Real Estate Transactions in Japan

As part of our list of the best books about real estate in Japan, we bring you a review of the book Real Estate Transactions in Japan, by Konishi and Tada. Released in December 2023, it is certainly one of the best books on the topic, in terms of both the content and the presentation. Based on the extensive notes we took as we read it, we hope the review below will entice you to buy a copy and read it yourself.

The full title is Real Estate Transactions in Japan: The Comprehensive Guide to Real Estate Transactions in Japan: From Law to Practice. The book is 331 pages, consisting of 17 informative chapters (256 pages), including samples of sales agreements, a very detailed walk-through of the “Explanation of Important Matters,” and a lengthy appendix (which includes samples of the Japanese Civil Code). Whereas other real estate books can focus on the whims of the authors (take Savvy Guide to Investing in Japanese Real Estate, for example), this book runs through each aspect of a real estate transaction in Japan in an orderly way, giving the reader multiple perspectives from which to understand the process.

Overview

We decided to provide a handy book for general readers, who are not legal professionals, to easily gain an overview of Japanese real estate transactions.

The authors are Takafumi Konishi and Shinsaku Tada, both of which are lawyers in Japan. And while they will be quick to tell you that “it’s unique to Japanese real estate transactions that lawyers are often not involved,” it is our opinion that their legal background provides an excellent procedural framework through which to understand the buying and selling of Japanese property. Unlike other Japanese real estate books, there are no anecdotes or client stories; but there are a few light examples of legal cases to help illustrate why some aspects of the process are important.

Konishi and Tada’s Real Estate Transactions in Japan feels like a training manual for real estate agents, or for investors that want truly in-depth knowledge of how a property sale in Japan comes together. While it is very thorough, it’s simple and easy to read. And (as we’ll emphasis later) the book is repetitive in a way that acts as a kind of ongoing review, integrating each of the parts of the transaction together.

As real estate consultants in Japan, we have personally been involved in many property transactions in Japan (and abroad), and have helped over 100 clients here in Hokkaido with matters including buying and selling property. Even with all that experience, there was so much for us to learn as we read Real Estate Transactions in Japan.

While the book has no particular focus on real estate in Sapporo or Hokkaido, as the book gets at the universal truths of real estate sales in Japan, Hokkaido-based buyers and sellers will certainly learn something as well. And even though the book is not focused on foreigners buying property in Japan, there are many specific notes for investors and potential homeowners coming from overseas.

Below we will provide some highlights from several topics based on the notes we took as we read Konishi and Tada’s excellent book.

Information about Japanese Real Estate in English

Information that clearly explains Japanese real estate transactions in English is still scarce. While the internet is overflowing with various pieces of information, including about Japanese real estate transactions, they are fragmented and do not provide a comprehensive understanding.

Real Estate Transactions in Japan is about Japanese real estate procedures, and does not cater to foreigners much at all. However, as this book is in English, it will largely serve outsiders interested in property here in Japan.

There are, however, several notes about the foreign experience:

The number of foreigners purchasing real estate in Japan is on the rise for various reasons. Some buy expensive properties in urban centers for investment purposes. Others are attracted by Japan’s low crime rate and high cultural standards, purchasing residences for second homes or relocation.

It is true that the population of foreigners here in Hokkaido is growing, that an increasing percentage of real estate transactions in Japan involve foreigners, and that English-language materials are helping to facilitate those transactions. For all of those reasons, the book Real Estate Transactions in Japan serves as an excellent contribution supporting international real estate in Japan.

As we begin to share some of our favorite highlights from the book, we point to Chapter 4 as a strong example of how the structure of the book, and the way the content is organized, makes it ideal as a teaching tool for investors in Japanese real estate.

The Parties Involved in a Real Estate Transaction in Japan

Shinsaku Tada and Takafumi Konishi dissect the buying and selling of Japanese property in many different ways, and their presentation of all “The Parties Involved in Real Estate Transactions” (Chapter 4) was a particularly effective way to teach. That chapter is divided into individual notes on the seller, buyer, representatives of the seller/buyer (not the agents), landowner (in the case where the land is leased), lessee (they don’t talk much about tenants in rental units, but we can assume that as well), real estate agents, judicial scriveners, lawyers, surveyors, and tax accountants.

By naming each of the players in the transaction, and spelling out their roles, you’ll gain an appreciation for each step, and how all of the participants contribute to the sale.

In addition to Chapter 4 – which serves as an overview of all the roles – Chapters 9 and 10 go into further details of the responsibilities of the seller and real estate agents respectively.

Buyer’s Responsibilities

As an example of the way Real Estate Transactions in Japan uses the roles of the interested parties to teach you about property transactions, here is a note about how the role of advisers in a transaction is limited:

Note that even the best real estate agent may not always be able to investigate all legal regulations. If a real estate agent investigates with the degree of care that a real estate agent should normally exercise, he or she will not be held liable even if it is later discovered that other regulations actually exist… It is ultimately the responsibility of the seller and buyer to decide whether or not to enter into a sales agreement.

