When selling real estate, it is common for a real estate company and the seller to enter into an agency agreement.
There are three types of agency contracts: exclusive agency contract, exclusive agency contract, and general agency contract, and the sales outcome can change depending on which type you choose.
That is why it is important to understand the characteristics, advantages and disadvantages of an agency contract and enter into an agency contract that suits your situation.
So, this time we will explain the basics of agency contracts for real estate sales and how to choose one.
Take advantage of this opportunity to learn more so you can get the sale you want.
What is an agency contract?
An agency contract is a contract that you enter into with a real estate company when requesting mediation in a real estate transaction, and it clarifies the services to be provided and the commission to be paid as a success fee.
When selling real estate such as an apartment or a house, it is common to first ask a real estate company to find a buyer.
This is because it is very difficult for an individual to carry out all of the procedures, and there is a possibility that problems may arise due to the contract terms not being decided easily.
Selling real estate is not something you do very often in life.
Because it is a valuable asset, enter into an agency agreement with a real estate company and create an environment in which you can sell with peace of mind.
There are three types of agency contracts for real estate sales
There are three types of agency contracts for real estate sales: exclusive agency contract, exclusive agency contract, and general agency contract.
Depending on the type of agency contract, the sales outcome may change, so be sure to choose one that suits the seller's situation.
| Exclusive agency contract | Exclusive agency agreement | General agency contract | |
|---|---|---|---|
| Contracts with multiple companies | × | × | ○ |
| Self-Discovery Trading | × | ○ | ○ |
| Rains' Registration Obligations | Register within 5 days of signing the contract | Register within 7 days of signing the contract | any |
| Sales status reporting frequency | At least once a week | At least once every two weeks | No regulations |
① Exclusive agency contract
An exclusive agency agreement is a contract that can only be signed with one real estate company.
In addition, direct transactions where you find a buyer yourself, such as with friends or acquaintances, are not permitted, so you can only do business with sellers found by the real estate company.
In addition, real estate companies are required to register with REINs within five days of concluding the contract and to report the sales status to the seller at least once a week.
Although this is the most restrictive contract, you will receive extensive support from the real estate company, which will ensure a smooth sale.
What is Rains?
REINS is an abbreviation for "Real Estate Information Network System," a computer network system operated by the Real Estate Information Network Organization, which is designated by the Ministry of Land, Infrastructure, Transport and Tourism. By registering with REINS, you can share property information with real estate agents across the country and widely solicit buyers.
② Exclusive agency contract
Like an exclusive agency agreement, an exclusive agency agreement only allows one real estate company to enter into the contract, but it does allow for direct transactions where you find a buyer yourself.
In addition, real estate agents are required to register with REINs within seven days of concluding the agency contract and to submit sales reports to sellers once every two weeks.
Since there are few restrictions and the real estate company is actively involved in sales activities, it can be said to be a well-balanced contract.
<Three differences from exclusive agency>
- You can find a buyer yourself and make a direct transaction
- Registration for Rains must be made within 7 days of the day following the contract.
- Sales status is reported at least once every 14 days
③General agency contract
A general agency agreement is a contract that allows you to enter into contracts with multiple real estate companies at the same time.
In addition, just like with an exclusive contract, you can deal directly with buyers you find yourself, and there is no obligation to register with REINs.
If you don't want people to know that your property is for sale, you should choose general agency.
In addition, for general agency contracts, you must choose between explicit and implicit types.
The explicit type is a method in which the seller notifies the real estate company they have requested of the agency contract, while the implicit type is a method in which no notification is given.
We recommend choosing the explicit type in order to build a relationship of trust with the real estate company.
Advantages and disadvantages of an agency contract
Let's take a look at the benefits of each of the "exclusive agency agreement," "sole agency agreement," and "general agency agreement."
Exclusive contract
| merit | Disadvantages | ||
|---|---|---|---|
| ・Active sales activities ・One point of contact ・Services from various real estate companies available | ・There is a possibility of being "locked in" ・Even if you find a buyer yourself, you will have to pay brokerage fees |
Benefits of an exclusive agency agreement
With an exclusive agency agreement, you can only enter into a contract with one real estate company, and you are not allowed to find a buyer yourself and conduct a transaction directly.
Real estate companies will be charged a commission if the property is sold, so they will be proactive in selling the property.
