Listing Agreements for Property Sellers’ in Japan

In every property transaction in Japan, there are two sides; the seller and the buyer. And commonly, there are two agents; a seller’s agent and a buyer’s agent. In almost all cases, the seller and the seller’s agent will sign an agreement, so they are clear about their relationship, the agent’s fees and responsibilities, and how the agent will help the seller to find a buyer for the property.

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A Listing Agreement in Japan is Called a Mediation Agreement

What is a listing agreement for property in Japan called?

The term for a contract between the seller and the seller’s agent in Japan is called a mediation agreement. In the United States, the equivalent document is sometimes called a listing agreement (which seems like a more descriptive name, as the agreement concerns “listing” the seller’s real estate), or a seller’s brokerage agreement.

The real estate mediation contract consists of a document whereby the mediation company (real estate agency) undertakes, for an agreed remuneration and on behalf of the client, to seek interested parties for the purchase, sale, exchange, transfer, lease or assignment of positions in contracts whose object is real estate.
— From Ana Mação, Keller Williams

From this excellent description above, we can see the document is called a “mediation agreement,” based on the idea the real estate company is a mediator (a “go between”) that brings the seller and a buyer together.

Below we will explain the purpose of these agreements, describe several types of mediation contracts for real estate in Japan, and explain some notes on the timing of when these documents are completed.

Should I Sign a Contract with My Real Estate Agent in Japan?

Yes, signing a contract with the real estate agent that will help sell your property in Japan is a good idea.

One important purpose of a contract or agreement is to avoid disputes during or after a transaction. The process of creating and signing a contract with a seller’s agent provides an opportunity to communicate expectations in writing, which can help avoid disappointment or disagreement as the transaction progresses.

When Do the Seller and Agent Sign a Mediation Agreement?

The seller first contacts a real estate agent and requests a buyer search. At this time, a mediation agreement will be prepared with a real estate agent.
— From the book Real Estate Transactions in Japan

In Japan (and other countries) this kind of agreement between the seller (or a representative of the seller) is typically signed before the real estate agent begins any work to help the seller find a buyer for the property. There are instances where the seller’s agent might postpone the agreement (see below), but it is usually in the seller’s interest to sign this kind of contract early in the process of selling property in Japan.

What is the Purpose of a Mediation Agreement in Japan

The listing agreement also specifies the listing price, broker’s duties, seller’s duties, broker’s compensation, terms for mediation, an automatic termination date, and any additional terms and conditions.
— From Investopedia

A mediation agreement in Japan helps to define the property that is to be sold, the agent’s role in helping to find a buyer for that property, the commission that the seller will pay the agent if the property is sold, the timeline the seller and the seller’s agent agree to work together, and any exclusivity that is agreed upon for the deal.

Do Real Estate Mediation Agreements in Japan Expire?

Like all contracts, the terms of the contract depend on what is agreed upon between the parties (and does not otherwise contradict established law). When and if a mediation agreement with a seller’s agent expires should be expressly stated in that agreement.

With that said, most mediation agreements have an expiration date. While the property may not sell within the time period specified in the contract, establishing a point where the contract is dissolved, or an extension is created, is a smart practice (that may benefit both parties). It may not be necessary to enforce a deadline, but the seller can use that opportunity to evaluate the relationship with the seller’s agent, and renew the contract, or to end the contract and establish a new mediation agreement with a different seller’s agent.

What are the Three Types of Mediation Agreements in Japan?

There are three different types of mediation agreements for property in Japan, and both the seller and agent should have specific expectations based on the type of mediation agreement.

The mediation agreement types in Japan are primarily based on how much exclusivity the seller gives the real estate agent to represent that property. The three types of mediation agreements in Japan are completely exclusive, exclusive, and non-exclusive mediation agreements.

What are referred to as “listing agreements” in the United States have similar categories, of: Exclusive right to sell, exclusive agency, and open listing – which are not exactly the same, but follow a similar pattern of agent exclusivity.

Three Types of Mediation Agreements with Seller’s Agents

The three types of mediation agreements for real estate in Japan differ based on their exclusivity, and also the responsibilities of the real estate agent.

• In a completely exclusive mediation agreement, the seller gives the real estate agent the exclusive right to sell the property (and the seller would pay a commission on the sale, even if the seller finds a buyer without the help of the agent). The agent is required to list the property on the Japanese multi-listing service REINS, and the agent must report to the seller weekly. As the completely exclusive type of mediation agreement gives the most surety to the agent, there are these additional responsibilities for that agent.
• In an exclusive mediation agreement, the seller again confirms that only that one real agent can represent the property for sale, but in this type of agreement, the seller may in fact sell the property to a buyer he finds on his own (and, in such a case, would not pay a commission to the agent). Real estate agents in exclusive mediation agreements in Japan must list the property on REINS, and must report to the client twice per month.
• In a non-exclusive mediation agreement for property in Japan, the seller may allow multiple agents to represent the property, and can initiate a sale on their own. The agent(s) knows other agents can list and sell the property, and the agent has less certainty of earning a commission. As the agent(s) involved in a non-exclusive relationship with a seller in Japan have no exclusive representation, they have fewer responsibilities; they do not have to list the property on REINS, and have no reporting responsibilities.

