This sounds like a "net listing," which is illegal in TN...

...for real estate licensees; at least, that's how I read it. I am not a lawyer and you need to consult one who knows real estate law in Tennessee. However, I am a former real estate agent who was licensed in Illinois and am a licensed appraiser. Net listings are definitely illegal in Illinois.

A net listing is one in which the seller and broker agree on a benchmark sale price. There is no base commission; instead, the broker keeps all or some of the increment of the achieved sale price over the predetermined benchmark sale price.

The moral hazard: the broker has an incentive to persuade a buyer that the home is worth more than a reasonably accurate market price. This is why many, if not all, states outlaw the practice.

I've attached a PDF chapter with the "RULES OF THE TENNESSEE REAL ESTATE COMMISSION" which states, in part:

"1260-02-.07 “NET PRICE” LISTING. No broker or affiliate broker shall accept or enter a listing based on a “net price” (i.e., a price excluding the customary commission and expenses associated with the sale)."

This chapter does not explicitly define "net price listing" beyond the brief text shown. However, you can find references to this practice by Googling. I found a Google Books version of Principles of Real Estate Practice in Tennessee that cites 1260-02.07 and then expands on its definition, saying, "The seller agrees to accept a certain price, and any amount the broker collects from the sale over that agreed upon amount is the broker's commission."

Click here for link at https://publications.tnsosfiles.com/rules/1260/1260-02.20170