Net listing

Key Takeaways

• In a net listing the seller names the amount they must receive from the sale, and everything the property brings above that figure goes to the broker as compensation.
• Washington statute does not use the phrase net listing. It appears nowhere in chapter 18.85 RCW or in chapters 308-124, 308-124A, or 308-124D WAC, so no Washington rule bans it by name.
• What restrains a net listing is the non-waivable broker duty list in RCW 18.86.030, especially reasonable skill and care and honest, good faith dealing.
• RCW 18.85.361 makes undisclosed profit, and compensation from more than one party without full written disclosure, grounds for disciplinary action.

What It Means

A net listing is a way of calculating pay, not a separate kind of Listing Agreement. The seller states the amount they need to walk away with, the firm markets the property, and whatever the sale produces above that amount becomes the broker's compensation. Sell a house on a $400,000 net at $412,000 and the broker earns $12,000. Sell the same house at $470,000 and the broker earns $70,000 for the same work.

That asymmetry is the entire problem. A percentage commission rises and falls with the seller's proceeds, so the firm and the seller are pulling the same direction. A net listing splits their interests at the exact point where the seller most needs honest advice, because the broker gains from a seller who sets the net figure too low and loses nothing by staying quiet about it. The seller least able to judge value, often someone selling an inherited or long held home without a recent Comparative Market Analysis, is the seller a net listing exposes most.

How It Works in Washington

Start with what Washington does not say. A full text search of chapter 18.85 RCW and of chapters 308-124, 308-124A, and 308-124D WAC turns up no mention of net listings. The accurate statement is that Washington does not expressly ban the arrangement, not that it is illegal here. Course shorthand that calls net listings prohibited is describing the practical outcome, not a Washington statute.

What restrains a net listing is the duty structure that attaches to every listing. RCW 18.86.030(1) makes a short list of duties non-waivable: exercise reasonable skill and care, deal honestly and in good faith, present all written offers and notices in a timely manner, and disclose all existing material facts known to the broker and not readily ascertainable by a party. A broker who knows the property will sell far above the seller's net figure, and structures the pay so that silence is profitable, is running straight at those duties.

The compensation rules point the same way. RCW 18.85.361(10) makes it grounds for disciplinary action to charge or accept compensation from more than one party in one transaction without first making full disclosure in writing of all the facts to all interested parties, and RCW 18.85.361(11) does the same for accepting, taking, or charging any undisclosed commission, rebate, or direct profit on expenditures made for the principal. Neither subsection names net listings. Both say the same thing about compensation a principal cannot see.

In practice, Washington firms write percentage or flat fee compensation into a Written Services Agreement and net listings are rare. Treat the term as an exam concept and a warning about conflicts of interest, not as a form you will be handed at a firm.

Example

Ellen inherits her mother's house in Tacoma and tells broker Dev Raman she needs $360,000 to settle the estate and be finished with it. Dev proposes a net listing: Ellen receives her $360,000 and the firm keeps everything above it. Ellen agrees, because $360,000 is the number already in her head.

Dev has run the comparables. Three similar houses on the same block closed between $431,000 and $448,000 in the previous ninety days. He does not show Ellen those numbers. The house sells in eleven days for $442,000. Ellen receives $360,000, and the firm keeps $82,000, roughly six times the $13,260 that a 3 percent commission would have produced.

No section of the RCW names what Dev did, because Washington does not ban net listings by name. What he built is a pay structure that rewarded him for not telling Ellen what the comparables showed, and a file that a Department of Licensing investigator will read against RCW 18.86.030 and RCW 18.85.361.

Common Mistakes and Exam Traps

• A net listing is not a fourth listing type. Exclusive right to sell, exclusive agency, and open describe who earns the compensation. Net describes how it is calculated.
• The tempting wrong answer is that net listings are illegal everywhere. States differ, and Washington in particular does not ban them by name.
• In a net listing the seller's proceeds are fixed and the broker's pay floats. A question describing a fixed broker fee with floating seller proceeds is describing a flat fee listing.
• The danger in a net listing is the conflict of interest, not the size of the fee. A large commission that was disclosed and agreed is a different issue from a spread the seller never saw.