California Real Estate SalespersonLaws of Agency and Fiduciary DutiesHard
A seller signs a net listing agreement specifying she must receive a net of $280,000 from the sale. The broker sells the home for $310,000, with the seller fully informed of and agreeing to this arrangement before closing. How much commission does the broker earn?
- A$15,500 (5% of sale price)
- B$30,000 (difference between sale price and net amount)
- C$18,600 (6% of sale price)
- D$0, because net listings are illegal in California
Show answer & explanationAnswer & explanation
Correct answer: B. $30,000 (difference between sale price and net amount)
In a net listing, the broker's compensation is whatever amount exceeds the seller's specified net price, provided the seller knowingly agrees to the final commission amount before the sale closes. Here, $310,000 sale price minus $280,000 net equals a $30,000 commission ($310,000 − $280,000 = $30,000).
Why the other options are wrong
- A. Incorrect; this percentage calculation does not apply to net listing arrangements.
- C. Incorrect; net listings are not based on a percentage but on the excess over the net figure.
- D. Incorrect; net listings are legal in California but strongly discouraged and require full disclosure/approval.
Net Listing
A listing where the seller sets a minimum net proceeds figure, and the broker's commission is any amount received above that net price, subject to seller disclosure and approval.
- Legal in California but discouraged due to conflict of interest.
- Commission = sale price minus agreed net amount.
- Seller must be informed and approve final price/commission.
Memory trick: Net listing: broker pockets everything above the seller's floor.