Why are net listings discouraged in real estate?

Net listings are discouraged in real estate primarily because they can create a conflict of interest between the seller and the broker. In a net listing arrangement, the seller specifies a minimum amount they wish to receive from the sale of the property, and any amount over that figure becomes the broker's commission. This structure may incentivize brokers to prioritize their own financial gain over the seller's best interests. As a result, a broker might focus on selling the property at the highest price to maximize their commission rather than ensuring the seller gets the optimal sale price.

This potential for unfair commission practices makes net listings controversial, as they can undermine the principle of fiduciary duty that brokers owe to their clients. Such arrangements may not align with ethical standards in real estate, leading to the recommendation against their use.

While extensive paperwork, decreased property value, and client approval are all important factors in real estate transactions, the core issue surrounding net listings primarily revolves around the conflict of interest and fairness in compensating the broker.