In addition, since the contract is with only one company, there is a single point of contact and there is no need to spend time or effort on managing information.
moreover,
・House cleaning service that cleans your house
・"Home staging" to create a room that looks like a model room
Another benefit is that these services are included in the contract.
Recently, many real estate companies have also started offering a "purchase guarantee service," whereby the company will purchase your home if you are unable to sell it within a certain period of time.
Disadvantages of an exclusive agency contract
A major source of income for real estate companies is brokerage fees.
Therefore, in order to receive brokerage fees from both the seller and the buyer, they may engage in fraudulent practices known as "monitoring," in which they keep the property for sale in their own company and do not introduce it to other companies.
If your property is cornered, your options for buyers will narrow, the selling period may be extended, and the price may be reduced, so you need to be careful.
In addition, direct transactions are not permitted under an exclusive contract, so transactions must always go through a real estate company.
This means that even if you find a buyer yourself, you will still have to pay an agent fee.
If, by any chance, you end up making a transaction without going through a real estate company, keep in mind that you will be charged a brokerage fee as a penalty.
Exclusive agency agreement
| merit | Disadvantages | ||
|---|---|---|---|
| ・Active sales activities ・Self-discovery transactions can be made without agency fees ・Services from each real estate company can be utilized | ・There is a possibility of being "locked in" ・It depends on the sales skills of the real estate company ・You need to be able to judge the buyer |
Benefits of an exclusive agency agreement
An exclusive agency agreement has the same benefits as an exclusive agency agreement, but in addition, it allows you to find a buyer and sell the property yourself.
In this case, there is no need for a real estate agency, so no brokerage fees are required.
The exclusive agency agreement is
・Selling through a real estate agency ・Selling directly by yourself
Since you can sell your property either way, if there is even the slightest possibility that a friend or family acquaintance could purchase the property, it is a good idea to enter into an exclusive agency agreement.
An exclusive agency agreement allows you to have a single point of contact, receive proactive sales activities and services from the real estate company, and even conduct self-discovery transactions by finding a buyer yourself.
If you are unsure which agency contract to choose, we recommend an exclusive agency contract.
Disadvantages of an exclusive agency agreement
As with an exclusive agency agreement, you need to be careful about monopolizing your property. If you are monopolized, you may not be able to introduce the property to other companies, which could slow down the sale process.
In addition, since the contract is made with only one real estate company, real estate sales activities are left to a single salesperson.
Therefore, depending on your sales skills, the sale may not go as planned.
Furthermore, direct transactions require the ability to assess the buyer.
For example, you may have decided to sell your property and purchased a new home, but just before moving, you may receive a cancellation notice.
In this case, you may end up with loans for both your new home and the resale property.
Remember that the buyer may not be a respectable person, so you will need to judge that.
General agency contract
| merit | Disadvantages | ||
|---|---|---|---|
| ・You can make contracts with multiple real estate companies. ・You don't want people to know that you're putting your property up for sale. | ・No active sales activities ・Difficult to grasp the sales situation ・Cannot receive various services from real estate companies |
Advantages of a general agency contract
The major difference between this and the other two agency contracts is that you can sign contracts with multiple real estate companies.
By signing contracts with multiple real estate companies, you can minimize the risk of making a mistake in choosing a real estate company and eliminate the risk of being locked in.
Also, if multiple real estate companies find buyers at the same time, the seller can choose the buyer, which will allow them to sell the property on better terms.
Furthermore, there is no need to register with REINs, so sales activities can be carried out without making real estate information public.
If you have reasons for not wanting your neighbors or relatives to know that your property is for sale, you should choose a general agency contract.
If you wish to register with REINs, please request this from the real estate company when signing the contract.
Disadvantages of a general agency contract
Being able to sign contracts with multiple real estate companies may make the real estate companies less proactive in their sales activities, making it difficult to find a buyer.
This is because you will not receive any commission even if you put in the time and effort.
In addition, general agency contracts do not require real estate companies to report sales status, and since there are multiple contact points, it takes more effort to keep track of the sales status, which increases the burden on the seller.
Therefore, unless you check the sales status with the real estate company yourself, you will not know the buyer's actual reaction, making it difficult to develop a sales strategy such as revising the price.
