Tennessee Realtor State Practice Exam

Which of these best defines the role of a broker in a net listing agreement?

1. The broker represents the buyer exclusively

2. The broker ensures the sale price exceeds the seller's expectations

3. The broker is paid based on the difference between the sale price and the desired price

4. The broker sets the sale price

The correct answer is: The broker is paid based on the difference between the sale price and the desired price

In a net listing agreement, the broker's compensation is structured in a way that aligns with the sale price of the property and the seller's desired minimum price. The broker’s payment comes from the difference between what the property sells for and the amount the seller specifies they want to receive from the sale. This effectively incentivizes the broker to negotiate a higher selling price since their earnings directly depend on the amount by which the sale price exceeds the seller's predetermined figure. This agreement type is unique because it shifts focus away from the traditional commission structure, where the broker receives a set percentage of the sale price. Given this context, the other choices do not accurately capture the essence of a net listing: the broker does not represent only the buyer, does not ensure the sale price exceeds the seller’s expectations as a primary duty, and does not have the authority to set the sale price independently. The seller specifies the desired price, and the broker's role revolves around maximizing profits beyond this figure.