How much do you know about the "purchase and resale" business model that has been attracting attention in the real estate industry in recent years? Against the backdrop of an increase in the number of vacant houses and the revitalization of the used home market, this method is becoming a new and promising option for those considering the sale or purchase of real estate. However, its mechanism and merits and demerits may not yet be fully understood.
This article provides a thorough overview of the real estate purchase and resale business. From the perspective of both the seller and the buyer, we will unravel the differences from conventional brokerage, specific merits and demerits, and even the business model of the operator. We hope this article will help you to deal with real estate, which is your most important asset, on better terms and with peace of mind.
The real estate purchase and resale business is a business model that creates new value in the used real estate market. At its core, a real estate company buys a property directly from the seller, enhances the property's value through renovation and remodeling, and then sells (resells) the property to a new buyer. Understanding this series of steps is the first step in properly utilizing this business.
Put simply, purchase and resale is a business in which a real estate company handles the entire process of "purchasing," "processing," and "selling" used properties. The real estate company purchases condominiums and houses owned by individual sellers, acting as the direct buyer. We then carry out value-added construction work, such as updating outdated facilities and changing floor plans to suit modern lifestyles. The beautifully and functionally remodeled property is then sold to a buyer who is looking for a new home. This process creates new home value beyond the mere distribution of used properties.
When many people hear of the sale of real estate, what comes to mind is "agency," in which a real estate company acts as an intermediary between the seller and the buyer. Purchase resale and agency seem to be similar, but their natures are very different. The most decisive difference between them is the parties to the transaction and thespeed to complete the transaction. Let us compare the difference clearly in the following table.
| Comparison items | Real estate purchase resale | Real estate brokerage |
|---|---|---|
| Party to the transaction | Real estate company | Individual buyer |
| Period until sale | Short term (a few days to about one month) | Long term (three months to six months or more) |
| Sale price | Tends to be lower than market price | Price close to market price |
| Brokerage fee | Not required | Necessary |
| Liability for non-conformity to contract | Often exempt | Seller assumes |
| Handling of viewings | Not required | Necessary |
In the case of agency, a real estate company plays the role of looking for a buyer as a seller's agent. Therefore, when and under what conditions the property can be sold is greatly influenced by market trends and the intentions of the buyer. On the other hand, since the real estate company itself becomes the buyer in purchase and resale, it is possible to proceed with the sale quickly and surely as long as a price can be agreed upon. This sense of speed is the greatest feature of purchase and resale.
The revenue of a buy-back and resale business consists of the difference between the "resale price" of the property minus the "purchase price" and "renovation costs and other expenses," in other words, the profit from the sale of the property. This business model is based on the business principle of "purchase at a low price, add value, and sell at a high price. Based on years of experience and data, the business owner accurately assesses the potential value of the property and precisely calculates how much it will cost to resell the property at what price. Purchasing at the right price, efficient and effective renovation, and a precise sales strategy are essential to ensure profitability. Specialized companies like ours aim to build relationships that benefit all three parties: the seller, the buyer, and the business itself, by accurately identifying market needs and maximizing the value of the property.
When selling real estate, choosing purchase and resale offers many advantages to the seller, but there are also points to consider. It is important to determine the best method of sale in light of your own situation and priorities.
The reason why purchase and resale is chosen by many sellers is because of its convenience and certainty. In particular, it demonstrates its true value when there are time constraints or when the seller wishes to avoid complicated procedures.
1. Rapid cash conversion
The greatest merit is that the time required for sales activities is overwhelmingly short. While it is not unusual for a brokerage to take several months to find a buyer, with purchase and resale, once an agreement is reached with the real estate company, settlement and cash conversion can be completed in as little as a few days to a few weeks. This is a very effective method when funds are needed quickly due to sudden transfers, resettlement, inheritance, etc.
2. No brokerage fee is required
When real estate is sold using an intermediary, a mediating fee of "3% of the sales price + 60,000 yen + consumption tax" is generally charged. However, since the real estate company becomes a direct buyer in purchase and resale, this mediating fee is not charged at all. The point where various expenses can be greatly reduced can be said to be a great economic merit.
3. Exemption from liability for non-conformity to contract
When real estate is sold and purchased between individuals, the seller remains liable for a certain period of time after delivery for repairing any hidden defects in the property (e.g., rain leaks, termite damage). However, in the case of purchase and resale where the buyer is a real estate agent, it is common to set a special clause that exempts the seller from this responsibility. The fact that the buyer is freed from future risks and uncertainties greatly reduces the mental burden.
