Table of Contents

7 min read May 09, 2023

Net Listing Agreement: Read BEFORE Signing

If you are about to sell your property, the chances of you hiring a real estate agent are pretty high. By doing so, you are assisted by the agent at every step of the property sale.

However, you need to sign a Listing Agreement with the agent or real estate broker. Listing Agreements are complex, legally enforceable contracts between you and the agent.

A Net Listing Agreement is a great option if you have a clear value of your property. In this blog post, we will discuss the ins and outs of Net Listing Agreements.

⚠️ Should You Sign a Net Listing Agreement?

  • Net Listings are the most rare Lisitng Agreements as they are highly regulated and not recommended by agents often.
  • In a Net Listing Agreement, you can set a minimum sale value for your property. Any amount above this price is the agent’s commission.
  • They are only legal in 3 states: Florida, California, and Texas.
  • No member agent of NAR is allowed to enter a Net Listing Agreement.

What is a Net Listing Agreement?

A Net Listing Agreement is a type of real estate contract where you and the agent set a minimum price for your property. The agent’s commission is any amount above that price. 

The Net Listing Agreement is an exclusive contract. It means you cannot work with another agent to sell your property until the end of the contract period. The agent’s commission structures are also quite abstract in comparison to other Listing Agreements.

For example, if you agree to sell your home for $500,000 and the agent’s commission is set at 6%, the agent would receive $30,000. However, if the home sells for $600,000, the agent would receive $60,000, leaving you with $540,000.

Net Listing vs Open Listing

A Net Listing Agreement differs from an Open Listing Agreement in terms of exclusivity. They also differ in other aspects such as: 

  • Net Listing: In a Net Listing, the agent agrees to sell the property for a certain price. Any amount above that price is considered the agent’s commission. This type of Listing Agreement is generally prohibited in many states because it creates a conflict of interest between you and the agent.
  • Open Listing: An Open Listing Agreement is a contract between you and the real estate agent. It specifies that you can work with multiple agents for the sale of the property. You only pay a commission to the agent that brings in the buyer.

Pros and Cons of a Net Listing Agreement

As a seller, you must carefully weigh the pros and cons before entering into a Net Listing Agreement.

👍 Pros

  • Potential for Higher Profit: You have the potential to receive more money if the property sells for a higher price than the agent’s agreed-upon price. This can be especially attractive if you want to sell quickly and are willing to take on more risk.
  • The Agent will be Committed to the Sale: As the agent’s commission is directly tied to the selling price, they work hard to sell the property for as high a price as possible. This can lead to more aggressive marketing and negotiation strategies.

👎 Cons

  • Conflict of Interest: Net Listings can create a conflict of interest for agents. They may prioritize their own commission over your best interests.
  • Unfair Commission: Net Listings can lead to agents receiving a higher commission than they would under a traditional Listing Agreement. You also run a risk of getting less than what the property is worth.
  • Legal Challenges: Net Listing Agreements can lead to legal challenges if the agreed-upon price is deemed unfair or illegal. This can result in costly legal battles for both you and the agent.

Important Factors to Consider Before Signing a Net Listing Agreement

While Net Listing Agreements may seem like a good deal to you, they come with their own set of risks and challenges. Here are some important factors to consider before you sign a Net Listing Agreement:

  • Pricing the Property: The agreed-upon price must be realistic and based on current real estate housing market trends. An overpriced property may sit on the market for a long time. Whereas an underpriced property may significantly cut down your profit.
  • Trust Between You and the Agent: Net Listing Agreements rely heavily on trust between you and the agent. Before you sign the agreement, ensure that the agent is professional and trustworthy.
  • Negotiate the Agent’s Cut: You should negotiate the percentage of the agent’s commission carefully. A high percentage may lead to the agent focusing on making a sale quickly rather than getting the best price.

Yes, Net Listing Agreements are legal in the US but only in 3 states namely Florida, Texas, and California. They are banned in all the remaining states due to their inherent risks and potential for abuse. 

NAR also forbids its member agents from using Net Listings. Hence, you might find it difficult to get an agent to agree to a Net Listing Agreement.

Alternatives to a Net Listing Contract

Apart from Net Listing Agreement, you can opt for other Listing Agreements to sell your property. They include:

1. Exclusive Listing Agreement

Exclusive Listing Agreements are the most common type of Listing Agreements, according to NAR. An Exclusive Listing Agreement is a contract between you and a real estate agent

It grants the agent the sole right to market and sell your house. You cannot work with another agent or broker till the end of the contract. However, you are able to bring in a buyer yourself. You may or may not have to pay the agent’s commission.  

There are two types of Exclusive Listing Agreements. They are: 

  • Exclusive Right to Sell Listing: In an Exclusive Right to Sell Listing Agreement, you grant the agent with absolute authority to market and sell your house. However, you have to shell out the agent’s commission regardless of who brings in the buyer.
  • Exclusive Agency Listing: In an Exclusive Agency Listing, you allow the agent to have sole rights to market your property. But you can bring in the buyer yourself and avoid paying the agent’s commission.

2. Open Listing

You can hire multiple agents to sell your house in an Open Listing. You only have to pay the agent who sells your property a commission. Like an Exclusive Agency listing, you don’t have to pay the commission if you bring in the buyer. 

But as you hire multiple agents, no one agent is fully responsible for marketing the property. 

3. Multiple Listing

Multiple listing features your property on the Multiple Listing Service (MLS) platforms. By listing a property on MLS, agents can increase its visibility. This increases the possibility of you landing the right buyer at the right price. 

But don’t you need to hire an agent and pay a 6% commission to get on the MLS? 

Not with Houzeo! With Houzeo, you skip paying the listing agent commission. Instead, you pay a one-time, small flat fee to list your house on the MLS. 

Check out how Houzeo works in this video:

What is Houzeo?

An overview of what the platform is all about

Start Your MLS Listing NOW!

» Houzeo Reviews: See how Houzeo home sellers save thousands with Houzeo technology and MLS exposure.

Bottomline

Net Listing Agreements can be risky and are not recommended for most sellers. Traditional Listing Agreements in which the agent receives a fixed percentage of the sale price, are a safer and more reliable option. 

The contract provides a strong incentive for the agent to invest time and money in marketing the property. 

Additionally, be aware that Net Listings are only allowed in a few states. It is important to know the laws and regulations in your state before signing any real estate Listing Agreement.

Frequently Asked Questions

1. What is a Net Listing in real estate?

A Net Listing Agreement is a type of real estate contract where you and the agent set a minimum price for your property. The agent's commission is any amount above that price. 

2. Are Net Listings legal in all 50 states?

No, Net Listing Agreement is only legal in 3 states: Florida, California, and Texas. It is banned in all other states of the US.

3. Why are Net Listings banned in several states?

Net Listing Agreements are banned in most of the states in the US as they lead to a conflict of interest between the sellers and the agents. The agent may prioritize their own interests over the sellers. Hence, Net Listing Agreements follow strict regulations to settle disputes regarding the commission between the sellers and agents.

Listing Agreement Net Listing

Save $20

On Silver & up plans

Use Coupon Code:

Copied
Need help? Call us on
(844) 448-0110