The Real Estate Industry Has an Incentives Problem

Most of what frustrates consumers and professionals alike isn’t caused by bad actors—it’s caused by misaligned incentives baked into the system itself.

The Trust Paradox

Everybody knows the real estate industry has a trust problem.

Public perception surveys consistently rank agents near the bottom of trusted professions. And yet, when it comes time to buy or sell a home, the overwhelming majority of consumers still hire one.

That’s the paradox.

On an individual level, most buyers and sellers like their agent. They describe them as hardworking, kind, responsive. But zoom out, and the profession carries a stigma that refuses to disappear.

That tension tells us something important: the trust issue isn’t primarily with individual agents. It’s with the system agents operate within.

It’s Not (Mostly) About Bad Agents

Yes, there are bad actors. Every industry has them. Real estate is no exception.

But when I talk with consumers—especially those of the DIY Homebuyer ilk who tend to be more analytical or have explored self-representation—their frustrations are rarely centered on a single terrible agent. Instead, the complaints sound structural.

I hear things like:

“My agent was fine, but after the transaction we found issues that were missed during the inspection period. For how much our agent got paid, they should have guided us better.”

“After months of searching, we suspected our agent was getting impatient. Nothing major, but we could feel their disappointment when we’d decide against a home. When we finally got one under contract, it doesn’t feel like they pushed hard enough for us during negotiations.”

“We love our agent. She’s such a great person! But we never really discussed compensation. We thought she was ‘free’ to us because she was paid by the seller. Now that we understand how compensation works, we’re not sure we’d use her again. Not because we don’t like her, but because her commission was over $20,000. That’s a lot of money, and we’re not convinced having an agent was worth that.”

You’ve probably heard—or experienced—similar sentiments yourself.

When patterns like these repeat across markets and personalities, we should stop blaming individuals and start examining incentives.

The Subsidy Nobody Talks About

Candidly, as an agent who for years represented both sellers and buyers under the traditional percentage-based commission model, I’ve wrestled with these issues personally.

I think every agent willing to be honest can confess: there are some clients and transactions so easy you can’t help but feel, “Easy money! I can’t believe how much I got paid relative to how little work I had to do.”

A property sells the first weekend. The buyer is decisive. The paperwork is smooth. A substantial commission arrives for what was, in truth, a modest amount of actual labor.

In the very next breath, that same agent will justify it: “That one makes up for the six months I spent with the client who never closed.”

Under the traditional model, such logic isn’t irrational. Productive clients subsidize the time and energy wasted on unproductive ones. It’s how income stability is achieved in a volatile profession.

But the consumer still feels the disparity.

How can they not?

They experience the transaction in isolation. They aren’t calculating the agent’s opportunity cost across a portfolio of clients. They’re asking a simpler question: Was the value delivered proportionate to the price paid?

When the answer feels unclear, trust erodes.

Commission Scaling as Exhibit A

In today’s post-settlement environment, buyer compensation has become explicit. Buyers are now required to sign agreements acknowledging that they are on the hook for their agent’s compensation. Across America, the average buyer agent commission remains between 2–3% of the purchase price.

On a million-dollar home, that could be $30,000.

Any reasonable consumer has to ask: 2–3% in exchange for what, exactly?

Before any of you jump to the comments to lecture me on everything a buyer’s agent does, let me remind you: I am a buyer’s agent. You don’t have to tell me. I know what good representation looks like. I know the value a skilled negotiator can bring. I, too, have saved clients from multi-six-figure catastrophes with my experience and expertise.

So I’m not arguing that buyer agents add no value.

I’m arguing that tying a buyer agent’s compensation to the price of the asset—rather than the scope or complexity of the work—is, at best, arbitrary. At worst, it’s lazy.

We hear this reasoning in the negative all the time: “Why does a buyer’s agent make twice as much selling a million-dollar home compared to a $500,000 home? Isn’t the work fundamentally the same?”

But I think the question cuts both ways.

Agents, if you “know your worth” (as I hear all the freaking time) why do you devalue yourself on a $500k home versus a million-dollar property? Are you worth half as much to a first-time buyer as you are to the established couple buying their forever home?

If not, then why do you accept a model of compensation that says you are?

The model persists because it’s simple. Because it scales. Because it’s culturally entrenched.

But simplicity does not equal alignment.

And when alignment is off, trust erodes. Fast.

How Incentives Shape Everything

This isn’t just about commissions. The incentive problem runs deeper.

When compensation increases as price increases, the system quietly rewards higher prices.

When income depends on closing volume, speed becomes economically attractive—whether or not it serves the client.

When services are bundled into a single percentage fee, consumers are rarely offered real optionality or choice.

None of this requires malice. It requires only structure.

Over time, incentives don’t just influence isolated decisions. They shape norms. They shape expectations. They shape culture.

And eventually, they shape public perception.

The industry wonders why consumers don’t trust agents. But consumers aren’t stupid. They sense when something is off, even if they can’t articulate exactly what. The misalignment is felt before it’s understood.

Why the Model Persists

If the misalignment is so obvious, why has it endured for decades?

Because it works—for the people inside it.

Percentage-based commissions create predictable upside for agents. They spread risk across clients. They required little explanation in a pre-settlement world where buyers didn’t directly confront the cost.

It’s clean. It’s familiar. It’s deeply embedded.

But familiarity is not the same thing as fairness. And stability for professionals is not the same thing as clarity for consumers.

The settlement didn’t create this tension. It exposed it.

Alignment Is the Actual Reform

I devote time to thinking these things through because I care deeply about my clients and what they experience. This isn’t theory for me. I’m a practitioner. And when I put myself in the shoes of my best clients, I can’t help but feel like they’re getting shortchanged by a broken system.

I’m certainly not immune to the allure of making more money, but running the prescribed playbook for building a “successful” real estate business feels like sandpaper to my soul. And I imagine I’m not the only one.

So, while I don’t claim to have all the answers, I’m utterly convinced that what we’ve done for the past forty years ain’t it.

Consumers want transparency.
They want optionality.
They want compensation that feels proportionate to value—not inherited from convention.

Real estate is one of the most significant financial decisions most families will ever make. Trust in this profession won’t be restored through better marketing or louder branding or improved scripts.

It will return when incentives are aligned.

Until incentives change, consumer trust won’t.

-----

Nick Aufenkamp is a licensed real estate broker in Washington, founder of DIY Homebuyer Academy, and one of the few agents in America offering transparent, unbundled representation options for buyers. His work has been featured in The New York Times and Wall Street Journal.

If you care about building a more aligned real estate model, subscribe.