I felt the need to add a couple of comments. In my experience a judge would never order a house to sell for a pittance. The order would be to "put it on the market" so it could sell at market rate. Also selling an asset - such as the proverbial corvette- for $10.00 and giving you ex $5.00 also would not be tolerated as it's called a fraudulent transfer. A judge - rightly so - would be highly annoyed.

"It's very presumptuous to assign your "ethics" to a deal." As to irrational insertion of one's own ethics into the situation - Realtors have a code of ethics to uphold. If my client or my customer wanted me to act unethically in the real estate transaction, then I walk away, notwithstanding if it's a $50k or a $200.00 commission on the line. Lastly, isn't it our obligation to explain the possible consequences to a very likely uninformed seller in this situation. The very least that should be done is to refer the seller to an attorney so they can discuss the legal and non-legal consequences of the request, which was "He doesn't care about anything more." The hypothetical -as proposed by Ruth -has liability written all over it and it's exactly in this situation that a Realtor uses ethics.

Fri Aug 31 2007, 23:29

Well, I see you read my post under "living your dream?" Yes, that was me. I did make it to the pool today.

I'm on-line because my hubby is now in Siberia.

Mike's response makes a good point. The owner doesn't care, he didn't say do it fast. Part of the reason I thought about this is from a post I did about improving your credit:
http://www.trulia.com/voices/Financing/My_score_is_and_impro…
It's an interesting story about an international traveler.

I also kept thinking about what Mike said and thought this is the perfect Judge demanded divorce sale. It's the old story where the X says, sell my Corvette and send me half. So the wife sells it for $10 and sends the husband $5.

Ruth

Fri Aug 31 2007, 16:14

Ok Ruth, Don't you ever rest! I can't keep up with you. Is all of this going into your book?

I have to agree with the popular vote. If they are not illegal they should be. It really does not do a service to the seller. I agree Ruth that a short sale or equity buy out may be similiar and do serve a purpose. I also think that some of the people that participate would resemble vultures circling, waiting for their dinner to die!

Fri Aug 31 2007, 14:16

They are legal in California, but I haven't seen one in nearly 20 years. Assuming that the seller is capable of handling his own business affairs AND that's what the seller wants AND having been given accurate market information...it's very presumptuous to assign your "ethics" to a deal. The implication I read from the question is that the seller has made some business decisions and has endeavored to find an agent who can accommodate those needs. There's nothing unethical about that. No one was asked to check their ethics at the door.

Let's look at a real life scenario...an offer comes in for $510k...the agent has no ability to "hold out" for anything. The listing grants them anything over $500k...in reality the seller can shank the agent...

From a co-op basis though the point raised by Ute is one to be heeded. I'm not sure how a MLS listed property might be compliant with the rules of that MLS. Accordingly I wouldn't be willing to drag other agents into such a deal. I would have no problem sleeping though if I was the only agent on the deal. It would be unethical to withhold an offer to purchase, but the seller could easily take a low offer that paid me poorly (or less than i wanted).

I would venture to guess that there are corners of the real estate business where net listings are common. (timeshare resales?) or were common (land, 100 years ago it was common for several brokers to place a sign on a parcel and to the victor, the spoils), but the rise of the cooperative style of commission sharing in residential resales, and the realities of that style of business model, have relegated net listings to the nether regions of the trade.

I'd bet that there are several other odd corners too that have the net listing as a continuing practice.

Fri Aug 31 2007, 12:33

I awarded Best Answer in record time, this time. After 9 answers, short and sweet one out.

Notice I used "real estate agent" this time instead of "Realtor". No one proposed this to me. I thought about it because of all the foreclosure/short sales "snake oil" salesmen. Don't get me wrong, I actually think the foreclosure/short sales people are doing a valuable service. The problem is that you can't tell the crooks from the good guys. When they "buy" the equity or an option, I think what they are really doing is creating a net sale.

Ruth

Fri Aug 31 2007, 10:16

I have no idea whether a net listing is considered unethical, but I do know that it is bad business. The negative factors outlined by the agents below demonstrate the pitfalls for the seller. The seller and listing agent may be at odds every step over the way due to the division between "your portion" and "my portion."

