Every couple of years a real estate agent will dream up an idea of a “net listing” and wonder why no one else has employed this unique way to increase commission. A “net listing” is when the client-seller agrees to an amount of money that they must make from the sale of the property with the listing agent netting any excess as his commission.
The reason no one uses this commission scheme is because it is unethical and illegal. Recently, a hearing panel for the National Association of REALTORS® ruled as much when a seller agreed to accept $170,000 from a closing with the Realtor receiving the excess as his commission. When the property eventually sold for $220,00 both the buyer and seller complained to the Board of REALTORS® about the Realtor’s conduct in the matter. The Realtor’s defense was he performed his service pursuant to the written agreement. The Hearing Panel found the Realtor in violation of Article 1 of the REALTOR® Code of Ethics because he had “departed completely from his obligation to render a professional service in fidelity to his client’s interest; that he had, in fact, been a speculator in his client’s property; and that he had not dealt honestly with either party to the transaction.”
The rationale used by NAR in ruling “net listings” are unethical also applies to an application of South Carolina law. Although no statute specifically denounces “net listings”, a reasonable interpretation of multiple provisions within the real estate laws would render “net listings” illegal. The real estate statute S.C. Code §40-57-10 et. seq., imposes a duty of good faith, fair dealing and loyalty towards the client. Moreover, the statute imposes upon the real estate agent a fiduciary duty that also prohibits any self-dealing. Therefore, whether the real estate agent is a REALTOR® or not, a “net listing” would violate the fiduciary duties the agent owes to the client under state law, especially when focusing on what is best for the client rather than the agent.
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