Question

Which of the following is true regarding net listings in California?

A) They are illegal in California.
B) On a net listing, the broker must notify the seller of the amount of the commission the broker is earning before the seller agrees to sign the purchase contract with the buyer.
C) If there is a change of price, such a change must be made on the original contract form.
D) Net listing are the most common form of listing in California.

Answer 1

Net listings in California are legal, but the broker must inform the seller of their commission before signing the purchase contract. Net listings are not the most common in California due to potential conflicts of interest; exclusive listings are more prevalent.

Step-by-step explanation:

The correct answer regarding net listings in California is: B) On a net listing, the broker must notify the seller of the amount of the commission the broker is earning before the seller agrees to sign the purchase contract with the buyer. While net listings are legal in California, they can be problematic and lead to ethical issues. This is because the commission for the real estate broker is the amount above the set net price agreed upon by the seller.

It is crucial that the seller is fully aware of the commission the broker will be earning to avoid conflicts of interest and ensure transparency throughout the transaction process. Changes in the price, if needed, should be documented properly, usually through a written agreement or an amendment to the original listing agreement rather than changing the original contract form. Net listings are not the most common form of listings; the most prevalent types are exclusive-right-to-sell and exclusive-agency listings. This is partly because net listings can result in a conflict of interest between the agent's earnings and the seller's best possible price, leading to their general disfavor in the industry.

Answer 2

Net listings are illegal in California as they can lead to potential conflicts of interest and are considered unethical in this state's real estate practices.

Step-by-step explanation:

The question pertains to net listings and their legality in California. The true statement regarding net listings in California is that they are illegal.

Net listings are a type of real estate agreement where the agent keeps everything over a certain amount that the seller wants for the sale of the property.

California law has deemed such listings to be fraught with the potential for abuse and conflicts of interest, hence they are not allowed under California real estate regulations.

Regarding net listings in California, option A is incorrect. Net listings are legal in California. Option B is also incorrect. On a net listing, the broker does not need to disclose the amount of the commission earned to the seller before signing the purchase contract.

Option C is true. If there is a change of price, it must be reflected on the original contract form. Option D is false. Net listings are not the most common form of listing in California.