licenses, 3,048 of them in Lisbon district (Source: IMPIC). One brand claims 10,000 agents—more than the number of licenses nationwide—distributed across its agencies, with some in Lisbon exceeding 100 agents. What are these thousands of agents doing? How do they make a living? Why do we see agents hopping from brand to brand in just a few years? They must have enormous resilience to embrace a brand, feel frustration when disillusioned, start over, and again experience frustration in a system unsustainable for those seeking collaboration rather than competition. What awareness and integrity do these brands show through aggressive recruitment strategies based on agent failure and turnover? This is the sixth incentive.

The next incentive explains more. Every new recruit brings at least one listing from their close network—family or friends—who want to help and trust them. But they don’t really help. Next time you consider entrusting your property to a friend, relative, or even a familiar social media contact, assuming all agents and agencies are the same, remember they may be excellent people yet still operate in a system with the wrong incentives in a highly egocentric market. This is the seventh incentive.

When we believe something works simply because it always has, there is no motivation to improve. The old saying “seeing is believing” reflects the difficulty in accepting something as possible and true until we witness it.

Is it possible to have real estate brokerage that truly serves, is authoritative, provides value, builds trust rather than fear, offers transparency rather than speculation, aligns commissions with real value rather than inefficiency and recruitment needs? Yes, although creating positive externalities is difficult until the entire sector operates with proper principles and incentives. Difficult because many profit from these systems, and major brands have powerful lobbies, empowered blindly by client beliefs. The question is not whether agencies maintaining these models will survive, but for how long. Their presence does not take market share from smaller agencies; it merely makes their work harder and unnecessarily costlier for clients.

Innovation begins not from belief, but from curiosity and possibility, reinforcing authority through integrity and coherence, refusing to follow established rules or align with competition and power games.

A leading company is not the one with the most employees or market share; it is a company that guides others, shows a new path, and has its own sense of direction. Service is the noblest attitude of any company.

It is with such an agency that clients, developers, and agents can feel heard and supported, rather than complicit in a necessary evil.

"Those who initiate change will have a better opportunity to manage the change that is inevitable." – William Pollard

Sandra Viana