It is instructive (and sobering) to see that ultimately agents and real estate attorneys can only provide comments; as final commitments are made, there is no substitute for your own education and experience. However, as this book will illustrate, there are practices (such as the seller providing the property condition report) that can help you prepare to engage in a transaction that is both legal and more likely to satisfy both sides of the agreement.

Choosing a Real Estate Agent in Japan

While the buyer and seller make the final decision about whether to commit to a real estate sale, the real estate agents are often very useful, if not crucial to the success for many transactions.

Both sellers and buyers usually use a company that provides matching services for real estate transactions. That is, a real estate agent. In Japan, buying and selling real estate is rarely done purely on an individual basis without the use of a real estate agent.

Real estate transactions are commonly the biggest financial decisions most of us will make in our lives. Real estate agents provide important expertise in both finding property, and also in advising about the value and appropriateness of a given property to meet the real estate goals of the buyer or seller.

While both the authors of Real Estate Transactions in Japan are attorneys, the following quote is about how agents typically play a much more important role in the transactions:

If you want to verify the accuracy of the contents of a disclosure document, you may ask another real estate agent to verify the contents. Note that it is not useful to ask a lawyer to verify the accuracy of the content… this is because real estate agents are often more knowledgeable than lawyers when it comes to verifying the contents of an important matters explanation document.

The primary service we provide to our clients is connecting them with local real estate agents in Sapporo and other cities in Hokkaido. We know from the experiences of our clients (as well as our own experience buying/selling real estate) the value agents provide clients. This is especially true for visitors from other countries trying to conduct business in Japan; an agent can help you get more value from a transaction, and also avoid costly mistakes.

Real Estate Property Listing Portals in Japan

Here is an interesting topic that helps illustrates some of the process – and pitfalls – as buyers begin the process of buying property in Japan.

In practice, the usual process is to first search for an interesting property on a portal site, and then contact the real estate agent handling that property.

While Takafumi Konishi and Shinsaku Tada show a lot of respect for the role of real estate agents in the process of buying property in Japan, they are correct that many buyers start by doing self-service searches on the internet, finding a property that looks good and fits their budget, and then contact the agent that represents that property – which is the seller’s agent (this is an important detail). While that is common practice, it represents some less-than-ideal circumstances for buyers (and sellers as well).

Even though it is true that there are several websites that list property for sale in Hokkaido, it is a good idea to begin first by talking to an agent that can represent you as the buyer, and letting that agent direct you to available opportunities on property listing websites in Japan, or on REINS (the official Japanese multi-listing service for real estate).

A good buyer’s agent does more than help you see available property; they can advise you about property that has more value and makes sense for your goals. They can also help steer you away from some common situations where you don’t see the full range of options or opportunities.

Real Estate Transactions in Japan makes reference to two common problems buyers make when they don’t have an agent helping them from the buyer side; “bait advertisements” and “dual agency.”

Bait and Switch Advertisements in Japan

There is a somewhat common practice some real estate companies in Japan utilize where appealing “bait advertisements” are used to attract buyers, even as those properties are no longer (or never were) available for sale.

There are cases of ‘bait advertisements,’ in which the real estate agent dares to post information about a quality property that is already been sold or is not for sale in the first place, and used it is bait to induce an inquiry and sell another property to you.

When you work with a buyer’s agent, your agent can screen properties for you in advance (talk to the seller’s agent, confirm the property is for sale and not already sold or in contract).

The more attractive the property is, the more likely it is that it has already been sold when you inquire.

The authors of Real Estate Transactions in Japan offer another good reason to get help from a buyer’s agent as you look for a home or investment property in Hokkaido:

The advantages of going to the real estate agent’s office for consultation are that you can give detailed information about your wishes, you can ask questions on the spot, and in some cases, you can be introduced to ‘undisclosed properties’ that are not listed on the portal site.

That is right. Not only do “self-service” real estate websites in Japan include some of these “bait and switch properties,” but many of the best properties are never publicly listed, and are traded off-market; your agent has access to more options (both publicly available and off-market) than these websites make available.

Dual Agency

Real Estate Transactions in Japan does a very good job of describing the concept of “dual agency,” which is another potential pitfall in the Japanese real estate market.

Dual agency is when one agent represents first the seller (typically), and then the buyer, in the same transaction. The question arises; how can an agent maximize the benefit for both sides of the same transaction? Is that even possible? Is there an inherent tendency to compromise, where the agent gets paid (both commissions, actually), even as the buyer or seller (or both) end up with less-than-ideal terms than if they had their own, distinct representation?

