When dealing and leasing of real estate are considered, many people will request a real estate company to mediate. In that case, it isamediation contractthat will always be concluded.However, there are several kinds of mediation contracts, and each has different features and merits and demerits.
INA&Associates is convinced that the selection of the best mediation contract for general consumers is an important element that influences the success of a real estate transaction based on the experience of having been involved in many real estate transactions so far.
In this article,from the basic structure of areal estate mediationcontract, adetailed comparison ofmediation contracttypes, andthe latest information onmediation contract commissions, we will provide an easy-to-understand explanation from a practical viewpoint.
In this article,from the basic structure of areal estate mediationcontract, adetailed comparison ofmediation contracttypes, andthe latest information onmediation contract commissions, we will provide an easy-to-understand explanation from a practical viewpoint.
A real estate transaction is one of the important decisions in life. By acquiring appropriate knowledge, we will convey our knowledge as a specialist without exception so that everyone can realize a better transaction.
Basic mechanism of mediation contract
What is a mediation contract?
A mediation contractis a contract which is concluded by the seller and the lender requesting a housing site building transaction contractor (real estate company) to "Please find a buyer and a borrower" in dealing and leasing of real estate, and a real estate company consenting to the request. It is also generally referred to as a "brokerage contract" and is used in substantially the same sense.
In Article 34-2 of the Building Lots and Buildings Transaction Business Law (宅建業法), detailed regulations concerning a mediation contract are provided, and a real estate company is obligated to perform appropriate mediation work based on the law. A mediation contract functions as an important legal framework in real estate transactions, and strict rules are established from the viewpoint of consumer protection.
Difference between mediation and agency
In a real estate transaction, "mediation" and "agency" are clearly distinguished. Mediation is an act in which a real estate company stands between the seller and the buyer and acts as an intermediary of dealings, and does not become a party to a contract. On the other hand, agency is an act in which a real estate company concludes a contract directly with a buyer as a seller's agent.
In the case of mediation, the seller and the buyer conclude a final sales contract directly, and a real estate companyreceives a mediating feeas a mediation contract feewhen a contract is concluded.By this mechanism, a real estate company supports dealings from a neutral standpoint and performs the role of coordinating the interests of both sides.
Legal basis of a mediation contract
A mediation contract is a legal contract based on the Building Lots and Buildings Transaction Business Law, and the following duties are imposed on a real estate company.
First, when concluding a mediation contract, delivery of a written contract is always obligated.Inthisreal estate mediation contract, the details of a housing, a contract period, a mediating fee, the contents of business, etc. are specified, and the client's right and duty are clarified.
In addition, depending on the type of mediation contract, the real estate company must properly perform the duties stipulated by law, such as registering properties with the designated distribution system (Raines) and reporting the status of business processing on a regular basis. By these provisions, a system is constructed by which a consumer can proceed with a real estate transaction with peace of mind.
Mediation contract type and feature
There are threemediation contract typeslargely divided, and each has different features and merits and demerits. Selecting an appropriate mediation contract is an important element directly related to the success of a real estate transaction.
Mediation contract type comparison chart
| Item | General mediation contract | Full-time mediation contract | Under-exclusive-contract exclusive duty mediation contract |
| The number of contractors who can request | Two or more companies are possible. | Only one company | Only one company |
| Self-discovery deal | Possible | Possible | Not possible |
| Contract validity period | No limit | Maximum 3 months | Maximum 3 months |
| Automatic Renewal | Possible | Not possible (client's request is required) | Not available (client's request is required) |
| Obligation to register with Raines | No (within 7 days) | Yes (within 7 days) | Yes (within 5 days) |
| Obligation of business report | No (within 5 days) | At least once every two weeks | At least once a week |
Details of a general mediation contract
A general mediation contractis the mediation contract form with the fewest restrictions. A client can request two or more real estate companies for mediation at the same time, and there is no legal limitation on the contract period. Moreover, it is also admitted that the client himself finds a buyer and deals directly.
The greatest merit of a general mediation contract is that the possibility of property information reaching more purchase desire persons will increase as two or more real estate companies compete. Especially in the case of a popular area or an attractive housing, sale in a short period of time or a contract at a high price can be expected through aggressive sales activities by multiple companies.
