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Real Estate · General

What is a 'net listing' and why is it problematic?

Correct answer

A listing agreement where the broker keeps everything above a specified net amount as their commission — the broker has an incentive to sell for the highest possible price, but the structure creates conflicts of interest and is illegal in some states

  1. A A listing where the broker networks with other agents to find buyers
  2. B A listing agreement where the broker keeps everything above a specified net amount as their commission — the broker has an incentive to sell for the highest possible price, but the structure creates conflicts of interest and is illegal in some states
  3. C A listing on the internet
  4. D A listing that guarantees a minimum sale price

Why this is the answer

NET LISTING: The seller specifies a minimum 'net' they want from the sale; the broker keeps everything above that net as commission. Example: seller wants $400,000 net; broker sells for $450,000; broker keeps $50,000 commission. PROBLEMS: Conflict of interest — the broker is incentivized to negotiate the highest possible price (helps themselves) but may also be tempted to not disclose a higher offer they could have gotten; the seller may not understand the full implication; potential for fraud if the broker inflates the sale price artificially in collusion with buyers. STATUS: Net listings are ILLEGAL in several states (California, Colorado, Georgia, others); legal but disfavoured in others; considered unethical by NAR regardless of legality. In states where legal, strict disclosure requirements apply.
Source: Real Estate State Exam, Net Listing

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