In this article, we will discuss the essential information that individuals considering selling real estate in the Japanese market should communicate to real estate companies when seeking sales consultations.
By clearly conveying these key points, you can alleviate concerns and facilitate a smooth sale that aligns with your preferences.
In a nutshell, effectively communicating these points not only helps prevent potential issues in real estate transactions but also enables you to receive optimal sales proposals tailored to your property.
While certain aspects should ideally be addressed by the real estate company’s representatives, if any of these details are overlooked, addressing them comprehensively will clarify any ambiguous areas between the seller and the agent, allowing for a more informed decision to proceed with the sales process.
Drawing from my extensive experience in real estate sales, I will provide practical insights from the real estate company’s perspective.
If you read through to the end, your real estate sale is likely to proceed smoothly.
The Reliability of This Article
This article was written by someone with the following background:
- Over 15 years of experience in real estate brokerage at a well-known major real estate agency
- Successfully closed more than 300 real estate brokerage cases to date
- A certified 1st Class Financial Planner
- A Certified Financial Planner (CFP)
- A licensed Real Estate Transaction Specialist
Motivation for Selling (Why and When You Want to Sell)
Real estate is put up for sale for various reasons in the world. For instance, it can be due to inheritance tax obligations, debt repayment, relocation, dissolution of joint ownership, disposal of surplus assets, marriage, divorce, and more.
The most crucial aspect of achieving a successful real estate sale is communicating to the real estate agent the “why” and “by when” you want to sell. This is because each of these circumstances calls for an optimal sales approach.
For instance, in the case of inheritance tax, in Japan, there is a need to liquidate within a specific timeframe (within 10 months of the inheritance event). On the other hand, if you’re looking to upgrade your residence or dispose of surplus assets, you can take your time with the sale.
Real estate agencies, after confirming the seller’s motivation, can then set an appropriate price and initiate individual sales or opt for professional real estate purchasing companies to compete for the purchase price through methods like bidding, tailoring the ideal sales strategy.
Status of Requests to Other Companies
Real estate agencies understand that property sellers often consult and request services from multiple companies. Some sellers may feel hesitant or even try to conceal the fact that they are consulting with other companies. However, this is a misconception.
First and foremost, if a seller has consulted with multiple companies, the real estate agency will become aware of this once the sales process begins. This is due to the common network system among real estate agencies, known as ‘REINS,’ which facilitates information exchange between real estate professionals, tracks the activities of other agencies in the field, and more.
It’s perfectly normal to consult multiple companies. When approaching a real estate agency for sales consultation, it’s essential to be upfront about which companies you have already engaged with, when you initiated the engagement, and the current status of your sales efforts.
Repeating methods that didn’t yield results with other companies can be a waste of time. Real estate agencies have various strengths and specializations. They may possess unique expertise, marketing channels, or innovative approaches that were not explored by other agencies. Considering the past activities and results of other agencies, they can provide more effective sales strategies. It’s all part of the process.”
Getting a Company Brochure
When meeting with a real estate agency for a sales consultation, make sure to request not only a business card but also their company brochure.
They might tout phrases like, ‘We’ve been in business for so many years’ or ‘We have a strategic partnership with a major industry player,’ but honestly, words alone may not establish credibility.
Company brochures can’t contain lies.
Moreover, you might wonder why you should review a company brochure instead of their website.
The reason is that the quality of the company brochure reflects the level of professionalism in how the company is perceived by its clients. Naturally, these brochures are also used when explaining the company to potential buyers, and they can significantly impact the sense of security provided to high-value real estate clients.
It may seem like a minor detail, but it’s an effective way to gauge the quality of a real estate agency.
The Need to Seek Input from Relevant Parties
When making decisions about real estate sales, it’s perfectly fine if you can confidently handle everything on your own. However, if there are individuals like family members or a tax advisor whose opinions you need to consider, it’s important to communicate with them.