However, from the standpoint of a real estate company, since other companies also handle the same property, the risk for investment in advertising expenses and sales activities is high. Therefore, it is necessary to understand that, in a general mediation contract, a real estate company's sales activities may become passive.
Details of a full-time mediation contract
A full-time mediation contractis a contract form in which the client requests mediation to only one specific company. The contract term is defined as a maximum of three months, and automatic renewal is not permitted. When renewing, an explicit offer from the client is required.
The real estate company which concluded a full-time mediation contract is obligated to register a property with the designated distribution system (Raines) within seven days (excluding holidays) from the conclusion of the contract. Moreover, the duty to report the work processing situation to the client at a frequency of once or more in two weeks is also imposed.
The merit of a full-time mediation contract is that more active and continuous support can be expected because a real estate company carries out sales activities on an exclusive basis. Real estate companies can develop more serious marketing strategies because the investment in advertising expenses and the risks associated with sales activities are reduced.
On the other hand, since the contract is with only one company, it is dependent on that real estate company's sales force and influence in the market. If by any chance the response of the real estate company selected is inappropriate, there is also a demerit that it cannot be changed to another company for three months.
Details of a under-exclusive-contract exclusive duty mediation contract
A under-exclusive-contract exclusive duty mediation contractis the most severe mediation contract form of restriction. Although it becomes a contract with only one company as well as a under-exclusive-contract exclusive duty mediation contract, a self-discovery transaction by the client himself is also prohibited. In other words, even if the client finds a buyer by himself, he must always perform dealings through the real estate company with which he made a contract.
In a under-exclusive-contract exclusive duty mediation contract, a real estate company registers with Raines within five days (excluding a holiday) from the conclusion of a contract, and is obligated to perform a business report more than once a week. This is the strictest duty among the three mediation contracts.
The merit of this contract form is that a real estate company is expected to carry out sales activities most actively. Since self-discovery transactions are also prohibited, it becomes a more certain profit opportunity for a real estate company, and the possibility that generous service will be provided accordingly increases.
However, since this is the most restrictive contract for the client, the real estate company should be chosen with particular care. Moreover, even if a purchase desire person appears from a relative or an acquaintance, since dealings must always be performed through a real estate company, it is a point to be considered that a commission burden occurs.
Commission system of a mediation contract
Limit of a basic mediation commission
The maximum amount of amediation contract commissionis set by the Real Estate Lots and Buildings Transaction Business Law. A real estate company cannot request a commission exceeding this upper limit amount. The calculation method of a basic commission is set as follows according to a transaction price.
| Transaction price | Upper Limit of Brokerage Fee |
| Less than 2 million yen | Transaction price × 5% + consumption tax |
| Over 2 million yen to 4 million yen or less | Transaction price x 4% + 20,000 yen + consumption tax |
| Over 4 million yen | Transaction price x 3% + 60,000 yen + consumption tax |
For example, when buying and selling real estate of 30 million yen, the maximum brokerage fee is "30 million yen x 3% + 60,000 yen + consumption tax = 1,056,000 yen. This formula is known as the "quick calculation formula" most frequently used in transactions exceeding 4 million yen.
Changes due to the July 2024 Law Revision
Due to a legal amendment enacted on July 1, 2024, the maximum brokerage fee has been substantially revised for transactions involving vacant houses, etc. with a sales price of 8 million yen or less. This amendment was implemented as a measure to address the growing problem of vacant houses.
Prior to the revision, a maximum of 198,000 yen (180,000 yen + consumption tax) commission could be received only from the seller's side for properties of 4 million yen or less under the "special exception for mediation of low-cost vacant houses, etc." introduced in 2018. However, the following changes have been made in the new law revision.
Conditions for applying the special exception after the revision:
-Target properties: Vacant houses and land with a sales price of 8 million yen or less
-Commission fee ceiling: 300,000 yen + consumption tax = 330,000 yen
- Scope of application: Receivable from both the seller and the buyer
As a result of this revision, for example, when buying or selling a vacant house worth 5 million yen, the maximum commission would have been 5 million yen x 3% + 60,000 yen + consumption tax = 231,000 yen, but now it is possible to receive up to 330,000 yen by applying the special exception.
