Q: I am a licensed real estate broker and a seller is offering me an exclusive listing agreement which contains an increase in my commission depending on the amount the property is sold for. Is this legal? Is this a net listing?
A: Yes, a real estate broker in New York can be paid a commission on a sliding scale based on the sales price of the property. For example, the listing agreement can provide that if the property is sold for $1,000,000 or less, the commission will be X%, but if the property is sold for $1,000,000 or more then the commission will be Y% (where Y% is greater than X%).
A sliding commission arrangement is not a net listing. A net listing (which is prohibited by Section 175.19 of the Rules and Regulations governing real estate brokers), is an arrangement whereby the seller agrees that if the seller’s property is sold above a specified amount, the real estate broker keeps, as a commission or compensation, any sales proceeds above the specified sales amount. For example, in the situation above, a net listing would provide that the real estate broker keeps all sales proceeds over $1,000,000. If the property is sold for $1,200,000, then the real estate broker would receive $200,000 as a commission. As indicated previously, a net listing commission arrangement is not legal in New York State.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP