A homeowner tells a broker she needs $180,000 in her pocket from the sale of her home and authorizes him to sell at any price he can negotiate. The broker, knowing the market supports about $220,000, lists the home at that figure, finds a buyer, and at closing pockets the $40,000 spread above the seller's bottom-line figure as his entire compensation. The seller never knew the home was worth more than $180,000 or that a customary 5% commission would have been only $11,000. Many state regulators view this arrangement as creating an inherent conflict of interest and either restrict or prohibit it. Which type of listing did the broker use?
Correct Answer
D) Net listing
The broker took as compensation the entire spread above the seller's bottom-line figure — keeping anything beyond what the seller wanted to receive — which inherently incentivizes him to undervalue market price advice. That structure is a net listing, restricted or prohibited in many states because of the conflict it creates.
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Related Topics & Key Terms
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Related Concepts
The extent of power and actions an agent is authorized to perform on behalf of the principal, as defined by the agency agreement.
The fiduciary obligations owed by a listing agent to the seller, including marketing the property, presenting all offers, and protecting the seller's confidential information.
A practice where the agent or brokerage represents only one party in a transaction — either the buyer or the seller, but never both.
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A listing agreement creates an agency relationship between:
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