Net Listing
A net listing is an employment contract where the broker keeps any amount received above the seller's minimum acceptable price, which is often illegal or discouraged due to inherent conflicts of interest.
Exam Tip
Net listing = broker keeps everything above seller's net price. ILLEGAL or DISCOURAGED in most states due to CONFLICT OF INTEREST.
What is a Net Listing?
A net listing is a type of listing agreement where the seller specifies a minimum "net" amount they want to receive from the sale, and the broker keeps everything above that amount as commission. This creates a significant conflict of interest because the broker is incentivized to sell at the highest possible priceānot for the seller's benefit, but for their own.
How Net Listings Work
| Component | Description |
|---|---|
| Seller's Net | Minimum amount seller wants to receive |
| Sale Price | Actual price property sells for |
| Broker's Commission | Sale Price - Seller's Net |
Example
| Scenario | Amount |
|---|---|
| Seller's Net Price | $300,000 |
| Property Sells For | $350,000 |
| Broker Keeps | $50,000 |
Legal Status by State
| Status | Description |
|---|---|
| Illegal | Banned in many states (e.g., most states prohibit) |
| Legal but Discouraged | Allowed but not recommended |
| Requires Disclosure | Must disclose market value to seller |
Problems with Net Listings
| Issue | Explanation |
|---|---|
| Conflict of Interest | Broker benefits from higher price, not seller |
| Potential for Fraud | Broker may hide true market value |
| Unfair to Seller | Seller may receive less than market value |
| Fiduciary Duty Violation | Agent's duty is to client, not self |
Net Listing vs. Other Listing Types
| Listing Type | Commission | Exclusivity |
|---|---|---|
| Net Listing | Amount above net price | Varies |
| Exclusive Right to Sell | Fixed percentage | Exclusive |
| Exclusive Agency | Fixed percentage | Exclusive (owner exempt) |
| Open Listing | Fixed percentage | Non-exclusive |
Why Net Listings Are Problematic
- Undisclosed Profits - Broker may not reveal property's true value
- Breach of Fiduciary Duty - Agent prioritizes own interests
- Vulnerable Sellers - Often targets uninformed property owners
- Price Manipulation - Broker may manipulate pricing information
Exam Alert
Net listings are ILLEGAL or STRONGLY DISCOURAGED in most states. The key issue is CONFLICT OF INTERESTāthe broker profits from the spread between net price and sale price. Always recommend exclusive right to sell or exclusive agency listings instead.