With a net listing, you specify how much you want to make from your home sale, and your real estate agent takes whatever is left over as commission. This type of listing is extremely rare.
On the surface, net listings may sound reasonable. However, in practice, they’re prone to abuse and misaligned interests between the seller and the agent. They're widely considered unethical, and they're even illegal in most states.
The more common option is an exclusive right-to-sell agreement, where you and your agent agree to a specific commission rate (usually 2.5–3% of the sale price). For most sellers, this agreement offers far more benefits.
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What is a net listing?
A net listing is a rare and sometimes illegal type of real estate agreement where the seller specifies a specific net amount they want to make from the sale, with their listing agent keeping the remainder. This arrangement differs from typical real estate transactions, where the agent makes a set percentage of the sale price, usually 2.5–3%.
In effect, this means there’s a maximum amount you can make on the sale of your home, with only the agent benefiting if your home sells for more than expected.
What is an example of a net listing in real estate?
Net listing scenario
Here’s a simple example of how a net listing can work: You and your agent sign a net listing agreement that specifies that when your house sells, you'll get $450,000 from the proceeds, and if the house sells for more, your agent will take anything above that amount as commission.
$450,000 turns out to be far below the fair market value of your home (which your agent may have known beforehand — this is how an agent can abuse a net listing). Your agent finds a buyer who agrees to a purchase price of $510,000. You receive $450,000, and your agent takes the remaining $60,000 as commission. That means your agent’s commission is 12% of the sale price.
That’s well above what realtors typically earn. The average real estate commission rate for listing agents is closer to 3%. On a $510,000 sale, a traditional realtor charging 3% would earn $15,300. Because you signed a net listing instead of agreeing to a set, standard commission rate, you’ve missed out on nearly $45,000 in profit.
Net listing contract
A net listing clause in your listing agreement might look something like this, although the specific language will vary from case to case:
“This is a net listing agreement whereby the Seller shall receive net proceeds of $450,000 upon the closing of the sale of the Property by [Agent’s name/Brokerage]. The Agent’s compensation shall be calculated as any and all money received from the sale above the Seller’s net proceeds, minus closing costs and expenses. The Seller acknowledges that the Agent’s commission is not predetermined and may exceed standard commission rates.”
What is a negative aspect of net listings?
Net listings are illegal in many states and controversial even where they're permitted. As a seller, it’s important to be aware of the downsides.
⚠️ Conflict of interest
The biggest problem with net listings is that they create an inherent conflict of interest since the agent’s commission is no longer tied to your profit.
For example, instead of trying to get you the highest sale price possible, an unethical agent may try to convince you that your home is worth less than what it’s actually worth and encourage you to agree to a low net amount.
As Martin Orefice, CEO of Rent to Own Labs, explains, “If a net listing has a low minimum price, the agent can unload it for very little work and still make plenty of money. Conversely, an agent could use unethical methods to drive up the price of a property in order to keep the difference.”
⚠️ Unknown commission cost
You won’t know until after your home sells how much commission your agent will actually make.
This lack of transparency makes it impossible to compare realtor fees when you’re trying to find a real estate agent. For example, if other agents are offering 3% commission but you agree to a net listing, you’ll only know once the sale is done whether or not your agent’s commission is less than the agents who were offering 3%.
⚠️ You miss out on higher sale proceeds
With a net listing, it’s very easy to end up greatly overcompensating your agent. If your house sells for more than you expected, your agent could end up earning well above the 3% commission that’s typical in traditional real estate sales. Even worse, you’ll receive none of that windfall despite it being your property that’s sold.
Why are net listings illegal in some states?
Net listings are illegal in most states. While some allow them, it’s usually with significant restrictions and disclosure requirements.
Net listings are typically banned because they create a conflict of interest between agents and their clients. Because the client no longer benefits from a higher sale price, the agent’s fiduciary duty to work to get their client the best price possible is inherently undermined.
Not only are net listings widely illegal, but they’re also considered unethical under the National Association of Realtors (NAR) regulations and aren't allowed on the multiple listing service (MLS).[1]
Many real estate agents are NAR members, so even in states where net listings are legal, it may be difficult to find an agent who will take them on. And it may take longer to find the right buyer, because your home won't be listed in the MLS database that most buyer's agents use to search for homes for their clients.
Are net listings legal in California?
Net listings are legal in California. However, realtors need to fully disclose the nature of the agreement to clients, including potential conflicts of interest. The California Department of Real Estate advises that "net listing should be used only with highly sophisticated clients, or with clients who are independently represented by another professional."[2]
Are net listings legal in Florida?
Net listings are legal in Florida.[3]
Are net listings legal in Texas?
Net listings are sometimes legal in Texas, but only if the client requires a net listing and is "clearly familiar with the current market values of real property," according to the Texas Real Estate Commission.[4]
Why do net listings exist?
With net listings being so risky and even illegal in many states, you may be wondering why they exist in the first place. The main benefit of net listings is that they give sellers certainty in terms of how much they’ll get paid from the home sale.
Erik Leland, a Real Estate Broker with Realty First in Lake Oswego, Oregon, says, “Net Listings appeal to sellers because of the simplicity. The mindset seems to be, ‘As long as I get my asking price, I don’t care what you make.’ That sounds reasonable, but it quickly breaks down. No seller is happy realizing the house was underpriced when it sells in a day and the Realtor walks away with a massive chunk of their equity.”
Net listing alternatives
- Exclusive right-to-sell listing: An exclusive right-to-sell is the most common type of real estate listing and gives you full access to the MLS. With this agreement, you work exclusively with one agent or brokerage. The commission is predetermined based on a percentage of the final sale price, which motivates the agent to get a higher sale price for you.
- Exclusive agency listing: An exclusive agency listing also gives one agent or brokerage the exclusive right to market your property, but if you find a buyer without that agent’s help, you don’t pay any commission. While this arrangement can save you money, it's rare and could create potential conflicts between you and your agent.
- Open listing: With an open listing, you work with multiple agents at the same time, and only the agent who actually finds you the buyer gets paid commission. Like with an exclusive agency listing, open listings result in less motivated agents since they may waste time and resources marketing a property without getting paid.
The bottom line: Should you get a net listing?
For most sellers, net listings are a bad idea. They create an inherent conflict of interest where your agent is no longer motivated to get you the best deal possible. Instead, unethical agents get rewarded for undercutting your listing price and not being transparent. You risk majorly overcompensating them.
That’s why net listings are either illegal or unethical in most states. Top realtors usually work under exclusive right-to-sell agreements, which tie their compensation to you getting a higher sale price. When your and your agent’s interests are aligned, you’re more likely to come out ahead at closing.
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