What is a Net Listing in Real Estate?
When you're getting ready to take your real estate exam, it's important that you know all about the different types of listings. A net listing is one type of listing, and it can be very confusing if you don't understand what it is. In this article, we will define a net listing and explain why it's discouraged in the industry. We'll also discuss why it's illegal in most states and outline the three common types of listings.
What is a Net Listing?
A net listing is when a seller agrees to sell their property at a price that is determined by the real estate agent's commission. The agent will then keep any proceeds that are above the agreed-upon commission. This type of listing is discouraged because it gives the agent an incentive to sell the property for more than it's worth. It's also illegal in most states because it's considered to be a form of price-fixing. Price-fixing is when two or more parties agree to set a price for goods or services.
There are three common types of listings: open, exclusive, and net.
Open listings: An open listing allows any number of agents to represent the seller in the sale of their property. The seller is not obligated to sell their property to the first buyer that comes along, and they can cancel the listing at any time.
Exclusive listings: An exclusive listing gives one agent the exclusive right to sell a property. The seller is obligated to sell their property to the first buyer that the agent brings them, and they cannot cancel the listing.
Net listings: As we've already discussed, a net listing is when a seller agrees to sell their property at a price that is determined by the real estate agent's commission. In a net listing, an owner sets the sale price of their home at the real estate agent's commission percentage.
What is an example of net listing?
Let's say that you are a real estate agent, and you have a client who wants to sell their home. They agree to list their home with you on a net listing basis. This means that they will sell their home for whatever price you are able to get for it, minus your commission. So, if you are able to sell the home for $200,000, your client will receive $190,000 (after your commission of $10000).
Why are net listings discouraged?
As we mentioned before, net listings are discouraged because they give the agent an incentive to sell the property for more than it's worth. This can lead to agents overvaluing properties in order to get a higher commission. It can also lead to agents pressuring sellers to accept low offers so that the agent can keep more of the proceeds.
Net listings are one of those common terms you will come across while preparing for your real estate exam. It is important to understand what a net listing is and why they are discouraged in the industry. We hope that this article has helped you to better understand this topic.
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