In addition, there are no services such as house cleaning to ensure a smooth sale, so any costs incurred will be borne by the property owner.
Explaining how to choose an agency contract by type
Now that you know a lot about agency contracts, you may be wondering, "Which agency contract is right for me?"
Next, we will explain how to choose an agency contract by type. Find the agency contract that suits you.
There are three types of agency contracts: exclusive agency contract, exclusive agency contract, and general agency contract.
Here we will explain what type of person is suitable for each contract.
| Exclusive agency contract | Exclusive agency agreement | General agency contract | |||
|---|---|---|---|---|---|
| ・The property conditions are not good. ・There is no know-how on selling property. | · I'm not sure which contract to enter into · There is a possibility that I will find a buyer myself | - Good conditions such as being in a popular area or close to a station - You don't want to make the fact that you're selling public |
People who are suitable for an exclusive contract
An exclusive contract is suitable for the following people:
- The property conditions are not good
- No know-how in selling real estate
The property conditions are not good
・Located outside the city center or popular areas ・Old building
If you are thinking of selling real estate such as the above, choose an exclusive agency contract. Real estate with poor conditions requires active sales activities by the real estate company.
This is because the conditions are not as favorable as those in city centers, popular areas, or newly built properties, where a buyer will likely appear even if the property is left alone.
That's why it's important to enter into an exclusive agency contract and receive services such as home staging to make the room look beautiful, while also having them handle the sales activities thoroughly.
You may be able to increase your chances of selling under better conditions and at a higher price than market value.
No know-how in selling real estate
An exclusive agency agreement is ideal for those who want to sell quickly without spending a lot of time and effort.
This contract allows you to entrust all real estate buying and selling matters to the other party, so it is not a problem even if you do not understand the know-how of real estate sales.
In addition, with an exclusive agency agreement, which is a contract with only one company and does not allow for self-discovery transactions, the real estate company is guaranteed to receive a brokerage fee if the property is sold successfully.
As a result, they will engage in proactive sales activities, and by registering with REINs, they will be able to distribute property information to a larger number of people, which will enable you to sell your property more quickly.
People who are suitable for an exclusive agency contract
The following people are suitable for an exclusive agency agreement:
- I'm not sure which contract to choose
- You may find a buyer yourself
I'm not sure which contract to choose
If you are unsure which contract to choose, choose the exclusive agency contract.
The exclusive agency agreement is the most balanced of the three types of agency agreements.
Since you can only contract with one real estate company, you can have a single point of contact and minimize communication.
Also, since you won't receive any commission unless you find a buyer, you'll be able to be more proactive in your sales activities and sell your property more quickly.
An exclusive agency agreement is in the middle position among the three types of agency contracts, so if you are unsure, one option is to see what the exclusive agency agreement is like.
You may find a buyer yourself
Exclusive agency agreements allow for self-discovery transactions, where you find a buyer yourself, so this type of contract is ideal if you have potential buyers such as acquaintances or relatives.
If an acquaintance or friend purchases a property, the transaction can be done directly without going through a real estate agency, and no brokerage fees will be charged.
Therefore, if there is even the slightest possibility of a self-discovery transaction where you find a buyer yourself, it is a good idea to choose an exclusive agency agreement.
In addition, with an exclusive agency agreement, you can expect a speedier sale, as you can ask only one real estate company to sell the property while also finding a buyer yourself.
However, if you have no prospective buyers and are trying to find a property yourself from scratch, you should choose an exclusive agency agreement.
Finding a buyer on your own is more difficult than you might think, and it takes time and effort, which can extend the time it takes to sell.
People who are suitable for general agency contracts
The following people are suitable for a general agency contract:
- Good conditions such as popular areas and close to stations
- I don't want to make it public that I'm selling
Good conditions such as popular areas and close to stations
If you are selling a popular property in a city center, near a station, or a recently built property, a general agency contract may be appropriate.
These properties tend to attract a flood of buyers even without any active marketing efforts.
In addition, unlike the other two types of agency contracts, a general agency contract allows you to enter into contracts with multiple real estate companies.
In these cases, real estate companies often focus their sales activities on elimination, but this is not the case when it comes to popular properties.
By signing contracts with multiple companies, each real estate company will become more competitive, leading to more proactive sales activities and increasing the chances of a smooth sale under better terms.