As the listing agent, I would never take a net listing because the market is not 100% predictable. As agents, we can pour hour upon hour into research and prepping the home for sale. However, all of the work that goes into bringing the house to market is still largely speculative. Until you put that specific property on the market, you never quite know how it will be received. As a REALTOR, I take pride in commanding the top price that the market will bear. If the market decides that our target price is not quite in alignment with what a buyer is currently willing to pay, however, I will not set myself up to take a bath. The home is worth what it is worth, and it is our job to find that value. It is not our job to somehow find the magical sales technique that will artificially pump the sales price of the home over its true market value. A good agent will help you realize the property's full potential, not achieve an unrealistic price because of a bigger slice of the pie. I am not Pavlov's dog. Ringing the bell of a larger potential commission does not get me all slobbery. More to the point, it won't make the buyer pay more than the buyer is already willing to pay.

Fri Aug 31 2007, 09:27

For me the question is always whether it's ethical. Something may be technically legal, but it can still be unethical. There's a difference between what's law and what's a professional rule. I believe ethical standards trump legal standards because they are more stringent. For instance, dual agency (i.e. representing buyer and seller) is legal in California, but I think it poses ethical challenges such as inherent potential for conflict. I believe net listings are legal in California, but I have never seen one advertised and I think there's a good reason for that. I don't think it's because of the potential windfall an agent may get if the property sells well above the minimum net proceeds the seller will accept. Most sellers have an inflated price in mind and the chances that the agent will earn what he should earn are slim. In very rare cases will a seller not care if the agent makes more than he would have made had he received a commission that's standard in the community. I believe commission should be negotiated in the very beginning so that the agent's commission so that the agent's compensation does not become a contract negotiation item. Agents are not parties to the sales contract and their compensation should therefore also not be dragged into the contract negotiations. That's the reason why our local MLS specifically prohibits making an offer or counter-offer that's contingent upon changing the terms of the commission that's offered in the MLS. That's also the reason why the C.A.R. (California Association of Realtors) purchase contract forms were revised about 5 years ago in that the commission portion was removed altogether. While there's a separate C.A.R. form that can be used to address the commission, when both parties are represented by agents who subscribe to the same MLS, the separate form is not needed as both MLS subscribers agree as part of their subscription to the MLS to pay the advertised commission. Thus, if an agent accidentally states that the commission is 5 or 6% (instead of 2.5 or 3), the listing broker is liable to pay that to the selling broker. However, in my opinion it would be bad business practice to make someone pay the full commission to the selling broker when it's obvious that the listing broker made a mistake (it's most likely a data entry error by an assistant). As a courtesy to the listing broker, I would inquire about the commission and give the listing broker an opportunity to correct the mistake. What goes around comes around.

Fri Aug 31 2007, 09:03

Ruth:
This is going to be a slam dunk answer pool. Legal or illegal (Illegal in my state) - is irrelevant. I always compared the practice to the snake oil salesman - "tell ya' what I'm gonna do" mentality.

(I hope I don't offend the snake oil salesman!)

We are working hard to elevate our profession & industry. An agent who would propose this type of transaction is working against the ethical foundation from which all agents stand - and from the responses you have received I am pleased to see that we are all on the same page.

Fri Aug 31 2007, 08:59

Net listings are illegal and unethical. Show him what he will receive from a pricing strategy that reflects the actual market on that home. I believe you will find that he does care how much his agent makes!

Fri Aug 31 2007, 08:10

Yep...you are opening another can of worms.

I am not quite sure if they are legal or illegal in AZ. I believe they are legal, however they should be illegal.

I do not use net listings at all. They do more harm than good to the seller especially in this market.

The two times that I have seen a net listing have been with expired listings.
Both times the sellers told me that they wanted to lower their price, but the agent said no.
Insert red flag here.
These sellers did not fully understand the deal.
They only saw the discount. I refer to this as discount tunnel vision.

I did not get the listings for these properties. If they were to be priced correctly, both homes would be short sales. I have had zero luck with Short Sales as the listing agent. In my opinion they just don't make it to close.

Fri Aug 31 2007, 07:51

Net Listings are not legal in MA.

Fri Aug 31 2007, 07:24

typo...insert *essentially*

Fri Aug 31 2007, 07:23

Net listings are not legal in NJ. I agree, they are also not in the best interest of the seller. What happens if a seller is willing to sell for 500K, and an offer comes in for 510K, but the List agent wants to hold out for a higher number and the seller loses this buyer?

Fri Aug 31 2007, 07:22

They're illegal in NY, if I'm understanding your question correctly. I would argue it's also unethical as it's no longer the best interest of the seller that the agent would be considering. If the seller wants $500k minimum and essentiall tells the agent "keep anything extra" - well that's self-dealing.

Fri Aug 31 2007, 07:20