From April 1, 2017, real estate agents are now obligated to inform a seller when they receive an offer from a buyer.
The revision to the Buildings Lots and Buildings Transaction Business Act (the law that governs real estate transactions in Japan) now includes a clause stating that a seller’s agent must promptly inform the seller, with whom they have an agency agreement with, when they receive a written offer from a potential buyer. Any special clauses in agency agreements to exclude this obligation will be void. In other words, even if a seller has instructed their agent not to present any offers below a certain amount, the agent will still be legally obligated to inform the seller of any and all offers received.
This applies to all types of agency agreements such as exclusive full-time, full-time and ordinary agency agreements.
Although this may seem like common practice in many countries, Japan’s real estate industry does, at times, have some unethical practices that we sometimes encounter. There are cases of seller’s agents withholding offers from sellers even when it goes against the best interest of their client.
This recent revision is intended to counteract a growing trend whereby seller’s agents will intentionally close-off a property from the market in order to find a buyer themselves and secure a double commission from both the buyer and the seller. The seller’s agent will either withhold any offers made through other agencies, shop the offer around with their own clients, or will flat out refuse to let buyers from any other agencies view a property. In a fast-moving seller’s market, this tends to be a frequent and dirty practice. The consequence for sellers is that they miss out on potential offers, including offers that may be higher than those provided by their agent.
What happens to agencies who ignore this new rule?
The new rule has not included any specific details on punishments, although agencies may be subject to disciplinary action or suspension of business activities.
Source: The Ministry of Land, Infrastructure, Transport and Tourism (MLIT), April 1, 2017.