Background and Impact of the Fee Revision
According to statistics from the Ministry of Internal Affairs and Communications, the number of vacant houses nationwide will reach 9 million units by 2023, and the percentage of vacant houses will be 13.8%, and this figure is increasing every year. Particularly in rural and suburban areas, there are many properties with low real estate value, and many transactions were unprofitable for real estate companies under the existing commission structure.
With the recent amendment to the law, real estate companies are expected to be more proactive in handling low-priced properties as well. The possibility of receiving appropriate brokerage services for properties that were previously rejected as "too low-commission to deal with" has been increased.
Although there is an increased commission burden for consumers, the possibility of selling properties that were previously difficult to sell at an appropriate price with professional support has been improved. In particular, a new solution has been opened up for properties in rural areas that were acquired through inheritance, or properties that have been unsalable for a long time.
Time and method of commission payment
A brokerage fee is a contingency fee, and the obligation to pay it arises when a sales contract is concluded. The general payment schedule is as follows.
Standard payment pattern:
1.At the time of conclusion of a sales contract: 50% of the commission
2.At the time of delivery of the housing: The remaining 50% of the commission
However, depending on a real estate company, there is a case in which it pays in a lump sum at the time of housing delivery, or there is a case in which the whole amount is paid at the time of contract conclusion. It is important to be sure to confirm the payment method and time when concluding a mediation contract, and to have them specified in the contract.
In addition, when a sales contract is not concluded, the obligation to pay a mediation fee does not arise. However, when a contract is canceled by the client's convenience, or when a contract becomes invalid by false information provision, etc., there is a possibility of receiving a claim for an amount equivalent to actual expenses.
Mediation contract merit and demerit
Merit and demerit of a general mediation contract
Merit of a general mediation contract:
The greatest merit of a general mediation contract is that mediation can be requested to two or more real estate companies at the same time. This makes it possible to secure more sales channels and approach a wide range of purchase desire persons. Especially in the case of properties in popular areas or real estate with high market value, the competitive effect of multiple companies can be expected to result in a sale in a short period of time or a contract at a price above the market rate.
In addition, since there are no restrictions on the contract period, it is suitable when there is no rush to sell or when one wishes to proceed cautiously while keeping an eye on market trends. Because a self-discovery deal is admitted, when a purchase desire person appears from a relative, an acquaintance, etc., it is also possible to perform direct dealings without paying a mediating fee.
The demerit of a general mediation contract:
On the other hand, from the standpoint of a real estate company, since other companies also handle the same housing, the investment risk for advertising expenses and sales activities is high. Therefore, active sales activities may not be expected, and as a result, the sales period may be prolonged.
Another point to consider is the increased administrative burden for the client due to the need to contact and coordinate with multiple companies. It is necessary to organize different proposals from each company and make an appropriate judgment when negotiating prices and adjusting conditions.
Merit and demerit of a full-time mediation contract
Merit of a full-time mediation contract:
In a full-time mediation contract, more active and continuous support can be expected because one company carries out sales activities on an exclusive basis. Since it is a sure profit opportunity for a real estate company, motivation for investment of advertising expenses and sales activities will be high.
In addition, regular business reports provide detailed information on the progress of sales activities. Information such as market reactions and feedback from prospective buyers is also shared, allowing for revisions to be made to prices and conditions as necessary.
Since a nationwide real estate company can access property information by the registration duty to Raines, a sales work utilizing a wide network is developed.
Demerit of a full-time mediation contract:
Since it is a contract with only one company, it will depend on the sales power and market influence of that real estate company. If, by any chance, the correspondence of the selected real estate company is inappropriate, it cannot be changed to another company for three months.
In addition, some real estate companies may experience a problem known as "enclosure," in which sales activities become passive because of the full-time contract. This is an act which intentionally excludes a purchase desire person from other companies, and aims at two-sided mediation by finding a buyer also by itself.
