Selling Property in Japan

A Foreigner's Guide to Selling Property in Japan

Selling real estate in Japan follows clear legal procedures, but it also has unique business customs that may be different from your home country. Understanding these practices will help you avoid misunderstandings and ensure a smooth transaction.
Below is an easy-to-understand guide to the typical process and key customs when selling property in Japan.

1. Using a Real Estate Agent

In Japan, property sales are usually handled through a licensed real estate agent (broker).

• The seller signs a brokerage agreement (媒介契約) with the agent, who will handle advertising, negotiations, preparing contracts, and coordinating the settlement.
• There are three types of brokerage agreements:
  o Exclusive Brokerage (専属専任媒介契約) - only one agent, no direct deal with buyers allowed
  o Semi-Exclusive Brokerage (専任媒介契約) - only one agent, but you can also find a buyer yourself
  o General Brokerage (一般媒介契約) - you can use multiple agents

Most sellers choose an exclusive or semi-exclusive contract, so the agent fully manages the sales process.

2. Pricing and Negotiation

The agent will evaluate your property based on market data and suggest a selling price.

• The suggested price is just a guide - the final listing price is decided by the seller.
• Price negotiation is very common in Japan. Most buyers expect some discount, so sellers often set the price slightly higher than the minimum they would accept.
• If the property is occupied, the agent will coordinate viewings (内覧) with potential buyers.

3. Sales Contract and Deposit (Earnest Money)

Once you find a buyer, a sales contract will be signed.

• Contracts are written in Japanese, but the agent can explain the details in English.
• At signing, the buyer pays a deposit, usually 5-10% of the purchase price.
• Once the contract is signed, it becomes legally binding.
  o If the buyer cancels, they lose the deposit.
  o If the seller cancels, they must return double the deposit to the buyer.

This "deposit system (手付金制度)" is a unique custom in Japan that ensures both sides are serious about the transaction.

4. Settlement & Handover (Closing)

In Japan, closing (settlement) and ownership transfer happen on the same day.
1. The buyer pays the remaining balance of the price.
2. A judicial scrivener (司法書士) checks all documents and handles the ownership transfer at the Legal Affairs Bureau.
3. Once the funds are confirmed, the seller hands over the keys.

The buyer usually pays the registration fees, while the seller covers any existing mortgage cancellation fees.

5. After the Sale: Taxes & Tenant Issues

After selling, you may have to declare and pay capital gains tax.

• If you owned the property for more than 5 years, a lower tax rate (approx. 20%) applies.
• If you owned it for less than 5 years, a higher tax rate (approx. 40%) applies.

If the property is rented, the tenant stays, and the lease is automatically transferred to the new owner (this is called an "owner change" property).

6. How It Differs from Other Countries

• Most sellers in Japan rely on agents, not private sales.
• Deposit rules are strict, and canceling after signing is not easy.
• Closing is very fast - ownership transfer and payment are completed on the same day.
• Judicial scriveners are required by law to handle registration, ensuring security.

Key Takeaways

• Always use a licensed real estate agent for smooth communication and legal protection.
• Expect price negotiation - it's normal in Japan.
• Be aware of the deposit system - canceling a contract can be costly.
• Understand the tax obligations after selling.

For foreigners living abroad or those unfamiliar with Japanese procedures, it's highly recommended to delegate the entire process to a trusted agent who can manage the sale on your behalf.