Realtor settlement will create ‘biggest mess on the planet,’ celebrity agent Mauricio Umansky says

A proposed real estate court settlement over commission rates taking effect in August will create “the biggest mess on the planet,” a Beverly Hills celebrity agent said.

Rules about how the industry will operate “are changing on a daily basis,” said Mauricio Umansky, chief executive and co-founder of global brokerage The Agency and star of the Netflix series, “Selling Beverly Hills.”

“It’s going to be an absolute mess.”

Speaking offstage following an interview at the National Association of Real Estate Editors conference in Austin on June 20, Umansky said he’s worried the proposed changes will spark more confusion and litigation as brokerages adopt new procedures and contracts.

“I’m scared of fraud,” he said. “I’m scared there’s going to be so many lawsuits.”

Umansky, an outspoken critic of the National Association of Realtors, was referring to the NAR’s plan to end 26 class-action lawsuits accusing the trade group of conspiring to keep agent compensation artificially high.

A federal judge in Kansas City, Mo., is scheduled to review a $418 million out-of-court settlement between NAR and plaintiffs attorneys in late November. Several national real estate chains have reached separate settlements, bringing the total payout to millions of American home sellers to nearly $1 billion, according to one of the law firms on the case.

But under the terms of the settlement, the new rules must take effect on Aug. 17, well before the court hearing, NAR said. The judge gave the settlement his preliminary approval in April, the New York Times reported.

Although agent commissions are supposed to be negotiable, most home sellers typically pay between 5% and 6%, split between brokers representing the buyer and the seller.

Currently, NAR and the nation’s 500-plus multiple listing services require home sellers to post an “offer of compensation” in the MLS, spelling out how much they will pay the buyer’s agent.

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Under the settlement, those offers would be banned from MLS listings — although sellers still can make such offers by other means, like on their websites or over the phone.

In addition, all home shoppers will have to sign a contract with an agent before visiting any homes. Currently, only about a fifth of California buyers sign such “buyer-broker agreements.”

But Umansky said that terms of such agreements could vary widely. He speculated, for example, that some clients could be unaware they’re agreeing to an exclusive agreement for up to three years if their agent doesn’t point it out.

“There’s no standard right now,” he said. “… There is no standard six-months listing agreement. There is no standard anything. It’s all negotiable. It’s an absolute wild West.”

Umansky noted that claims of “standard” 6% commission rates are what sparked the lawsuits in the first place. Hence, it’s likely Realtors will steer clear of “standard” buyer broker agreements, he said.

In January, Umansky and Compass agent Jason Haber announced the creation of a rival trade group, the American Real Estate Association, to compete with NAR.

Umansky blamed the 1.5-million-member trade group for anti-competitive practices and for being self-serving.

For example, a private listing service Umansky helped create, The PLS.com, was forced out of business after NAR banned private “pocket listings.” Umansky maintained the ban was aimed at squelching competition with the Realtor-run MLS network.

Supporters of the pocket listing ban argued when it was adopted that private, off-market sales excluded buyers, agents and could lead to racial discrimination.

Umansky also called the commission settlement self-serving since it was aimed at saving NAR from bankruptcy, while excluding more than 90 of the nation’s largest real estate chains, including The Agency, from settlement protections.

A NAR spokesperson issued a statement in response to Umansky’s comments, saying the trade group delivers “unmatched value to our members.”

“NAR members have always appreciated and thrived in a competitive environment,” the statement said. NAR provides members with “industry leadership, best-in-class advocacy efforts, innovative tools, educational opportunities, leading economic research, national property data and other benefits.”

The industry group faces more scrutiny from the U.S. Justice Department, which reopened its investigation into commission practices in April, following an appellate court decision allowing the probe to move forward.

Umansky said the American Real Estate Association, which has about 5,000 members, seeks to benefit agents, not itself. In addition, he hopes to end fragmentation of the MLS system by creating one national listing service.

“The National Association of Realtors has been a cartel,” Umansky said. “It’s a monopoly.”

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