Real Estate Brokerage
09 May 2023
Author’s note
I am a real estate agent and work essentially in the residential market. I work with Keller Williams (KW), but I've collaborated with Remax and Porta da Frente Christie's. If this weren’t my activity, I would not have the know-how, experience and awareness to write an article on a topic that, despite having an impact on so many people, is not easily identified by anyone who does not work in real estate.
This article is – like any other in this publication – an impartial and editorial effort to provide you with relevant information on a given topic. The present note aims to honor the editorial status of this publication, and to share all the relevant information, providing you with “the power to build your own opinion, based on objective information and facts".
Buying and selling a house represents, for the majority of the world's population, the biggest transactions of their lives. That's probably why so many people turn to a real estate agent for help.
Remax is the leading (in relative terms) real estate brokerage brand in Portugal. And probably the one most Portuguese know of. But in recent years, part of its legacy could be described as follows: a contribution to making the real estate market in Portugal a worse place.
A more obscure and conflicting place. A place where an agent (or consultant, both terms are used indistinctly in this article), may have to resort to informal approaches in order to provide their client with the best service. A place where circumstances lead to situations where that same agent may feel compelled to lie to his client.
Especially because Remax Portugal does not only deprive its agents from freely choosing the best market solutions for their clients. It also promises to punish those who decide to do so.
This article is essentially a chronology of facts.
An accurate and objective listing of the hostile measures that a given brand decided to apply to the market. And an attempt to explain its motivations and consequences.
By
"What I'm trying to tell you (and as unbelievable as this may seem), is that there are real estate brokerage brands in Portugal that set aside potential buyers interested in purchasing that same property for which they are obliged by contract to try to find a buyer.
And yes, Remax is one of those brands."
By
WHAT IS AT STAKE?
When you hand over the promotion of your home to a real estate agency, the contract stipulates a compensation linked to the success of that sale or lease. In most cases, this compensation is defined by a percentage of the transaction value. For example: a commission of 5% on a sale of €200,000 corresponds to a compensation of €10,000 (added by VAT at the current rate).
The most common practice in the residential market (and the one that is usually described as good practice) is that the realtor to whom you trust your house promotion is willing to share half of that commission with any other duly licensed realtor who finds a buyer. In fact, my professional advice is that you should demand such a guarantee. Because those €5,000 (half of the €10,000 commission) represent the prize that ensures the motivation of all other market players (agencies and agents) to show your house to their clients.
This mechanism is called partnership or sharing/splitting and is the system that enables you to hand over the promotion of your home to the consultant you trust the most, ensuring at the same time, that a whole universe of agents has a financial motivation to share your property with potential buyers.
When a real estate agency turns down partnerships, the number of agents who are allowed to schedule a viewing with their clients to a given property is automatically reduced. And there is also a blatant omission of relevant information, which should be provided to the client.
Have you ever seen a listing contract where a realtor states the refusal to accept potential buyers for this or that reason?
I haven't seen any, and I bet you haven’t either because, according to IMPIC, whose aim is to regulate and supervise the market, "Decree No. 228/2018, of 13.08, established a real estate agency contract model with general contractual clauses (...)". And what this decree says, literally and textually, is that the real estate agency is committed to finding an interested buyer for a given business.
What I'm trying to tell you (and as unbelievable as this may seem), is that there are real estate brokerage brands in Portugal that set aside potential buyers interested in purchasing that same house for which they are obliged by contract to try and find a buyer.
And yes, Remax is one of those brands.
In which scenario do you think you’ll be able to sell your property on more favorable terms? When you have 1 or 3 offers? And when do you think you’ll be most likely to get a higher number of offers? When you choose a brand that agrees to partner with all other real estate agents? Or when you choose one which uses mechanisms that reduce the likelihood of closing a deal with a buyer represented by another real estate brand?
This is the most elementary understanding of the concept of market value. If the realtor to whom you have trusted the promotion of your home limits or restricts the property market, you cannot expect this attitude won’t affect the price at which you’ll be able to sell it. Because it will. I’m not the one saying it: it's the theory of economics and any real estate agent with half a brain.
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THE POPPING CHRONOLOGY
The following chronology consists of two types of information. Facts and related comments.
