How is a net listing defined in real estate?

A net listing in real estate is defined as an arrangement where the broker is entitled to keep any amount they receive over a predetermined price set by the seller for the property. This means that if the property is sold for more than this agreed-upon price, the broker earns a commission only on the excess amount.

For example, if a seller establishes a net price of $200,000 for their home, and the home is sold for $250,000, the broker would earn a commission based on the $50,000 excess. This setup gives brokers a strong incentive to sell the property for the highest possible price, as their earnings would increase directly with the sale amount above the set price.

This method is different from typical commission structures where the broker earns a percentage of the total sale price rather than just the amount exceeding a specific threshold. It’s important to note that net listings can be controversial and are not allowed in all states due to potential conflicts of interest.