As we mentioned above, when buyers contact an agent that has listed a property for sale online, that agent will often try to represent the buyer as well (and collect two commissions). In the quote below, you can see that the incentive for an agent to try for “dual agency” is that that agent can then collect a commission (renumeration) from both the buyer and the seller:

Real estate agents can accept requests from both sellers and buyers. Although there is a legal cap on the remuneration that licensed real estate agents can receive from their clients, they’re often engaged by both parties because they are allowed to receive double the remuneration. When an agent accepts requests from both sides, they are not allowed to act in a way that is only advantageous to one side.

While it may be natural for an agent to want to earn more commission, there is a tension as to who’s interests that agent is working towards; how can an agent negotiate (for instance) for both the buyer and the seller at the same time? While dual agency is not illegal, the danger of a conflict of interest is difficult to avoid.

This duty of good faith typically becomes an issue when the client (buyer and/or seller) and the real estate agent engage in a transaction in which their interests conflict.

It is highly advised to seek the services of your own agent; someone experienced that can help guide your choices, help educate you about the market and your options, represent your interests in any negotiations, and more generally guide you through the transaction.

Therefore, while relying on the high degree of expertise of real estate agents, it is important to recognize that they are basically acting for their own benefit as well.

That is correct. And while it is healthy for an agent to act for their own benefit, when you avoid dual agency, you avoid many dangers where the agent’s incentive is to get you to buy not just some property, but a particular property that they represent (so they can have both sides of the commission).

Pocket Listings and Off-Market Property for Sale in Japan

Another topic Real Estate Transactions in Japan touches on is the idea of property that might be for sale, but is not publicly known; these kinds of properties, commonly called off-market listings, are intriguing; everyone wants access to a “good deal.”

Undisclosed properties are real estate information which are not listed on REINS or any portal site but held by a real estate agent. Undisclosed properties are often shown to the real estate agent’s top customers, and it is possible to expect that they are excellent properties with good yields.

For various reasons (often for privacy, or the ease of a transaction), some sellers don’t list their property publicly, and those sales are initiated via word of mouth in the network of agents and other real estate professionals in a given area. Some insiders in Japan call that kind of property a “pocket listing” – as it is “in the pocket” of the agent, where the general public doesn’t have access to it.

The Process of Buying Property in Japan

One of the strong points of Real Estate Transactions in Japan was the clear descriptions of the timing of when and how various aspects of the property sale transpire. There were many excellent examples from the Japanese Civil Code about the various requirements in property sales in Japan.

Legally, there is a provision that the obligations of the seller and the buyer are to be performed simultaneously (Civil Code Article 533).

Some of this detail comes from how Japanese real estate contracts are expected to function. Notes like this can help you understand the flow of the deal, and the timing (and even location) of how a purchase is concluded.

On the closing date, the seller, buyer, real estate agent, judicial scrivener, and other related parties gather in one place (ex. the bank from which the money was remitted), the buyer performs the necessary procedures for bank remittance on the spot, and the seller often delivers all necessary documents for the title registration procedure to the buyer immediately after confirming receipt of the money.

Even after having completed several deals here in Japan, the descriptions in Real Estate Transactions in Japan helped us understand the process better.

Real Estate Registration System in Japan

As we studied this book, one area where we learned a lot was in the way the authors explained how, when, and why ownership is documented via the property registration system in Japan.

Under Japanese law, registration of a change of ownership is not a requirement for a transaction such as a sale and purchase to be valid. The real estate transaction is valid even without registration. However, the law provides that a real estate transaction that is not registered cannot assert its own rights against a third party.

As you read his book, you’ll come to understand how the judicial scriveners manage this process, that they can perform this function for both the buyer and the seller, that the buyer typically pays the fee for this service, that the scrivener is one of the parties involved on the day the transaction is completed, and that the registration process is finalized after the sale, and a certificate of ownership is delivered some days after the sale.

Even if a purchase agreement is concluded, the buyer does not automatically become the registered owner. In order to reflect the transfer of ownership in the registration, the title registration procedure must be performed.

There is so much excellent detail on this aspect of the transaction in Real Estate Transactions in Japan.

Even experienced players in real estate can learn about the role of the judicial scriveners with respect to the Legal Affairs Bureau; another example of how thorough the authors are in utilizing descriptions of the many roles involved to teach you about how real estate is traded in Japan.

There is more about this topic in our Winning Strategies for Japan Real Estate book review, which has two chapters written by judicial scriveners about the role and importance of property registration in Japan.

Property Condition Report

We mentioned that Real Estate Transactions in Japan focuses on each of the roles in the transaction, and that there are separate chapters for the most essential roles. For the seller, one of their legal responsibilities is to faithfully represent the function, value, and even any defects in the property, so that there are no significant surprises or issues with “non conformity” as the buyer takes delivery. One way the seller (and their agent) help fulfill this duty is through a document called the property condition report.