The paragraphs marked "THE FACTS" refer strictly to just that, facts.
Comments on these facts are marked "COMMENTS". These paragraphs are mainly intended to give context to the facts, for a better understanding of their scope and consequences.
"I would say that the most famous recipe in the world for retaining talent is to offer people more. More money, more conditions, more recognition... Trying to make people feel that staying in a certain place is best for them.
Remax Portugal seems to have chosen a different strategy. By creating obstacles for direct competitors before they become too big, not giving a damn for their own clients’ best interests and, with no special subtlety, passing the following message to their agents:
– Do you want to leave? Well, screw you..."
AUGUST 2014
THE FACTS
Remax Portugal and Remax Ábaco sign a termination agreement on friendly terms (without either party having to financially compensate the other).
COMMENTS
Remax Portugal is the so-called master franchise of the Remax brand in national territory. That is, the entity that purchased the commercial rights of the brand in Portugal. Similar to what happens, for example, with Century 21 Portugal or KW Portugal, and also with many other brands from so many other sectors.
Remax Ábaco was one of the so-called franchises. That is, one of the entities that pay (in this case to Remax Portugal), to benefit from the right to explore a given brand. These are the companies that embody the agencies you are used to seeing on the streets. Imagine that I name my agency ABC. If I join Remax or Century 21 my agency will probably be called "Remax ABC" or "Century 21 ABC".
SEPTEMBER 2014
THE FACTS
KW opens its doors in Portugal under the franchisee KW Ábaco.
COMMENTS
Ábaco purchases KW brand’s commercial rights in Portugal. In other words, it constitutes the master franchise of the KW brand with the same purpose as any other business in a franchise model: to expand the brand in Portugal through the multiplication of franchises, in this case real estate agencies.
OCTOBER 2014
THE FACTS
Remax Portugal’s president sends an email to the brokers (a term usually used to designate the agencies’ owners), from which I transcribe three excerpts:
1) "Sharing/splitting business with KW will help them grow quickly, leveraged by our listings and clients";
2) “RE/MAX Portugal’s Master decided to FORBID THE SHARING OF ANY BUSINESS WITH KELLER WILLIAMS (from our listings or KW’s listings)”;
3) "we were also advised by the Lisbon Brokers to implement strong penalties in order to ensure that no one fails to comply with this rule, already included in the Procedures Manual".
COMMENTS
As far as I am aware, this is Remax Portugal’s first attempt to cancel a competitor. Something that does not happen without the deliberate constraint of the Remax agent’s freedom of action, and the clear intention to penalize anyone who considers ignoring this same constraint. Equally or more relevant than mentioning these measures, is understanding the concrete consequences they generate in the agent’s activity, and in the deterioration of the value proposition offered to clients.
When I was a Remax agent, I vividly remember hearing a colleague say one day (any Remax consultant who has never heard anything like this please raise your hand):
– When clients ask me to visit a KW listing, I tell them it's already sold.
As much disapproval as this conduct may deserve, it is – more than anything else – an unfortunate option facing a choice that no agent should be forced to make. The choice between:
1) Lying to the client (which shouldn't even be an option);
2) Breaking the rules of a real estate brokerage brand that deliberately deprives its agents of the full performance of their duties, and risk punishment for not complying with these restrictions;
3) Explain to a buyer that, even if he finds the property of his dreams, a Remax agent is not allowed to show him that property if it is being promoted by KW.
And acknowledge towards a selling client that, even if there is someone willing to pay the asking price for his property, the Remax agent is not allowed to show him this offer if that potential buyer is represented by KW.
Can you imagine the stress undergone by an agent in these situations? The indignation raised in a client? The time spent trying to find a solution? The pressure put on everyone? The conflict between the internal rules of Remax Portugal and the interests of the clients themselves?
Do you now understand what it means to make the real estate market in Portugal a worse place?
BETWEEN 2014 AND 2015
THE FACTS
Other Remax franchisees decided to abandon this brand and become part of the KW network in Portugal.
COMMENTS
Not only is it not unheard of, but it is not at all uncommon that, sometimes, real estate agencies change brands (franchise). Either at the end of the franchise agreement (which usually lasts for 5 years, subject to renewals), or by means of a termination agreement between both parties.
