✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
In May 2024, 35.1% of homes across the US were sold above their listing price. Looking at this, real estate agents may propose a net listing agreement to maximize their profits.
Net listings may seem lucrative from the outside, but a seller must stay far away from them. These listings are a hunting ground for agents where the seller is completely exploited.
Why trust an agent who doesn’t have your best interest in mind? You can opt for a flat fee MLS listing service and get wider exposure and a better deal.
What Is a Net Listing and How Does It Work?
A net listing is a rare type of real estate property listing agreement between a seller and an agent. In such an agreement, an agent doesn’t charge a fixed commission instead they agree upon a particular home sale price with the seller. Any amount that exceeds it is the agent’s commission.
Net listings usually benefit the agent over the seller. Moreover, these contracts are exclusive. So, sellers can’t work with multiple agents, unless the house is sold or the contract expires.
Example of a Net Listing
Let’s assume you want to sell a house, and an agent proposes a net listing. Here, they may put forth that they’ll give you $350,000 once your house is sold. So, you are guaranteed the said amount irrelevant to how much the agent sells the home. Furthermore, they don’t take any commission upfront.
In this case:
- If the agent is able to sell the house for $400,000, they’ll get a commission of $50,000. But you’ll only get $350,000.
- In a traditional setup where you have to go through a seller and buyer agent, you’ll make more cash. Here, both agents charge anywhere between 5% to 6% combined. In this case, if they sell the house for 400,000, they’ll only take $24000 as commission. So, you’ll be left with $376,000 as your final sale price.
Comparing both listings, it is clear that an MLS listing is far better than a net listing. In a net listing, an agent can easily trick the seller and offer them a lower amount.
Are Net Listings Legal?
Net listings are frowned upon and illegal as there is a clear conflict of interest between an agent and a seller. The National Association of Realtors (NAR) prohibits its members from selling net listings. Furthermore, they cannot be listed on the Multiple Listing Service.
Since they are not listed on the MLS, their exposure is less. This limits the chances of finding a buyer for the property.
In Which States Are Net Listings Legal?
Net listings are legal in 3 states- Florida, Texas, and California. Texas and California have pre-defined laws on how a net listing contract can proceed. Agents in Florida have a free hand while offering a net listing.
In Texas, the seller must explicitly request a net listing for the sale of their home. Further, the homeowner must demonstrate an in-depth knowledge of the real estate market and know the value of their home.
In California, only clients who know the real estate market dynamics are eligible for a net listing agreement. These individuals should also have a real estate attorney who can protect them from any legal complications.
Pros and Cons of Net Listing
✅ Pros
- Guaranteed Home Sale Price: In a net listing, the seller and agent decide on a guaranteed home-sale amount when the house is sold. The agent is typically liable if the property doesn’t sell for the agreed-upon minimum price.
- Committed Agents: The agent’s commission depends on a higher selling price. This can motivate them to use aggressive marketing and negotiation strategies.
❌ Cons
- Conflict of Interest: In a net listing, agents earn a commission if they sell a home for higher than the agreed-upon price. So, they might prioritize getting a higher commission instead of the seller’s best interest.
- Legal Concerns: Net listings are legal in only 3 states, and they also have laws that govern their use. In case an agent makes false claims about the value of a home, a seller can take them to court.
- Exclusive Contract: The sole right to sell your house is given to one agent. It will thereby restrict you from working with multiple agents at a time.
- Lack of Realtors: Many real estate professionals consider net listing unethical and refrain from doing so. NAR probhits these listings and they cannot be listed on the MLS.
- Time-bound Contract: Just like traditional agreements, net listings are time-bound agreements. They can only be terminated after the contract expires or the property has been sold.
Net Listing vs. MLS Listing
Net listing and MLS listings are complete opposites. Let us look at how they compare against each other.
| Feature | Net Listing | MLS Listing |
| Commission Structure | No fixed commission | Fixed commission (2.5-3% to list your house) |
| Exposure | Limited exposure | Wide exposure as your home will be listed across multiple real estate websites |
| Exclusivity | Exclusive to a single broker | Not exclusive to a single agent |
If you are looking to eliminate net listing agreements, you can opt for a Flat Fee MLS listing service like Houzeo. Here, your home will be listed on the MLS within 48 hours. In addition, your listing will be syndicated to popular real estate websites significantly increasing your visibility.
What Are The Alternatives of Net Listings?
There are several better options over net listings with more security and exposure. Listed below are some of the alternatives you must explore:
1. Exclusive Right-to-Sell Listing
An exclusive right-to-sell listing is the most common agreement in the real estate ecosystem. Here, you grant a single agent the sole right to market and sell your property within a certain period. Even if you find the buyer, you will have to pay a commission to the agent.
2. Exclusive Agency Listing
In an exclusive agency listing, a single agent or broker will have the right to sell the property. However, if the seller finds the buyer, they don’t have to shell out any commission to the agent.
3. Open Listing
In an open listing, sellers can work with multiple real estate agents. The agent who brings the buyer will get the commission. If the agent doesn’t get the buyer, the seller won’t have to pay any commission.
In all these listings, you must negotiate the sales terms with the agent before hiring them.
Should You Use a Net Listing to Sell Your Home?
No, you should not use a net listing while selling your home. They may be legal where you live, but they offer an unfair advantage to brokers. Their time-bound nature and exclusivity may not be in your best interest.
On the contrary, an MLS listing can give you more exposure and you’ll have to pay a pre-defined commission. If you want to sell your home, you can try FFM websites, like Houzeo, and get listed on the MLS.
How to List on MLS With Houzeo?
5 Easy Steps to List on MLS with Houzeo as FSBO
Frequently Asked Questions
What is net listing in real estate?
A net listing can be defined as a real estate agreement where a seller sets a fixed amount for the sale of their home. The agent doesn't charge any commission before the sale. So, anything above the set price is the agent’s commission.
Are net listings common?
No, net listings are a rare type of agreement amongst a seller and an agent. Due to conflict of interest between an agent and seller they are unethical and illegal in many states across the US.
Are net listings legal in all 50 states?
No, net listings are illegal across 47 states in the US. Florida, Texas and California are the three states where sellers and agents can opt for a net listing agreement.
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