4. No need to deal with previews and negotiations
In agency, it is necessary to attend many previews by prospective buyers and to negotiate the price. With purchase and resale, you are freed from such hassles as making weekend appointments and taking care of room cleaning, since the real estate company's staff only conducts on-site inspections at the time of appraisal.
| Advantages | Specifics |
|---|---|
| Promptness | No need to search for a buyer, speedy cash-in |
| Economical | No need to pay expensive brokerage fees |
| Peace of mind | No liability for non-conformity after delivery, less anxiety in the future. |
| Simplicity | No time-consuming and mentally burdensome process of handling previews and negotiations with the buyer. |
While there are many advantages, there are also disadvantages to purchase and resale. The most important point relates to the sale price.
The disadvantage is that the sale price tends to be lower than the market price in the intermediary market. Generally, 70% to 80% of the market price is considered to be the standard. This is because the purchase and resale agent needs to secure remodeling costs, sales expenses, and its own profit. Therefore, if the request to "sell as high as possible" is given top priority, it may be more suitable to conduct sales activities by intermediary over time. However, if you comprehensively take into account the intermediary fee, the time required to sell, and the risk of non-conforming liability, etc., there are many cases in which purchase and resale will result in a larger final balance and a higher total satisfaction. It is essential to carefully determine which option is best for you by consulting with an expert.
On the other hand, purchase and resale properties, which are offered to the market after renovation, are an attractive option for buyers who are considering purchasing a home. Understanding the value of this third option, which is neither newly built nor conventionally used, will help you choose the ideal home.
The most attractive feature of purchase and resale properties is the excellent balance between quality and price. Buyers can obtain a high quality living environment at an affordable price compared to newly built properties.
1. Renovated and beautiful interior
Purchase and resale properties are professionally renovated before sale. In many cases, wallpaper and floor coverings have been replaced, and water facilities such as kitchens and bathrooms have been replaced with the latest equipment, creating a beautiful interior that looks like a newly built property. You can start living comfortably right away without having to spend money or go through the hassle of remodeling after purchase.
2. Priced lower than new construction
Compared to new construction properties of similar location and size, purchase and resale properties are generally less expensive. Especially in recent years, the price of new properties has been on the rise due to soaring construction costs. However, since purchase and resale properties are based on the used market, you are more likely to find your ideal home at a more realistic budget.
3. Peace of mind in knowing the condition of the property
Purchase and resale agencies conduct detailed surveys of the condition of buildings when they purchase properties. If structural problems or other problems are discovered during the renovation process, appropriate repairs are made. In addition, many properties are covered by "Existing Home Sales Defects Insurance" and have their own warranty system, which eliminates the "concerns about unseen parts" that are often associated with used properties, another major advantage.
| Advantages | Specific details |
|---|---|
| Quality and design | Beautiful interiors and functional facilities, just like new buildings, through professional renovation |
| Economic rationality | Compared to new construction, it is available at a discount price, and no renovation costs are required |
| Sense of security | Detailed property inspections in advance and post-purchase risk reduction through liability insurance and warranties |
| Immediacy | Since the property has already been completed, the process from contract to delivery is smooth, and you can move in immediately |
Although purchase and resale properties have many advantages, there are also several caveats that must be understood when considering purchase.
The main disadvantage is the lack of flexibility in renovations. Since the renovation has already been completed, the buyer cannot freely choose the floor plan, interior design, and facilities according to his or her own preferences. For those who want to create a space that is uniquely their own, there is a possibility that they may feel inadequate. Another disadvantage is that the number of properties on the market is still limited compared to new construction or general used properties, so you may not always be able to find one in your desired area. However, these points will not be a major problem for those who want to efficiently obtain a professionally designed, high-quality space.
The real estate purchase and resale business is not just a transient boom, but a growing market with high potential that is closely linked to changes in Japan's social structure. We will explain the background and future prospects of this market.
In recent years, the buy-back and resale market has achieved remarkable growth. According to a survey conducted by Yano Research Institute Ltd., the purchase and resale market for existing homes has grown significantly from approximately 24,300 units in 2015 to approximately 41,000 units in 2022. This data is based on the business of buy-back and resale. This data clearly shows that the buy-back and resale business model is not a passing trend, but is firmly established in the housing market.
| Year | Purchase and resale market size (units contracted) |
|---|---|
| 2015 | 24,300 units |
| 2022 | 41,000 units |
| 2023 (forecast) | 42,000 units |
| 2030 (forecast) | 50,000 units |
Source: "Survey on the Used Home Purchase and Resale Market (2023)," Yano Research Institute Ltd.
