Brokerage fees on cheap vacant homes may be increased

In order to encourage and promote the sale of long-vacant homes in Japan, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) is considering increasing the maximum commission that a real estate agency can charge on a transaction.

Real estate brokerage fees in Japan are currently capped at the following rates:

Sale price: Commission*:
< ¥2,000,000 5%
¥2,000,000 ~ ¥4,000,000 4% + ¥20,000
> ¥4,000,000 3% + ¥60,000
*Consumption tax is then charged on top of the brokerage fees.

 

Under current laws, the maximum an agency could charge on the sale of a 3,000,000 Yen property is 140,000 Yen + consumption tax to their client. If they represent both the buyer and the seller, then can charge this to both parties. On a 2,000,000 Yen sale, the maximum commission is currently 100,000 Yen + consumption tax. The revision would apply to vacant properties sold below 4,000,000 Yen (approx. 36,000 USD).

To avoid agents charging excessive fees in this situation, the MLIT may cap the maximum total commission that can be received by an agency in a transaction under 4,000,000 Yen to 180,000 Yen.

Agencies will normally bear various costs involved in taking on a sale listing that can make these low-priced transactions unappealing and unprofitable. The planned revision is designed to allow an extra buffer on top of the ordinary commission rate to cover some of the agency’s costs.

It is hoped that this will provide an incentive to real estate agencies, as low-priced properties do not provide much in the way of commission, yet still require the same amount of paperwork, time and attention as selling a higher priced property.

According to the Ministry of Internal Affairs and Communications, there are 8.2 million empty homes across Japan. This number is expected to swell 1.8 times over the next 20 years. This figure is often quoted but is over-simplified as it includes holiday homes that are not lived in all-year-round, as well as properties that have deteriorated to the point of near-collapse. Almost half of these vacant homes are said to be almost uninhabitable due to age and decay. The potential for finding new owners and occupants for these vacant homes is often limited due to their poor condition and inconvenient or rural locations.

Over 60% of Japan’s local town and city governments participate in a ‘Vacant House Bank’ where vacant homes are listed for sale online with the permission of their owners. However, the usage rate of these online pages by potential buyers is still relatively low. To search for these listings, buyers must visit each local government website depending on the locality. To streamline the process, the MLIT is working on a nationwide system that will aggregate all vacant house listings on one site.

Sources:
The Sankei Shimbun, June 5, 2017.
The Jutaku Shimpo, May 19, 2017.