AUGUST 2015
THE FACTS
Remax Portugal files a lawsuit against Ábaco. The total amount of the legal action is €36,000.
COMMENTS
As far as I could find out, this lawsuit concerns two points:
The fact that there were KW Ábaco advertisements in at least one portal with Remax’s watermark on the property’s photographs.
The fact that some Remax sale signs were not removed.
JANUARY 2017
THE FACTS
The sentence relating to the lawsuit filed by Remax Portugal against Ábaco was issued.
Ábaco was ordered to pay €3,500 to Remax Portugal (less than 10% of the amount claimed by Remax Portugal).
COMMENTS
This was the amount that the judge decided Ábaco should pay Remax Portugal, due to having maintained advertisements in at least one portal, with a Remax watermark they had not cared to remove. Also, due to having been unable to remove all of the Remax sale signs.
To contextualize: the amount that Ábaco was sentenced to pay is lower than the value Remax Portugal recommends should be charged for the sale of a property of €20,000 or less.
APRIL 2019
THE FACTS
KW Prime, KW Business and KW Viva, three of KW's franchises (two of which, prior to the arrival of KW in Portugal, had been Remax Prime and Remax Business), communicate their unilateral termination to KW Portugal. That same month, a new real estate network emerged in Portugal: Zome. These franchises are now called Zome Prime, Zome Business and Zome Viva.
The emergence of Zome leads to:
1) A set of lawsuits filed by KW Portugal against franchisees who left KW during the term of the franchise agreement. That said, KW's agents have never had any restrictions to doing business with Zome, nor did Zome impose any restrictions on their agent’s freedom to work with KW.
The judicial litigation had no implications on what is, objectively, the freedom of action of KW and Zome’s agents in serving their respective clients.
2) New cancellation attempt: Remax Portugal extends to Zome the decision already deliberated in regard to KW. According to the update of the Remax Procedures Manual after this date, "Sharing direct contacts of clients with intermediary entities, doing business and/or viewings with Brands where sharing is forbidden – KW and Zome" – results in "the removal of the agent from the network".
COMMENTS
Why does Remax extend its cancellation attempt to Zome? I never heard an effort at an explanation that didn't mention the fact that part of Zome's founders were once Remax brokers, and later decided not to be.
It is also common knowledge among Remax associates that Remax Portugal promoted telephone contacts as a “mystery shopper”, with the aim of testing what Remax consultants said when confronted with potential requests for business with KW. When I say "it's common knowledge" I'm not trying to take cover in vague concepts: ask Remax agents. That's exactly what I did and, according to them, the brokers themselves were the ones who warned agents to be aware of these initiatives by Remax Portugal.
"Conclusion: according to data provided by Remax Portugal itself, the brand will have lost between 23% and 27% of its property stock within 15/16 months."
JANUARY 2021
THE FACTS
Remax Portugal institutes the obligation to establish protocols with other realtors. Basically, this procedure imposes that every Remax agent, in order to accept a viewing for one of his listings, from a client represented by a consultant from another agency, must register information such as tax identification number, company name, address or the employer’s agency’s commercial name, for subsequent validation by Remax Portugal.
COMMENTS
According to Remax agents themselves, Remax Portugal wanted to ensure that its consultants were not accepting viewing requests from KW and Zome agents. But as we will see right away, there were possibly other reasons.
The most obvious consequences of this procedure were the piling up of some bureaucratic work for Remax agents (imagine that you receive half a dozen requests for viewings for the following day, from half a dozen different real estate agents), the rise of some distrust among potential partners (the message would not always be conveyed clearly), and a less practical and dynamic process of scheduling showings.
1st SEMESTER OF 2021
THE FACTS
A message is sent to the consultants (note that these communications do not necessarily have a written nature, sometimes they are transmitted to the agents in person or online, during the meetings that take place in each agency), that Remax Portugal splits only 30% commission (instead of the usual 50%) with EXP Portugal and IAD Portugal.
COMMENTS
The reasons provided referred to the fact that these two real estate agencies do not have physical branches, and supposedly charge lower commissions.
I would dare say that the most plausible reason for this measure is that: any recruiter will tell you that Remax agents receive a compensation of between 40% and 50% of the real estate commissions they generate (unless they pay monthly fees, never lower than €1,000). Whilst IAD and EXP agents earn, respectively, 69% and 75% of the business generated.