Merit and demerit of under-exclusive-contract exclusive duty mediation contract
Merit of a under-exclusive-contract exclusive duty mediation contract:
Since it is the contract form with the strictest restrictions, a real estate company can expect to perform a sales work most actively. Since self-discovery transactions are also prohibited, it becomes a more certain profit opportunity for a real estate company, and the possibility that generous service will be provided accordingly increases.
By a business report more than once a week, the situation of a sales activity can be grasped in real time, and quick correspondence and the modification of a strategy become possible.
The demerit of a under-exclusive-contract exclusive duty mediation contract:
Since it becomes the most restrictive contract for the client, the choice of a real estate company must be especially careful. Even if a purchase desire person appears from a relative or an acquaintance, since a transaction must always be performed through a real estate company, a commission burden which was originally unnecessary occurs.
Moreover, as well as a full-time mediation contract, the risk of enclosure and the risk which depends on the ability of the real estate company selected also exist.
Judgment standard of mediation contract selection
In order to select an appropriate mediation contract, it is important to consider the following elements comprehensively.
Judgment by the characteristic of a housing:
-Popular area and property of high scarcity: General mediation contract
-Special properties and properties requiring specialized knowledge: Full-time system contract
When sale is hurried: Full-time contract
Judgment according to the seller's situation:
- When it is possible to coordinate with two or more companies and wants to be positively involved: General mediation contract
When leaving it to a real estate company and wanting to receive a regular report: Full-time contract
When you want to reduce the management burden of sales activity: Full-time contract
Judgment by a market environment:
- Active market environment: General mediation contract
Stagnant market environment: Full-time contract
Based on these elements, selecting the mediation contract most suitable for your own situation is the first step to a successful real estate transaction.
Points to note when concluding a mediation contract
Confirmation of the contents of a contract
When concluding areal estate mediation contract, it is important to be sure to confirm the following items, and if there are unclear points, do not hesitate to ask questions.
Required confirmation items:
1.Detailed information on a housing (location, area, structure, etc.)
2.The kind and term of a mediation contract
3.The amount of a mediating fee and the time of payment
4.Business contents and the range of responsibility of a real estate company
5.Conditions and procedure of contract cancellation
6.Frequency and method of business report (in the case of a full-time system contract)
In particular, it is necessary to clearly confirm the actual amount and payment terms for the brokerage fee, even if it is within the maximum amount. Also, if there is a possibility of being charged separately for actual expenses such as advertising and research expenses, confirm the conditions of such charges in advance.
Real estate company selection point
The selection of a real estate company with which a mediation contract is concluded is an important element that influences the success of a transaction. It is recommended to evaluate comprehensively from the following viewpoints.
Professionalism of the sales representative:
-Certification of the real estate agent as a licensed real estate agent
- Transaction experience in the relevant area
- Expertise in the type of property
-Communication skills and promptness of response
Reliability of the company:
- Licensure of the real estate transaction business
- Membership of industry associations
- Past history of problems
- Financial soundness
Marketing ability:
- Utilization of advertising media
- Exposure of properties on the Internet
- Customer network
-Specificity of sales strategy
Mediation contract cancellation
Mediation contract cancellation ispossible under certain conditions, but the procedure differs depending on the type of contract and the reason for cancellation.
Justifiable reason for cancellation:
1.Breach of contract of a real estate company (non-fulfillment of work report obligation, etc.)
2.Insufficient ability or inappropriate response by the real estate company
3.Change in the client's circumstances (suspension of sale, etc.)
Expiration of the contract period
Points to note at the time of cancellation:
In the case of a full-time contract, if the contract is terminated mid-contract without a justifiable reason, you may be charged an amount equivalent to the actual cost of the contract.
- It is important to give notice of termination in writing and clearly state the reason for termination.
-Youmay still be obligated to pay the actual costs of advertising and other expenses already incurred.
Preparation for smooth cancellation:When considering cancellation, it is advisable to first try to resolve the issue through discussions with the real estate company. If this does not resolve the issue, it is possible to consult with a third-party organization such as the Building Lots and Buildings Transaction Business Association or the Consumer Affairs Center.
