Michigan License Law Practice Test

Which type of listing is deemed illegal in Michigan?

1. Open listing

2. Exclusive agency listing

3. Net listing

4. Exclusive right-to-sell listing

The correct answer is: Net listing

A net listing is deemed illegal in Michigan because it creates a conflict of interest between the seller and the broker. In a net listing agreement, a broker agrees to sell a property for a certain amount of money, and any amount received above that becomes the broker's commission. This arrangement can incentivize the broker to sell the property for a higher price than the seller desires, potentially leading to unethical practices. Michigan law prioritizes the protection of consumers in real estate transactions, and net listings are seen as a situation where the broker's financial interests may not align with those of the seller. This leads to a lack of transparency and can contribute to pricing issues, since the seller may not be fully informed about what the property is worth or what potential buyers are willing to pay. Therefore, to maintain fair practices within the state’s real estate market, net listings are prohibited.