Agents commonly work harder, and invest more time and effort, if they have more commitment from the client. Real estate agents in non-exclusive listing agreements in Japan typically do less work to sell the property than agents with more exclusive agreements.

Arguments for and Against a Completely Exclusive Mediation Agreement

Generally speaking, the more exclusivity you give a real estate agent in Japan, the more motivated that agent will be to put in the effort to sell your property.

When a real estate agent in Japan has a completely exclusive mediation agreement, that agent knows that – at least for a given period of time – that if the property sells, they will earn a commission. While there is no guarantee the agent can sell the property, the “complete exclusivity” for a given property may motivate an agent to put in more effort to complete the sale (in terms of advertising the property for the seller and doing more manual outreach to other agents and potential buyers, communicating with buyers, etc.).

Theoretically, it is possible that a non-exclusive agreement with multiple seller’s agents might increase the advertising of that property, as each agent may then promote the property to their network of contacts, each trying to find a buyer. However, as those agents know the seller has not committed to them (or any agent), they know multiple agents are involved, they thereby know their chance of closing the property is reduced by all the competition from other agents. While real estate companies in Japan may want those non-exclusive listings for their own company’s website, they are unlikely to take on an unnecessary expenses for marketing efforts to advertise on third party property listing websites in Japan.

The reality may be that a property that is in a non-exclusive relationship with multiple agents is under-marketed, is not advertised as extensively, and receives less attention from buyers.

Private Real Estate Sales in Japan

As we described above, both completely exclusive and exclusive mediation agreements include requirements that the seller’s agent post the property listing on REINS. Once a property is listed on REINS, every real estate agent in Japan can see the property is for sale. For sellers that want to keep the sale of a property in Japan private, avoiding being listed on REINS may help toward that goal.

When a property seller chooses a non-exclusive mediation agreement, the agent(s) involved are not required by statute to post the property to REINS. That may help a seller to keep the availability of the property, and the effort to sell it, private.

While the property registration process in Japan ensures that the owner of an individual property can be identified, if an owner wants to avoid neighbors (or other parties) from knowing the property is for sale, keeping the property off REINS, and avoiding other public advertising, is one way a seller might keep the sale private (until the sale is completed, in which case the buyer should insist on completing the registration process).

Why Some Agents Postpone/Ignore the Mediation Agreement

While many agents want an exclusive opportunity to represent a seller’s property, and will suggest an agreement between themselves and the seller, there are some reasons that an agent will avoid having an agreement, or will delay signing an agreement until later in the process. Especially when the seller assumes they are working exclusively with that seller’s agent, delays in signing the mediation agreement are almost never beneficial to the seller, but may benefit the real estate agent.

Most real estate clients are not well educated. And most clients will not do the extra work required to establish relationships with multiple agents. Most real estate agents know that, and are not necessarily concerned about “exclusivity.” In this way, the mediation agreement may not immediately benefit the seller’s agent.

Some agents will begin the work of representing the property, and will not suggest (or sign) an agreement with the seller, or will delay signing that document until just before the sale. These agents know they are the de-facto “exclusive” agent, because the seller isn’t working with anyone else. By delaying the mediation agreement, the seller’s agent can avoid putting the property on REINS, and is not required to show the property. Sometimes it is to the seller’s agent’s advantage to avoid listing the property on REINS, and to find a buyer for the property, so that the agent can then collect a commission from both the seller and the buyer. This attempt to serve both sides of a real estate transaction in Japan is called “dual agency,” and it is a common practice that often benefits the real estate agent, but is not ideal for either the seller or buyer.

If the seller’s agent avoids a mediation agreement with the client, and thereby can forego listing the property on REINS, the property may take longer to sell. REINS is the default property listing in Japan, and buyer’s agents in Japan use REINS to find available properties. If the seller’s agent avoids REINS, buyer’s agents are less likely to find the property. If the seller’s agent can then find a buyer some other way (via their own network or by advertising the property on property listing websites where buyers might contact the seller’s agent directly), the seller’s agent can potentially represent the buyer as well, and can earn a commission from both sides.

Seller’s agents’ sometimes avoid listing a seller’s property on REINS, and avoid working with clients that have a buyer’s agent, as these seller’s agents can earn as much as twice the commission if they can find a way to represent both the buyer and seller.

Dual agency in Japan, and this potential to earn double the commission, is a strong incentive that can influence the behavior of real estate agents in Japan.

Sellers can avoid problems with dual agency (which is almost never a good thing for clients), by signing a mediation agreement early in the process, making sure that listing the property on REINS is part of that agreement, and then asking the agent to demonstrate that the property is in fact publicly listed on REINS. Those practices will help ensure the property is easily found by buyer’s agents, can bring more attention to the property, and should help sell the property faster (and potentially for a higher price).

Finding a Seller’s Agent in Hokkaido

If you are selling property in Sapporo (or other cities in Hokkaido), and would like to find a local seller’s agent, we are happy to make introductions to qualified agents that speak English. Through our work with clients, we know seller’s agents in Niseko, Otaru seller’s agents, and real estate agents for sellers in Sapporo and other cities. Contact us – our services are always free to you.

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For More Information:

— Our collection of articles on real estate in Sapporo
— Some details on selling a house in Niseko and more
— Research on selling property in Otaru
— More general articles about Hokkaido real estate
— Some particulars on real estate taxes in Japan