Utah License law prohibits which of the following?
Audio Lesson
Duration: 2:35
Question & Answer
Review the question and all answer choices
Net listings
Open listings
Open listings are permitted in Utah. In an open listing, a seller can work with multiple agents, but only the agent who brings the ready, willing, and able buyer earns the commission. This type of listing doesn't create the same conflict of interest as net listings.
Exclusive Agency
Exclusive Agency listings are legal in Utah. In this agreement, the seller works exclusively with one agent but reserves the right to sell the property themselves without paying a commission.
MLS listings
MLS listings are standard practice in Utah and most other states. These are properties listed in the Multiple Listing Service, a database of properties shared among real estate professionals to facilitate cooperation and sales.
Why is this correct?
CORRECT_ANSWER
Deep Analysis
AI-powered in-depth explanation of this concept
This question tests knowledge of Utah's real estate licensing laws, specifically which types of listing agreements are prohibited. Understanding listing agreements is fundamental to real estate practice as they form the contractual basis for property representation. The question requires recognizing that net listings are illegal in Utah, while other common listing types are permitted. Net listings create a conflict of interest because the agent's commission isn't fixed but instead depends on how much they can sell the property above a set price. This creates an incentive for the agent to push for a lower sale price to maximize their commission, which violates the fiduciary duty owed to the seller. The other options (open listings, exclusive agency, and MLS listings) are all legitimate and commonly used types of listing agreements in Utah and most other states. This question is challenging because it requires not just knowing what a net listing is, but understanding why they're prohibited and recognizing them among other listing types. This connects to broader concepts of agency relationships, fiduciary duties, and regulatory compliance in real estate practice.
Knowledge Background
Essential context and foundational knowledge
Net listings are prohibited in many states, including Utah, because they create an inherent conflict of interest between the agent and the seller. In a net listing, the seller sets a minimum acceptable price (the 'net' amount), and any amount above that becomes the agent's commission. This incentivizes agents to push for lower sale prices to maximize their commission, directly contradicting their fiduciary duty to obtain the best possible price for their client. The prohibition against net listings is part of broader real estate licensing regulations designed to protect consumers and ensure ethical practices in the industry.
Think of a net listing like a fishing net with a minimum catch requirement. The fisherman (agent) only gets paid for what's above the minimum, so they might intentionally catch less than possible to maximize their share.
When you see 'net listing' on an exam, imagine this fishing scenario to remember why it's prohibited.
When you see a question about prohibited practices, look for any listing arrangement where the agent's commission isn't fixed but depends on the sale price. These are typically net listings and are illegal in most states.
Real World Application
How this concept applies in actual real estate practice
A homeowner in Utah contacts an agent expressing frustration with previous agents who seemed more interested in quick sales than getting top dollar. The agent suggests using a net listing where the homeowner would set a minimum acceptable price of $300,000, and the agent would receive any amount above that. This would create a direct financial incentive for the agent to push for a lower sale price. A knowledgeable agent would explain that this type of agreement is illegal in Utah and instead propose standard listing agreements that align their interests with the seller's goal of maximizing the sale price.
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