And yes, I also confirm that real estate agents, like other human beings, tend to appreciate the possibility of earning more money.
And yes, if that's the question crossing your mind: KW and Zome also have compensation plans usually considered more attractive than those of Remax.
SEPTEMBER 2021
THE FACTS
All previous measures listed in 2021 cease to apply. Remax Portugal waives the obligation to establish protocols. What already existed before remains the same: the banning of contacts, viewings, business with KW and Zome.
COMMENTS
I don't know for sure what the reason for this withdrawal was, but I imagine that it is linked to the fact that most agents and brokers do not endorse it (that said, I never felt that most Remax agents backed up the imposition of a boycott on KW and Zome).
MARCH 2022
THE FACTS
Between January and February 2022, Remax franchisees communicate other measures to their agents:
1) As of March 1, 2022, Remax agents are allowed to do business with KW and Zome;
2) From that date onwards, Remax stops sharing half of the commission with real estate agents from all other networks. They only share 1.5% of the transaction value.
COMMENTS
About the end of the KW and Zome boycott, information spread that it was due to the end of the court case. Do you recall what you read just a while ago? The sentence was known 5 years earlier, in January 2017. Basing anything on facts is an act which the Remax Portugal universe systematically seems to fail...
Regarding the other measure, if a Remax franchisee took a buyer to a property sold by another Remax franchise, the partnership would continue to be carried out in the same way: half the commission charged to the seller (usually 5%) for each of the parties, that is, 2.5% for each one. But when the buyer was represented by another real estate brand, Remax's franchises began to pay only 1.5%.
Taking the initial example of the house that was put up for sale for €200,000, with a 5% commission, the agency that found a buyer would no longer earn €5,000 but €3,000. In other words, Remax decided to reduce in 40% the compensation of the party that brought the buyer, whenever that buyer was not represented by a Remax agent.
When we reduce a compensation in 40% (from 2.5% to 1.5% of a given transaction), we cannot assume that it won’t impact the interest of its beneficiaries: the most immediate consequence is that realtors will be less interested in promoting that property to potential buyers. In other words, those who handed over the promotion of their homes to Remax are potentially harmed, because the market size for their property (and respective value) virtually drops as soon as this decision is made.
And there is a very important note to add here: Remax is the leading brand in Portugal. But that does not mean that it has a market share of more than 10% or 15% (it will just be higher than the shares of its most direct competitors). Assuming these values are credible (and I believe they are), this measure will have left between 85% and 90% of the real estate market much less willing to show Remax properties to potential buyers. There is no denying it: the impact is very significant.
And who gains from it? As Lavoisier said, “(...) nothing is lost, everything is transformed”. The answer is: Remax Portugal.
Why? This measure, due to the reasons already mentioned, generates a predictable reduction in the number of external shares, which leads to an increase in the number of internal shares (an expectation categorically stated in this video by Remax Portugal) and, therefore, a bigger contribution for the master franchise. Because in the case of internal commission split, even if it implies dividing 2.5% of the transaction value of a property between two Remax agencies, there is a total of 5% commission to be billed by Remax agencies, value over which Remax Portugal (as a master franchise), is entitled to receive a percentage. In an external sharing scenario, Remax Portugal could only charge a percentage of 2.5% (or now according to this new rule: 3.5%) reported by a Remax agency, because the other 2.5% (or 1 .5%) would be payable to an external intermediary, over which Remax Portugal has no rights. In one way or another, this option does not happen without a significant reduction in the value proposition that is offered to the seller: the one with whom the realtor signs the listing contract.
And in general, what do real estate contracts in Portugal say? That "the realtor is obliged to attempt to obtain an interested party in the purchase/lease/transfer" or "is obliged to look for a client for the purchase/lease/transfer". They don't say that the real estate agency “engages/puts more efforts in some cases and less in others”. But in effect, that's more or less what Remax took the liberty of doing: by compensating the purchasing party in a discriminatory way, depending on where they come from. As if it is relevant for the client to whom they promised to sell a given property, whether the interested party, who has the conditions to buy, is brought in by Remax or another realtor.
