Buying a House: Brokerage Fees

Choosing a Real Estate Company: Brokerage Fees

Brokerage Fees

To prevent trouble concerning a brokerage fee, it is important to take note of the legal regulations for brokerage fees and the precautions to be taken when concluding a mediation contract.

Brokerage fees are capped by law.

According to the Real Estate Brokerage Act, there is a maximum amount of brokerage fees that a real estate company can receive. Therefore, if a real estate company receives a brokerage fee that exceeds the maximum amount, it is in violation of the law. While the maximum amount that is stipulated by law, it does not mean that the maximum amount can automatically be charged.

A brokerage fee is incurred only after a sales contract is concluded.

In the brokerage of a real estate transaction, the real estate company's right to charge a brokerage fee occurs when a sales contract is concluded. (It is generally called "a transaction completion fee.") Therefore, it is not necessary to pay a real estate company a mediating fee until a sales contract is concluded.

The timing of commission payments is also to be discussed.

When a sales contract is concluded, the right to claim a brokerage fee arises from the real estate company. For example, it is not illegal if the full amount of the brokerage fee is paid to the real estate company at the time the sales contract is concluded. However, since in real estate transactions there are many cases in which delivery has not been completed at the time of contract conclusion, it is generally common to pay 50% of a mediating fee at the time of contract conclusion, and to pay the remaining 50% at the time of completion of delivery.

Handling of expenses other than brokerage fees, etc.

Expenses incurred by a real estate company in ordinary brokerage work cannot be charged to the client. For example, the costs related to advertising expenses and site visits for prospective buyers that are generally conducted are included in the brokerage fee that is incurred when a sales contract is concluded. Exceptionally, "actual expenses" such as advertising expenses incurred based on the client's special request are allowed to be charged. For example, a real estate company can claim the cost of advertising that was specially implemented at the client's request, travel expenses for negotiations with a prospective purchaser in a remote area that were conducted at the client's request, etc., separately from the brokerage fee.
However, it should be noted that the exceptions are limited to cases where all of the following conditions are met:
(1) the cost was incurred based on the client's request,
(2) the cost is not incurred in the ordinary brokerage business, and
(3) the cost is an actual cost. 

Maximum brokerage fees
The maximum amount of a brokerage fee to be paid to a real estate company is set for each monetary category of the sales price as follows.

The maximum amount of a brokerage fee for land with a sales price of 10 million yen
→ The sales price is broken down and calculated as follows.

a) The portion up to 2 million yen
2,000,000 yen  x  5% = 100,000 yen
b) The portion exceeding 2 million yen up to 4 million yen
2,000,000 yen x 4% = 80,000 yen
c) The portion exceeding 4 million yen up to 10 million yen
6,000,000 yen x 3% = 180,000 yen

a + b + c = 360,000 yen
​
*The amount obtained by adding the consumption tax to this amount is the maximum amount of the brokerage fee.

• For properties exceeding 4 million yen, the following formula can be used to calculate the brokerage fee:

          →　sales price x 3 % + 60,000 yen + consumption tax

Special provisions for the sale and purchase of low-cost vacant houses, etc.

In the case of an inexpensive sale or purchase of a vacant house, etc., where the cost of on-site inspections, etc. is higher than usual, the brokerage fee that can be received from the seller of the vacant house or the person exchanging the house is limited to the total of the above maximum amount and the cost of on-site inspections, etc. (however, the maximum is 180,000 yen plus consumption tax). The brokerage fee must be agreed upon between the two parties in advance.

*Real estate companies to watch out for
Be wary of real estate companies that engage in the following inappropriate discussions regarding brokerage fees. If you have any doubts, you should clarify them until you are satisfied. If you receive an insincere explanation, there is room to reconsider your request to that real estate company.

• Offering commission terms that exceed the maximum amount.
• Explaining the maximum amount as if it were a flat fee set by law.
• Automatically charging advertising fees, etc. that are incurred in addition to the brokerage fee.