In a perfect world, Craigslist would be used as a forum for civil communication and fair postings of available jobs and housing. Unfortunately, sometimes inappropriate content makes it on to the site, or people spam the site by including ads multiple times in the wrong category. If you are flagged for misconduct on the site, your posting is apt to be removed.
If the classified ad you placed on Craigslist was free, such as a posting to sell furniture or advertise an available room for rent, flags can result in an automatic removal. While you ad won't be deleted after only one flag, if a significant amount of users flag the ad it might be removed. Craigslist does not supply a specific number for the flags necessary before removal, other than to say that if a lot of negative flags occur, the post is eligible for removal.
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While most flags on Craigslist have a negative connotation, it is also possible to be flagged for good reasons. If a user flags your ad for the "Best of Craigslist," the posting is put into consideration for the list of best Craigslist ads, published a few times a year. While being flagged does not guarantee that you will make the list, your ad will be reviewed for possible inclusion. Ads that are funny and memorable are included on "Best of Craigslist."