"When selling a home, one of the most important decisions a property owner makes is the type of listing agreement they sign with their real estate agent. Most sellers are familiar with standard commission models, but there's another, more controversial option called a net listing. Net listings, though rare and even illegal in most states, occasionally come up as an alternative way to compensate real estate professionals. However, they come with significant legal, ethical, and financial risks that are imperative to understand."
"A net listing is a type of listing agreement where the seller sets a bottom-line price, and the real estate broker keeps any amount above that price as their commission. The broker's commission is then the difference between that minimum amount, called the "net", and the actual sale price. So essentially, the seller sets a bottom-line price, and the real estate broker keeps any amount above that price as their commission."
Net listings let sellers specify a bottom-line price while brokers keep any amount above that price as commission. Net listings can incentivize brokers to prioritize higher sale prices for personal profit, creating conflicts of interest and potential ethical breaches. Most states prohibit net listings, with only a few jurisdictions such as California, Texas, and Florida permitting them under strict regulations. Violations of net listing rules can result in license revocation, civil lawsuits, and fraud charges. Safer alternatives include standard commission structures and seller net sheets, which offer clearer, fairer, and more transparent compensation arrangements.
Read at Redfin | Real Estate Tips for Home Buying, Selling & More
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