From the perspective of your agent, it can be frustrating if negotiations are disrupted by these key advisors at the eleventh hour, so it’s crucial to show consideration for them and carefully navigate opinions in every stage of the process.
Furthermore, these advisors might not always align with your preferences. In such cases, your agent, having established contact with them since the early stages of the deal and understanding their personality, can act as your ally and handle the situation skillfully.
The worst-case scenario is when negotiations between the seller and the agent are progressing well, and just when it seems like a deal is about to come together, these key advisors step in and derail the entire conversation. It may sound unbelievable, but it’s a fairly common occurrence in the practical world of real estate transactions.
This can be unfortunate not only for the seller but also for the buyer.
Property Defects, Flaws, and Issues
It’s essential not to hide the drawbacks of a property as it may lead to irreversible problems during a transaction. Instead of concealing them, it’s crucial to communicate any defects, flaws, or issues with the property to your real estate agent during the initial stages of the sales consultation.
While real estate professionals can identify property defects through governmental and registration records, some information may only be known to the seller. This could include past events, accidents, neighborhood disputes, equipment malfunctions, or issues with the building’s facilities.
This information significantly impacts the buyer’s decision, and failing to disclose it can lead to claims for damages from the buyer (even if the seller was unaware of the issue, they could still be held responsible for repairs).
By being honest from the outset, you can develop a sales strategy directed at suitable prospective buyers in the early stages of the sales process. This allows you to find buyers who are aware of the property’s condition and are willing to accept it.
In the sales contract, a special clause is included where the buyer acknowledges and accepts any defects, ensuring a smoother real estate transaction and reducing the likelihood of disputes.
Details of Renovation and Expansion
Covering a parking area with walls and a roof, transforming a balcony into a sunroom, or converting an attic into a habitable space—all these changes may potentially exceed the permissible building volume in Japan, making them non-compliant with building regulations.
In cases of non-compliance, property owners may receive orders for rectification from the authorities or face obstacles such as failing loan applications at financial institutions.
Discovering these violations often involves checks on the current building structure, comparisons with taxable floor area, and examination of registration records. However, less apparent alterations may sometimes go unnoticed by real estate agents.
Similar to property defects and issues, if such violations are only revealed after the sale contract is executed, it can lead to significant issues between the buyer and the seller.
Despite being in a non-compliant state, there are potential solutions depending on the nature of the violation. For instance, land and housing surveyors can measure the floor area and initiate corrective registration to demonstrate compliance. Remedial construction work may also be a viable option.
By informing your real estate agent about these issues at the early stages, you may explore solutions and proposals before commencing the sales process.
Ensure Verification of All Property-Related Documents
Property-related documents encompass specific records such as survey plans, boundary confirmation documents, memorandums, private road access excavation permits, lease agreements, sublease contracts, property management agreements, and more.
It’s essential to ensure that all these documents are thoroughly examined by a real estate agency. While they might appear complex to interpret for laypeople, they can contain critical information that demands attention during real estate transactions.
A common area for potential issues is sublease agreements, where a property is leased by a real estate agency and then subleased to a third party. In cases where the contract remains irrevocable after the property’s ownership is transferred from the seller to the buyer, or when a memorandum with similar terms is in place, troubles may arise.
With advance knowledge of such matters, you can proactively address potential sources of trouble, negotiate with relevant parties, and implement corrective measures. In some cases, you might even consider canceling the sale altogether.
Regarding survey plans and boundary confirmation documents, as long as they aren’t significantly outdated or the neighboring property has changed hands, they may still be applicable for the sale, potentially saving you the considerable expense of a new survey.
One might think it’s just a piece of paper, but the existence of one document can have a million-dollar impact on a property’s sale price.
Desired Selling Price (Even If It’s High)
When you receive a property appraisal from a real estate company, don’t be shy about letting them know your desired selling price, even if it seems high. You have every right to do so.
