Net listings are currently legal in Michigan, but a 2026 amendment to the Michigan Real Estate License Act imposes strict safeguards and limits the practice to licensed brokers only. The rule change was prompted by consumer‑protection concerns and now requires written disclosure of the broker’s commission structure, a cap on the maximum commission, and mandatory escrow of the seller’s net proceeds until closing.
What Is a Net Listing?
A net listing is a contract in which the seller sets a minimum price they must receive from the sale; any amount above that price becomes the broker’s commission. For example, if a seller demands $250,000 and the property sells for $270,000, the broker keeps the $20,000 excess. This arrangement can create a conflict of interest because the broker’s incentive is to maximize the sale price rather than to act solely in the seller’s best interest.
Legal Status in Michigan Prior to 2026
Before the 2026 amendment, Michigan law permitted net listings under MCL § 445.385, provided the agreement was in writing and the broker disclosed the commission method. However, the statute lacked explicit consumer‑protection language, and the Michigan Real Estate Commission (MREC) issued advisory opinions warning that net listings could violate the fiduciary duty owed to clients if the broker’s compensation became “unreasonable” (MREC Advisory Opinion 12‑04).
Changes Enacted in 2026
Effective January 1, 2026, the Real Estate License Act was amended to:
- Restrict net listings to licensed brokers only – sales agents may not enter into net listings without broker supervision.
- Require a detailed written disclosure – the contract must state the seller’s minimum net amount, the broker’s anticipated commission, and a clear statement that the broker will hold the seller’s net proceeds in escrow.
- Impose a commission cap – the broker’s portion cannot exceed 6 percent of the gross sale price, regardless of the net amount set by the seller.
- Mandate escrow of net proceeds – the broker must place the seller’s net proceeds in a trust account until the closing, reducing the risk of misappropriation.
These provisions aim to balance the broker’s freedom to negotiate compensation with the seller’s right to transparent, fair dealings.
Practical Implications for Agents and Sellers
- Agents must update their listing agreements to incorporate the new disclosure language and escrow procedures. Failure to comply can result in disciplinary action, including license suspension.
- Sellers gain greater assurance that their expected net proceeds are protected. They should request a copy of the escrow agreement and verify the broker’s compliance with the 6 percent cap.
- Brokerages should conduct training sessions on the amended rules and audit ongoing contracts to ensure conformity.
Key Takeaways
- Net listings remain permissible in Michigan, but only brokers may use them.
- The 2026 amendment strengthens disclosure, caps commissions, and introduces escrow requirements.
- Both agents and sellers must adapt to the new contractual standards to avoid legal pitfalls.
Frequently Asked Questions
Can a sales associate still create a net listing if their broker approves it?
No. The 2026 amendment expressly limits the execution of net listings to licensed brokers. A sales associate may only participate under direct broker supervision and must ensure the broker’s written agreement meets the statutory requirements.
What happens if the broker’s commission exceeds the 6 percent cap?
Exceeding the cap constitutes a violation of the Real Estate License Act and may trigger disciplinary proceedings by the MREC, including fines, mandatory restitution, or license revocation.
Is the escrow of the seller’s net proceeds mandatory for every net listing?
Yes. The law requires that the broker hold the seller’s net amount in a trust account until closing. This protects the seller’s funds and provides an auditable trail of the transaction.
Can a seller negotiate a lower commission than the 6 percent maximum?
Absolutely. The 6 percent figure is a ceiling, not a floor. Sellers and brokers may agree on any lower percentage, provided the agreement is documented in writing.
Does the new rule affect existing net listings signed before 2026?
Existing contracts remain enforceable, but any amendment or renewal after January 1 2026 must comply with the new requirements. Brokers are advised to review active agreements and update them as necessary.