Tisha is a licensed real estate agent in Texas. She holds bachelor's in legal studies and a master's degree in criminal justice.
Definition of Net Listing
Imagine being a real estate agent, helping people buy new homes and sell their old ones. You get to make dreams come true every day. If you're lucky, business will be booming and you will make stacks of money. However, that's not always the case, and it can be frustrating when income is inconsistent. Additionally, you may have to pay the broker a percentage of your commission, further dwindling your income.
The type of listing an agent is selling determines the amount of money they will make from the sale. A net listing allows the agent to keep any amount of money over the price set by the seller at the conclusion of the sale. In other words, if the house sells for more than the seller's asking price, the agent can keep or 'net' the difference.
It's important to note that net listings are illegal in many states. While they are legal in California and Texas, both of these states have rules in place to protect sellers and to avoid complications and potential lawsuits.
Why would a client allow their home to be listed as a net listing? The client may want to sell his house quickly, if for example, he's already found a new house and wants to act fast. A net listing could give the agent the incentive to get the house under contract quickly at a great sales price as, the higher the sale, the more the agent will profit. Unlike other kinds of listings in which the agent retains a pre-set percentage as commission, a net listing may be an opportunity to make more money.
Example of Net Listing
Chrissy and David are relocating from Texas to Georgia due to David's job. They purchased their home in Texas just two years ago and now need to sell and make the move east. They have looked into the housing market in Georgia and decided that their budget for a new home there will be $150,000.
David is a veteran, so they won't have to pay a down payment, but they will have to pay any closing costs above what the seller agrees to pay, which their lender told them will be about $6,000. They have $25,000 in equity in their current house in Texas, and they want to sell quickly. After talking to a listing agent, they agree to a net listing, with the understanding that, as long as they net $6,000 in the sale to cover those closing costs, the agent can have the rest.
Other Types of Listings
There are other types of listings available to sellers; each has its own benefits to fit individual needs. Three other types of listings are:
Exclusive Right to Sell Listing - This is a type of listing that is beneficial to real estate agents. The real estate agent who lists the property will get paid no matter who ultimately makes the sale; another agent, or even the seller, can bring a buyer. The listing agent will still make a commission, and the seller will be able to move on to another home.
Exclusive Agency Listing - This listing isn't quite as beneficial for the real estate agent as an exclusive right to sell listings are. With this type of listing, the agent only gets paid if she sells the property herself. If the seller finds a buyer, the agent won't be paid.
Open Listing - This listing is beneficial for the seller. The seller can use any broker, or even list with multiple brokers. If the seller finds a buyer himself, he won't have to pay commission to anyone.
A net listing can be beneficial to sellers wanting to sell their homes quickly, or to sellers wanting to have control over the amount of money they will net in the sale. An 'exclusive right to sell' listing is similar to a net listing in that the agent is guaranteed payment. However, with a net listing, the agent may have more control and be able to profit more. An 'exclusive agency listing,' on the other hand, will leave the agent without a commission if the seller finds a buyer himself.
Finally, an 'open listing' differs from a net listing in that it can involve multiple brokers, with no one guaranteed payment unless she or he makes the sale. Like an 'exclusive agency listing,' if it's the seller, rather than an agent, who brings in the buyer, no commission is paid.
There are multiple types of listings available to individuals wishing to sell real estate. These include: net listing, which allows the agent to keep any money above and beyond the property's listing price; exclusive right to sell listing, ensuring the agent gets paid no matter who sells the property; exclusive agency listing, with which the agent only gets paid if they sell the property; and open listing, which allows the seller to list the property with any or multiple brokers. The differences in these listing types can benefit sellers in some ways and agents or brokers in other ways. The type of listing ultimately chosen will depend on the state in which the property is located and the individual needs of the seller.
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