What Is an Net Listing Agreement

A net listing agreement is a real estate contract between a seller and a broker that specifies a minimum price for a property. In this type of agreement, the seller sets a net amount they wish to receive from the sale of their property, and the broker is responsible for selling the property for a price over that amount to earn their commission.

Net listing agreements are legal in some states, but they are generally seen as controversial due to the potential for conflicts of interest. When a broker is incentivized to sell a property for as much as possible over the net amount, they may be tempted to withhold higher offers to ensure they earn a larger commission. This can lead to a situation where the seller receives less money than they would have if the broker had acted in their best interest.

To mitigate this issue, some states have banned net listing agreements altogether, while others have imposed strict regulations on their use. For example, in California, net listings are only legal if the seller is a licensed real estate broker and sets a net amount in writing that is not influenced by the broker.

In addition to the potential for conflicts of interest, net listing agreements can also be challenging from an SEO perspective. Because the net amount is often not disclosed in public listings, it can be difficult for potential buyers to find the property online. This can lead to a lack of exposure and a longer time on the market, which can ultimately result in a lower sale price.

Overall, while net listing agreements may be tempting for sellers looking to maximize their profit, it is important to carefully consider all the potential risks and drawbacks before entering into such an agreement. Working with a reputable broker and seeking legal advice can help ensure that your interests are protected throughout the process.