Contract Delivery by Electromagnetic Means
In recent years, with the progress of digitalization, provision by an electromagnetic method (e-mail, etc.) is permitted for the delivery of a mediation contract. However, in this case, the client's prior consent is necessary, and the following points should be noted.
Conditions for electromagnetic delivery:
- Explicit consent of the client
- Measures (e.g., electronic signature) in lieu of a signature
- Transmission in a manner that ensures receipt of the contents by the client.
Advantages and disadvantages:While electromagnetic delivery speeds up contract procedures and improves document management efficiency, it also requires security precautions and proper storage of electronic data.
Conclusion
A real estatemediation contract isan important legal framework in a real estate transaction, and an appropriate contract selection influences the success of the transaction.The three types of ageneral mediation contract, afull-time mediation contract, and aunder-exclusive-contract exclusive duty mediationcontract each have different features and merits and demerits, and it is important to consider the characteristics of a housing, the seller's situation, and the market environment comprehensively and select them.
As for the mediation contract fee, the law was revised in July 2024, and it was raised to the upper limit of 330,000 yen for vacant houses, etc. of 8 million yen or less. This amendment creates an environment in which appropriate mediation services can be received even for low-priced properties that have been difficult to handle up to now.
When concluding a contract, itis important to fully confirm the contents of thereal estate brokerage contractand do not hesitate to ask questions about unclear points.In addition, by understanding the conditions and procedures formediation contract cancellation in caseof emergencyin advance, you can prevent troubles before they occur.
INA&Associates Inc. offers the best mediation contract proposal and professional support according to each customer's situation. Please feel free to contact us if you have any questions about real estate transactions. We will do our best to support you so that your important real estate transactions will be successful.
Frequently asked questions
Q1.Is it possible to change a mediation contract in the middle?
A1.To change the type of mediation contract in the middle is to cancel the present contract in principle, and to conclude a new contract. Although it is relatively easy to change from a general mediation contract to a full-time system contract, a justifiable reason may be required to change from a full-time system contract to a general mediation contract. Changing at the time of expiration of the contract term is the most reliable method.
Q2. Can a mediating fee be negotiated at a discount?
A2. Since the maximum amount of a brokerage fee is set by law, it is possible to negotiate with a real estate agency to reduce the fee if it is within that range. However, since there is a possibility that the quality of service contents is affected, it is important to judge the balance of service contents and a commission fee comprehensively instead of a simple discount.
Q3. What will happen if a purchase desire person appears from another company under a full-time mediation contract?
A3. In a full-time mediation contract, it is necessary to perform dealings through the real estate company with which a contract was concluded. Even if there is an introduction of a purchase desire person from another company, the real estate company which made a contract becomes a window, and a deal is advanced in cooperation with another company if necessary. In this case, a brokerage fee will be paid to the contracted real estate company.
Q4. Can the general public view the information registered with Raines?
A4. Raines (designated distribution system) is a system exclusively for real estate companies and cannot be directly accessed by general consumers. However, registered housing information will be widely distributed through real estate companies throughout the country, and will eventually be made available to the public on each company's homepage or real estate portal site.
Q5.What should I do if I want to stop sale during the mediation contract period?
A5. The correspondence differs according to the reason of the suspension of sale. In the case of a discontinuance by the client's convenience, actual expenses such as advertising expenses incurred until then may be charged. On the other hand, in the case of cancellation due to unavoidable reasons, such as a change in family circumstances or a change in economic conditions, it is often possible to cancel the contract amicably after consulting with the real estate company. In either case, it is important to consult with the real estate company as soon as possible.
Please feel free to contactthe official website of INA&Associates K.K. if you have anyquestions or concerns about real estate transactions.
Reference Information
Related Laws and Systems
Building Lots and Buildings Transaction Business Law
Daisuke Inazawa
Representative Director of INA&Associates Inc. Based in Osaka, Tokyo, and Kanagawa, he is engaged in real estate sales, leasing, and management. He provides services based on his extensive experience in the real estate industry. Based on the philosophy that “human resources are a company's most important asset,” he places great importance on human resource development. He continues to take on the challenge of creating sustainable corporate value.
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