What is an Exclusive Brokerage Agreement?

To begin with, there are three types of brokerage agreements in Japan. The "Privileged and Exclusive Brokerage Agreement," the "Exclusive Brokerage Agreement" and the "General Brokerage Agreement."
The General Brokerage Agreement has the loosest restrictions among the three types while the Privileged and Exclusive Brokerage Agreement has the strictest.
The Exclusive Brokerage Agreement which we will talk about in this article, is in the intermediate range but what exactly does it mean?

You can only enter into a brokerage agreement with one real estate agency

The Seller may only conclude a brokerage agreement with one real estate company and it is prohibited to conduct transactions with two or more companies.
It is considered a breach of contract if a request for sales activity is made to another real estate company during the term of the brokerage agreement.

You can find your own Buyer

Even if you, the Seller, have signed and entered into an Exclusive Brokerage Agreement with a real estate agency, you are still allowed to go out and find Buyers on your own (Just not through another real estate agency).
It is permitted to find a buyer yourself and conduct a direct deal and this is called a "self-discovery" transaction.
In a self-discovery transaction, there are advantages such as eliminating the need to pay a real estate company a brokerage fee and smoothly negotiating a price on your own behalf.

Reporting obligation every 2 weeks

Unlike a General Brokerage Agreement, the real estate company which concluded an Exclusive Brokerage Agreement with a client must make a sales activity report to the seller at least once every two weeks.
Because of this regular reporting, the seller will know the number of inquiries and the number of offers, and it is possible to grasp the situation of the property's popularity or sales value.

Obligation to register information with REINS

REINS is an abbreviation for "Real Estate Information Network System," a website that only member real estate companies can use.
In an Exclusive Brokerage agreement, it is obligatory to register the information of the requested property in the REINS database within seven days after the conclusion of the contract.
REINS contains information on properties throughout Japan, and since it is possible to advertise and promote properties to a larger number of real estate brokers, an increase in the number of inquiries can be expected.

Maximum contract period is 3 months

When concluding an Exclusive Brokerage agreement with a real estate agency, a contract term for three months is set.
If a sale is not concluded within the contract period, it is possible to renew the contract as it is or to switch to another real estate company.
Moreover, since the upper limit period is only set as three months, there is no problem even with a short-term contract such as one month.
Although it is possible to terminate a brokerage agreement in the middle of the contract period, you need to be mindful of the fact that there is a possibility that sales promotion expenses, etc. until then will be charged.

What are the advantages of an Exclusive Brokerage Agreement?

Now that the characteristics of an Exclusive Brokerage Agreement have been discussed, now let's discuss the advantages and disadvantages.
First, there are three main advantages to an Exclusive Brokerage Agreement.

Allows for a single point of contact

Since there is only one real estate company to work with, and thus one single point of contact, discussions and consultations regarding sales activities are easy.
In a general brokerage agreement, it is necessary to keep in touch with several real estate companies at once and a lot of time can be spent keeping updates on sales activities and being informed on which company is doing what.
It is very convenient to have one company arranging everything.

Easier to find a buyer quickly

By selecting an Exclusive Brokerage agreement type, a buyer can be found relatively quickly.
A real estate company uses the brokerage fee generated by having concluded a sales contract as its main source of profit.
In an Exclusive Brokerage agreement, since only one real estate company can perform a sales transaction, if they find a buyer, they are sure to receive a brokerage fee.
Therefore, a real estate company under an exclusive contract performs their sales work actively and energetically, and as a result, the possibility that a sales contract is concluded quickly becomes high.

Services available from various companies

Some real estate companies may offer various services to be entrusted with the sale.
For example, one may offer to cover the cost of house cleaning and water line repairs.
Another service that has been attracting attention recently is the purchase guarantee.
In this service, if the property cannot be sold within a certain period of time, the real estate company will purchase the property as is.
Since the services provided by real estate companies differ greatly, it is recommended that you confirm these services before concluding a brokerage agreement with one.
Next, we will discuss the disadvantages.

A lot depends on the competence of the real estate company

Depending on the ability of a real estate company, the property may not be sold under the desired conditions.
Because only one real estate company can perform sales activities at a time, whether the property sells or not depends on the skill of the real estate company and the salesperson in charge.
There may be a problem with the real estate company in the case where the number of inquiries and the number of offers are extremely small, or the number of offers is large but does not reach a conclusion of contract.

People may find out that you are considering selling

As stated earlier, under an Exclusive Brokerage Agreement, the real estate company must publish the property information onto the REINS database within 7 days upon concluding the brokerage agreement.
Because anyone can look at REINS if it is an employee of a registered real estate company, it is possible that the fact you are trying to sell your property may be exposed to neighboring residents or acquaintances.
If you don’t want to let it be known that are selling, then you may need to rethink the type of brokerage agreement.

What type of person is best suited to have an Exclusive Brokerage Agreement?

So far, we have explained the characteristics of an Exclusive Brokerage Agreement as well as its advantages and disadvantages.
An exclusive brokerage agreement has many merits; however, one may have difficulty deciding whether an exclusive contract is for them.
Below, we will explain what type of person is best suited for an Exclusive Brokerage agreement.

Those who want to sell fast

An exclusive brokerage agreement is recommended for those who want to sell their property quickly.
A real estate company under an exclusive agreement will be motivated to sell enthusiastically.
They will also publish the information on REINS increasing the possibility that a buyer may be found that much more quickly.

Those wishing to sell suburban real estate

If the property you wish to sell is in a central or popular area of a city, you can expect to receive many inquiries and sell the property for a higher price.
However, in the case of the suburbs or real estate with negative conditions, there are quite a few cases where the owner struggles to have potential buyers come see the property.
For those who are considering the sale of such real estate, the possibility of being able to sell it off under good conditions will increase if you have one real estate company that has an exclusive contract and can conduct vigorous sales activities.

Those who want to reduce the hassle of selling

If it is troublesome to communicate with multiple real estate companies at one time, choose an exclusive brokerage contract.
If different sales activity reports come in from different real estate companies, it takes time and effort to manage the sales situation.
After all, being able to unify the contact points of exchange and reduce the burden is one of the best benefits of going with an exclusive agreement.

In conclusion

In this article, we discussed the merits and demerits of going with an Exclusive Brokerage agreement as well as the type of person most suited for this kind of contract.
An Exclusive Brokerage Agreement enables the seller to get good sales activities and generous support by one real estate company.