Several compounding factors are behind this market expansion. First is the soaring prices associated with the rising construction costs of new housing. As a result, prospective homebuyers are turning their attention to relatively more affordable existing homes. Second, the housing stock, or the total number of existing homes in Japan, continues to grow, increasing the need to promote the distribution of existing homes. The government is also encouraging this trend, and is supporting the healthy development of the market through special measures such as reduced real estate acquisition taxes for purchase-and-resale businesses acquiring existing homes.
The structural challenges facing modern Japanese society have increased the need for the purchase-and-resale business. As you are all aware, the number of vacant houses is increasing nationwide due to the declining birthrate and aging population. If these vacant houses are left unattended, they will lead to the deterioration of the local landscape and public safety. The purchase and resale business is one effective solution to these social problems. By purchasing vacant houses and renovating and revitalizing them, businesses can return them to the market as new homes and contribute to the revitalization of the community.
The diversification of people's values is also a tailwind for the purchase and resale market. An increasing number of people prefer existing homes that have been renovated to create unique, high-quality spaces rather than standardized new homes. Purchase and resale properties are increasingly becoming a viable option to meet the needs of today's consumers for a "personalized lifestyle. We at INA&Associates Inc. are also earnestly engaged in this business as part of our "investment in human resources" to create new value, not only by simply rehabilitating properties but also by understanding the characteristics of the land and the needs of the times.
In this article, we have explained the real estate purchase and resale business from various perspectives, from its structure, merits and demerits, to the future potential of the market. Finally, we will reiterate the main points of this article.
Real estate purchase resale is a business model in which a real estate company directly purchases a used property, enhances its value through renovation, and then resells it.
The seller's advantages include "quick turnaround to cash," "no brokerage fees," and "exemption from liability for nonconformance with contract," which significantly reduces time, financial, and emotional burdens. On the other hand, the sale price tends to be lower than the market price.
The advantage for the buyer is that he/she can "obtain a beautiful property that is as good as new at a reasonable price. It is a smart housing purchase option with an excellent balance between quality and price. However, design flexibility is limited.
The market is expanding, and it is expected to continue to grow in importance as a business of great social significance that contributes to solving the vacant house problem and revitalizing the distribution of used housing.
The sale or purchase of real estate is an important decision that occurs only once in many people's lives. Your options will be enriched by knowing that there is a "purchase and resale" method in addition to the traditional "brokerage" option. The key to realizing a real estate transaction with no regrets is to clarify your situation, values, and priorities, and to choose the most appropriate method after correctly understanding the advantages and disadvantages of each.
We, INA & Associates, Inc. will sincerely attend to each client's situation and make the best possible proposals as real estate professionals and as partners who think about your future together. If you have any concerns or questions about real estate, no matter how trivial, please do not hesitate to contact us.
Q1. If I request an appraisal, do I have to sell the property?
A1. No, there is no such thing. The purpose of the appraisal is for the customer to grasp the value of his/her real estate and to use it as a basis for making a decision to consider selling. If you are not satisfied with the appraisal price presented, you can of course refuse the sale. Since we will never force you to sell, please feel free to consult with us.
Q2: Can you buy any kind of property?
A2. Basically, various types of properties are eligible for purchase, including condominiums, detached houses, and land. However, there are cases in which we may not be able to purchase a property if the condition of the building is extremely poor, if the property has strict legal restrictions, or if the property is located in a part of a rural area, due to conflicts with our business area or rehabilitation plan. Please feel free to contact us to inquire about the property, as we will first take a look at the property information and determine whether or not we can purchase the property.
Q3. How is the purchase price determined?
A3. The purchase price is calculated by comprehensively evaluating multiple factors. First, we determine the "estimated price at the time of resale" based on transaction examples of similar properties in the neighborhood and market trends. From there, we deduct the "renovation costs" required to rehabilitate the property, "advertising and promotion expenses" for sales activities, and our "profit" as a business, which is then the purchase offer price to the client. We always strive for highly transparent assessments.
Q4. I am not sure which method to choose, agency or purchase and resale.
A4. Which method is best for you depends on what your highest priority is. When the hope "I want to sell it as high as possible even if it takes time" is the strongest, "agency" is likely to be suitable. On the other hand, "purchase and resale" is a very effective choice when "I want to make cash quickly, surely, and without trouble" and "I want to avoid future risk. It is important that you understand the advantages and disadvantages of each method, and choose the method that best suits your life plan.