Which type of estate listing is illegal in many states?

A net listing is considered illegal in many states due to the potential for conflicts of interest and ethical concerns it raises. In a net listing agreement, a property owner sets a minimum acceptable price for their property, and the real estate agent's commission is based on any amount the property sells for above that minimum. This arrangement can incentivize agents to prioritize their commission over the best interests of the seller, potentially leading them to undervalue the property or encourage unnecessarily high sale prices.

Many state laws require real estate commission structures to be transparent and reasonable, ensuring that agents act ethically and in the best interest of their clients. Therefore, net listings are often prohibitive in various jurisdictions as they can complicate fiduciary responsibilities and lead to disputes concerning fair market value and agent commissions.