A seller wants to clear $50,000 from the sale of their home and the broker sold it for $160,000. What is the issue with this arrangement?

In this scenario, the key issue stems from the concept of a net listing. A net listing is an arrangement where the seller sets a specific amount they wish to receive from the sale of a property, in this case, $50,000, and anything above that amount becomes the broker’s commission. This type of listing can create unethical situations and is often considered illegal in many states, including South Dakota.

When the broker sold the home for $160,000, the gross amount received was significantly more than the desired net amount for the seller. If the broker were to take the difference as their commission, it could lead to conflicts of interest and questions about whether the best interests of the seller were being prioritized. Because of these potential ethical concerns and the blurred lines surrounding compensation, a net listing is often prohibited by real estate regulations, thus highlighting the issue in this arrangement.