I don't want to make it public that I'm selling
If, for some reason, you do not want your acquaintances, relatives, etc. to know about your real estate sale, we recommend a general agency contract.
For the other two types of contracts, registration with REINs is mandatory, so the fact that the property is up for sale becomes public.
On the other hand, general agency contracts do not require registration with REINs, so it is possible to sell secretly without others knowing.
Therefore, if you do not want your real estate sales information to be made public, choose a general agency contract.
However, some real estate companies may post this information in flyers or on their websites during sales activities, so if you don't want it to be made public, be sure to state this when signing the contract.
Have you found the right agency contract for you? Even if you find the right agency contract, there is no guarantee that you will be able to sell your property within the contract period.
In some cases, you may have to renew your contract or change real estate companies.
Here are three options you can take before your contract expires:
Before that, let's first look at the validity period of each agency contract.
The effective period of the agency contract is approximately 3 months.
The validity period of the brokerage agreement varies depending on the type.
Exclusive exclusive agency and sole agency are limited to a maximum of three months.
Sellers who can only do business with one company are at a disadvantage. Therefore, by setting a short period of up to three months, sellers are given the opportunity to periodically review their real estate companies.
Please note that renewals will only be accepted if the seller requests it, and renewals will not be automatic.
On the other hand, since general agency agreements can be concluded with multiple real estate companies, there is no legally set period of validity.
However, the guideline is usually three months, just like with exclusive sole agency and exclusive agency.
Another feature of general agency is that it is not legally binding, so you can cancel the contract midway or enter into a contract for more than three months.
Three options to take before your contract expires
When selling real estate, it is said that it takes an average of 3 to 6 months to sell an apartment, while a detached house takes longer to sell than an apartment.
Therefore, it is often the case that you are unable to sell during the contract period, so you should proceed with the agency contract procedures using one of the following three methods before the contract period expires.
- Renew your current contract
- Switching agency contracts
- Switching real estate companies
Renew your current contract
If you are not dissatisfied with your current real estate agency, you may go ahead and renew.
The agency contract will not be automatically renewed without the seller's consent. Therefore, if you wish to continue the contract, the seller must make a written request.
When renewing, the contract period is generally a maximum of three months.
This can be renewed as many times as you like, and you can also shorten the contract period to two months or one month to see how it goes, so sign a contract that suits your situation.
Please note that only general agency contracts may include automatic renewal clauses.
Please note that contracts with automatic renewal will not end unless requested by the seller.
Switching agency contracts
In a general agency agreement in which multiple companies are requested to act, once a company that suits your needs is found, you can switch to an exclusive agency agreement or an exclusive agency agreement.
Exclusive agency agreements and exclusive agency agreements are regulated by the law and can only be signed with one company, so be sure to cancel any contracts with other real estate companies.
Also, if you are requesting an exclusive agency agreement or an exclusive agency contract, you must first determine whether you can really sell the property using only your current real estate company.
・No inquiries ・Few sales reports
If you are unsure about the capabilities of the real estate company, such as those mentioned above, consider switching to a general agency contract or switching to another company.
Switch real estate companies
If you are unable to sell within the contract period, you may want to consider switching real estate companies.
Real estate agents will encourage you to renew your contract, but they will often propose lowering the selling price at that time.
Of course, if you realize that you have over-priced the seller, it may be okay to lower the price.
However, the reason the property is not selling may not just be the price, but it could also be a strategic mistake on the part of the real estate company, so it is important to carefully determine the cause.
Even if you do what the real estate company says, if your strategy is not right, you won't be able to sell anything.
First, think carefully about why you were unable to sell and decide whether or not you want to switch.
[Finally] The most important thing in an agency contract is a relationship of trust with the real estate company
We have introduced you to the agency contract for real estate sales.
There are three types of agency contracts: exclusive agency contract, exclusive agency contract, and general agency contract.
Each has different characteristics, so it is important to enter into an agency agreement that suits the seller's situation.
However, no matter what agency agreement you sign, if you have not built a relationship of trust with the real estate company, it will be difficult to sell your property.
First, communicate your intentions as the seller and consult with the real estate company to decide on the type of agency contract.
Whether or not you can sell your property as you wish depends largely on the relationship of trust you have with the real estate company.
That's why you should choose a reliable real estate company and aim for a satisfying sale.