To fulfill the duty of explanation to the buyer, in real estate sales transactions in Japan, a document commonly referred to as property condition report is created.

This report is not required by law, but helps the seller fulfill their duties of explanation and full disclosure. Real Estate Transactions in Japan does an excellent job of explaining the purpose of this document, specific details about what it might include (with separate descriptions for land or building sales), and how and when the document is involved in the sale.

Loans for Foreigners Buying Property in Japan

As the book offers so much on the procedure and process of the sale of real estate in Japan, there are intermittent comments about loans, particularly about how they can affect contracts. In our business, we encounter many foreigners looking for loans to buy property in Hokkaido, so several of these notes caught our attention:

For foreigners who do not reside in Japan, it is difficult to obtain financing from Japanese banks when purchasing real estate, and in many cases, it is necessary to use personal funds to cover the entire purchase.

This is generally true. It is part of why there are so many all cash property deals in Japan (transferred via the banks) when foreigners are involved; loans are difficult to acquire.

As another example of the excellent quality of the comments regarding the nature of real estate contracts and loans, the authors make several notes about adding a “buyer’s loan stipulation” to standard sales agreements (for any buyer that tries to include a loan in the process), as failed loan attempts can occasionally automatically cancel the sale. Read the book for more detail on that concept.

Making Payments for Real Estate in Japan

As Tada and Konishi’s Real Estate Transactions in Japan book goes to great lengths to describe the process of a transaction, there are also notes on the timing and method of the payments made in these transactions.

There are excellent descriptions of the distinctions (and functions) of earnest money, interim money, and intent money (read the book to learn more); the notes about how buyers make payments will help those buyers to be prepared. These notes are particularly important to avoid delays, as foreign buyers need to remit purchase funds from overseas.

Since payment must be completed on the closing date, it is often preferable to deposit the money in a Japanese bank first and complete the domestic remittance procedure on the closing date, rather than sending money from the overseas bank, which takes a considerable amount of time to arrive.

For buyers from countries that have more developed escrow systems, the tradition in Japan may be surprising; the final payment for purchase is typically done via a bank transfer in real time during an in-person meeting as the sale closes.

If the buyer does not have a bank account in Japan, the buyer may consider appointing a person in Japan as an agent and depositing the money in the agent’s bank account. Note that in Japan, escrow services for real estate transactions are not well developed, so it is not practical to settle real estate transactions using an escrow agent.

As noted in the quote above, buyers may sometimes deposit the final purchase funds in the bank account of their agent’s real estate company, and then the real estate company can make the transfer at the appointed time. Having completed several transactions here in Japan, this is in fact a common practice (even if it requires some degree of trust for those unfamiliar with the tradition).

Real Estate Taxes in Japan

We won’t try to do a full summary here, but the book provides an excellent review of all the taxes involved in real estate purchases in Japan including the stamp taxes at the time of competing contracts, the conditions under which certain buyers should expect to pay consumption taxes, notes on the real estate acquisition tax and property taxes for owners, and details on capital gains taxes as you sell a property.

We’ll leave it to you to read those notes, but their inclusion of the section on Japanese real estate taxes is part of the professionalism and thoroughness of the publication.

Examples of Japanese Real Estate Agreements and Contracts

In the final chapters before the book transitions to the appendix, the authors provide excellent examples of the documents involved in the sales process. Chapter 16 provides three examples of sales contracts with specifics. There’s one for land, one for land and a building, and one for leased land agreement. That chapter serves as yet another kind of review of the sales process, and if you have read the book, by that point you should have a very strong understanding of why each segment of the agreement exists, and its function.

Chapter 17 is an extensive, step-by-step English-language translation of a typical Explanation of Important Matters. Probably not required reading for most buyers, but like the appendix, makes the book a great reference tool for real estate in Japan.

Closing Comments from the Authors

If this book can play even a small role in connecting Japan with the world, there would be no greater joy for us.

Real Estate Transactions in Japan is a very straightforward description of Japanese real estate transactions, and isn’t nearly as focused on foreigners as many of the other Japanese real estate books we’ve reviewed. But as the content of the book is English, it can serve English-speaking buyers from around the world (including Asian buyers of real estate in Japan, who commonly do business in English).

The authors should be commended on the production of an excellent resource for anyone interested in Japanese real estate. Tada and Konishi’s Real Estate Transactions in Japan is exceptionally well organized, easy to read, and is professionally produced. The result is a very high-quality, authoritative view into the world of real estate in Japan.

We learned so much. Highly recommended.

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For other book recommendations on real estate in Japan, we provide a review of Landed Japan, by Christopher Dillon, Yamamoto’s The Savvy Foreign Investor’s Guide to Japanese Properties, Winning Strategies for Japan Real Estate, along with overviews of several more books in our post on the best books about Japanese real estate.

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For More Information:

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