APRIL 2023
THE FACTS
In March 2023, Remax agencies communicated to their consultants that, as of April 2023, Remax Portugal overturns the decision to split only 1.5% with other realtors. Remax returns to splitting 50% of the commission, which will usually represent 2.5% of the total transaction value.
The other announced measure is that Remax Portugal will no longer allow businesses/partnerships with KW Portugal. Which is actually acknowledged at the beginning of the 24th minute of this interview published by Remax Portugal itself on May 11, 2023 (the censorship of the agent's reference to KW is just another tragic-comic detail of this soap opera).
COMMENTS
Regarding the reinstatement of the 50%/50% sharing system (an option that I cannot help but applaud; like someone who applauds a 3-year-old child who stops trying to hit his kindergarten classmates), the reasons seem to be clear. Between the beginning of March 2022 and the end of March 2023, the period during which Remax split only 1.5% of its commission with partners, Remax Portugal lost many agents (there are hundreds and hundreds of Remax agents who witnessed this exodus, and many others from other real estate brands that every month or week noticed the arrival of new colleagues from Remax). Equally or even more relevant: it will have lost many agents with large business volumes.
Which unveils the failure of the measure that came into force on March 1, 2022. Anyone who watched the video produced by Remax Portugal in early 2022, which in the meantime went viral among agents in the sector, could confirm that paying only 1.5 % to other real estate agencies was also a strategy to prevent losing agents and attract new ones.
Moreover, in that same video, which will have been shown to brokers in January 2022, Remax claims to have a stock of over 60,000 listings. To be more precise, a character that symbolically represents a Remax broker, mentions in the video the "more than 60,000 mushrooms that we have in our warehouses". If you watch the video, I assure you that:
1) You will understand the metaphor;
2) You will question whether Remax Portugal communicates with its associates as if they were idiots.
But let's get to the numbers: yesterday, May 8, 2023, I asked ten Remax agents and they all confirmed that, according to their back office, Remax Portugal has just over 44,000 listings available (but according to their website, on the same day, there were almost 46,000). Conclusion: according to data provided by Remax Portugal itself, the brand will have lost between 23% and 27% of its property stock within 15/16 months.
[For a better interpretation and contextualization of these figures, I add the following note: in an article dated April 26, 2023, Idealista – considered the largest national real estate portal, therefore a relevant reference in terms of inventory – refers that the number of houses for sale in Portugal fell by 7% between the first quarter of 2022 and the same period of 2023. In other words, the decrease in Remax’ stock vastly exceeds the reduction of inventory in the market as a whole]
But most alarming of all: Remax franchisees sign listing contracts (in which the contacting agent's data is included), where they commit to making efforts to find a buyer for a given house; but allow themselves to set aside potential interested parties for the purchase of that same house, claiming reasons that are not mentioned in the listing contract. And if they were to appear there, they would have to be approved by the regulator.
If this is not illegal...
As for the return of a greater hostility towards KW, at least two rumors are circulating: the first would be a stand taken due to KW's supposed aggressiveness in recruiting Remax agents; the other a bizarre explanation according to which KW's commissioning system would be illegal.
I'll just recall some obvious ideas:
1) Real estate agents are citizens with full rights, who are allowed to make the professional choices that they consider to be the most suitable for them at a given moment. It is, so to speak, a basic idea of what we usually call the free world;
2) In Portugal, Remax franchisees, as well as the overwhelming majority of real estate brands that work in the residential sector (which include all those referred to in this text), do not offer employment contracts or salaries to real estate agents; the professional relationship is precarious (where stability is not guaranteed) and based on the provision of service contracts; therefore offering each party a wide flexibility.
3) KW's compensation model stipulates that the commissions generated by the agent contribute to the agency’s and KW Portugal’s income only up to a given billing amount. From that value onwards, the Market Center (designation given by KW to each of its agencies) and KW Portugal stop profiting with the commissions generated by the agent. Putting it very simply: on average, each KW agent contributes less for his agency and KW Portugal than a Remax agent does for his agency and Remax Portugal; which, on average and for the same business volume, enables him to obtain a higher compensation than his colleague at Remax. It is just a different business model, like the Zome, IAD and EXP models (which I don't know in detail, but which will surely have their merits), and many others. There is nothing illegal about these approaches: their only flaw is that they are considered more attractive than Remax Portugal’s pay scale.