Unlike appraisals for items like cars or jewelry, a real estate appraisal doesn’t guarantee a specific selling price. It’s merely an “estimate” of what can be expected based on the current market conditions.
As a result, getting appraisals from multiple companies can yield different results, and these estimates generally aim to reflect a realistic price for a property, with the assumption that a sale will occur within approximately three months. This often leads to appraised values lower than what sellers might expect.
Real estate sales involve finding just one buyer.
In the extreme case, even if 99 people show no interest, all you need is one person who likes the property enough to buy it.
Of course, it’s essential to stay within the bounds of the market value. Any significantly overpriced requests will likely be rejected by the real estate agency. However, if your desired price falls within the potential range of market prices, you should consider starting with a higher figure.
Feel free to say something like, “I understand the market conditions, but I’d like to start at X amount.”
However, it’s crucial not to persist with an unrealistic high price if you receive no market response after initially listing at your desired price. This can lead to your property being stigmatized as unsellable or used against you when other similar properties are being marketed. It’s not the most effective approach.
Listen to your agent’s advice and be willing to adjust your price to one that aligns with the market conditions.
The Pros and Cons of the Proposed Sales Approach
There are various methods to sell your property, such as general sales to end-users, off-market sales, public bidding, limited bidding, bulk sales for multiple properties, and real estate M&A methods (for properties held by corporations, involving the transfer of shares).
For example, even within the bidding method, there are options like open bidding (public bidding), which involves gathering bids from a broad pool of potential buyers, and limited bidding, where you narrow down the candidates for competitive pricing.
At first glance, open bidding might seem like a better choice as it attracts more participants, theoretically aiming for higher prices. However, there is a downside to this method. Bidders may be deterred by the fear of too much competition, thinking it’s not worth participating, or they might place symbolic low bids as a formality to maintain a good relationship with the real estate agency managing the bidding process. In the end, this may not result in a price that reflects the true value of the property.
On the other hand, limited bidding tends to encourage a competitive environment. Bidders feel that if they put forth their best offer, they have a higher chance of winning. This often leads to maximizing the property’s value.
General bidding methods are more suitable for large land in central areas, such as what a condominium developer might purchase. In these cases, the capital strength needed for bidding is limited to a few, which creates effective competition and the expectation of higher prices.
Moreover, there are different pros and cons when selling to end-users compared to selling to real estate buying companies.
In conclusion, there are optimal sales methods for each case with their own set of advantages and disadvantages. Understanding them well and aligning them with your selling motivations is crucial.”
Getting an Overview of the Sales Timeline
Real estate transactions can vary significantly in terms of the time it takes to complete and the tasks involved, depending on the specifics of the deal. Various obligations, such as surveys, demolition, tenant relocation, obtaining permits for private road access and excavation, changing land use from agricultural to residential, and preparing for mortgage lien removal, can arise for the parties involved in the transaction.
Managing these obligations and coordinating the schedules of all parties involved is a pivotal role of a real estate brokerage. While real estate agents help guide sellers through their necessary tasks, including document submissions and communication with financial institutions, it is crucial for sellers to be diligent about their responsibilities. Failing to meet deadlines for required tasks can cause significant inconveniences to all parties.
It’s also essential to understand that the full receipt of the sale proceeds will only occur upon completion of all these obligations. When tax payments and other disbursements are involved, it’s important to be well-informed about the settlement timeline.
Understanding Closing Costs, Taxes, and Estimated Net Proceeds
Selling a property involves various costs such as brokerage fees, mortgage discharge expenses, survey costs, demolition expenses, and moving costs.
Additionally, when you sell at a higher price than what you paid, you may be subject to taxes on the profit. Taxes can vary based on factors such as the duration of ownership, whether it was used as a primary residence, and other individual circumstances, resulting in various deductions and tax methods.
To ensure there are no unexpected surprises and to have a clear understanding of how much you will ultimately receive and how much you might owe in taxes for the following year, it’s important to carefully confirm these details.