Iowa Real Estate Practice Exam

What is the status of listings based on a "net price" to the seller in Iowa?

1. Legal if agreed upon

2. Illegal regardless of agreement

3. Common practice in the real estate market

4. Allowed under certain conditions

The correct answer is: Illegal regardless of agreement

In Iowa, a listing based on a "net price" to the seller is not permissible. This practice, often associated with net listings, is considered illegal because it can create conflicts of interest and may not serve the best interests of all parties involved. A net listing means that the seller specifies a minimum amount they want to receive from the sale of their property, and any amount received above this would go to the broker as commission. This approach can lead to situations where the broker may be motivated to sell at a higher price without adequately representing the seller's interests. Real estate regulations typically aim to ensure transparency and fairness in transactions, which is why net listings are discouraged or outright disallowed. Instead, the common practice is to have a traditional listing agreement where the broker receives a percentage of the sale price as their commission, ensuring that the broker remains aligned with the seller's goal of achieving the best possible sale price. Although there may be some conditions under which variations exist, in general, net listings are illegal regardless of any agreement that may have been made between the seller and the broker.