I would say that the most famous recipe in the world for retaining talent is to offer people more. More money, more conditions, more recognition... Trying to make people feel that staying in a certain place is best for them.
Remax Portugal seems to have chosen a different strategy. By creating obstacles for direct competitors before they become too big, not giving a damn for their own clients’ best interests and, with no special subtlety, passing the following message to their agents:
– Do you want to leave? Well, screw you...
The reaction took a while but manifested itself: the last 12 months were marked by the exodus of experienced agents, who decided to send Remax and its lack of civility in Portugal to hell.
By
A FEW RELEVANT CONSIDERATIONS
There is something important that should be said: Remax Portugal is far from having a monopoly on practices that harm the sharing system. In fact, it is fair to recognize that historically speaking, Remax even had a very relevant role in the implementation of the partnership/splitting system in Portugal.
Unfortunately, there are some brands on the market that refuse to partner under any circumstances (a topic I already wrote about in 2020). What I'm saying is that you risk signing a listing contract with a company that contractually undertakes to "seek a client for the purchase" of your property; but that grants itself the right to set aside, in cases where it has to split part of the commission with another realtor, precisely what it promised to deliver: potential buyers.
After reading this, don't you feel that real estate in Portugal should be more regulated?
Some will cling to the idea that none of this is against the law (belief with which I completely disagree). So, let's do the exercise of letting ourselves get carried away by the cynics and imagine what the market would be like if all realtors refused or complicated partnerships between different real estate brands.
A real estate market where everyone who wanted to sell their property with a broker would have to sign dozens of listing contracts with dozens of real estate brokerage brandes to ensure that they would be able to cover a considerable part of the market and reach a reasonable number of potential buyers. A real estate market where every client who wished to go through a purchasing process backed up by a broker would have to contact dozens of real estate agents to try to find the most suitable home. In short: a real estate market offering much less added value.
What these cynics often forget is that they are not smarter than everyone else. And that in the same way that Remax's hostility led to the loss of agents and market share, a real estate brokerage under these terms will also lose interested parties. Because the reason a given product or service exists lies essentially in the added value recognized by the market.
Remax agents understand the importance of partnerships very well. Because it was this idea and mechanism that, for so many years, characterized the identity and practices of the brand (and what, according to agents and brokers, led them to leadership). In fact, when I comment with Remax North American agents how Remax Portugal has chosen to work in recent years, they find it hard to believe.
For the record, I don't think Remax agents are any worse than Century 21, KW, or Zome agents. You will find good and bad agents in almost all brands. And the fact that these three brands (and many others) embrace good practices, does not mean that one of their agents, at some point, will not engage in conduct that is contrary to the clients’ best interests.
The problem is that in Portugal, at Remax, even though it is said that each agency is independently owned and managed, the conducts that harm the agents’ actions, the clients’ interests, and the proper functioning of the market, seem to come from the top of the hierarchy. Which immediately conditions the agents’ work. Namely the good professionals who, predictably, will be those to whom it is not necessary to explain why limiting their freedom of action also reduces the value proposition they have to offer. Those who seem to have only two options: try to change the course of Remax or change to another place.
Remax Portugal is still in time to rethink its hostile measures, and the crude narratives it builds to try and justify them. But this player is not just an entity that will have a smaller market share today than the one it had 365 days ago.
It is also a brand. And like people, brands are defined by their actions.
By
Andrea Krug (edited).
FINAL NOTE
Each means of internal communication from Remax Portugal that contributes to the objective richness of this article (the e-mail, the Procedures Manual, the video...), came into possession of external people because at some point elements of the Remax universe provided them.
That is, there are people who remain at Remax but, regardless, express discomfort and embarrassment towards the brand's policies.
All that remains is for me to thank all my professional colleagues, in particular the Remax agents (and former agents), who largely contributed to getting rid of myths and lies, by comparing data and cross-referencing information, in order to confirm the facts and be able to place them in a time frame.
More than anything, thank you for the trust you have placed in me. And for never having doubted the simplicity of my goal: to share the truth.
Article edited on the 16th of May with reference to the interview published by Remax Portugal.
