Agent commission for real estate transactions in Japan

Poste date: Tuesday, November 14, 2023

In Japan, agent commissions are often paid in real property transactions, but many people may wonder why should they be paid?  So, we will explain here what the agent commissions are and how the amounts are determined, etc., for the case of buying, selling, and leasing.

What is an agent commission?

This is a fee paid to the real estate company for its intermediary service when a sales contract or lease contract is concluded. To facilitate the process toward conclusion of a contract, the real estate company that acts as an agent posts the information of the real property requested by the seller or lessor, on its own website or various property information websites, creates leaflets, videos, and conducts various other advertising activities. In addition, the company perform various tasks essential to the conclusion of a contract, such as guiding clients to the properties, researching the property to be contracted, adjusting the conditions of a contract, preparing contract documents, and explaining important matters at the time of the conclusion of a contract.

An agent commission is what you pay for such activities. Since it is a contingency fee, you do not have to pay it if the contract is not concluded.

How is the commission amount determined?

The maximum amount of the agent commission is set by the Building Lots and Buildings Transaction Business Act and is calculated in the following manner.

Contract for Sale

The upper limit is calculated depending on the contract price, such as “5% or less for the portion of the contract price of 2 million JPY or less”, “4% or less for the portion of the contract price over 2 million JPY and 4 million JPY or less”, and “3% or less for the portion of the contract price over 4 million JPY”.

Example) When the contract price is 10 million JPY.

Commission for the portion of 2 million JPY or less:   2 million JPY x 5% = 100,000JPY

Commission for the portion over 2 million JPY and 4 million JPY or less:  2 million JPY x 4% =80,000JPY

Commission for the portion over 4 million JPY:  6 million JPY x 3% = 180,000JPY

Total: 360,000 JPY

As shown above, the calculation must first be divided into the price ranges and then added each results together at the end, so it is not a simple calculation of 10 million JPY x 3% = 300,000 JPY. This troublesome calculation formula is simplified by what is called the following quick calculation formula. The same amount of agent commission can be calculated by both the above regular calculation method and the below quick calculation formula.

In the case of quick calculation formulas

Commission for the portion of 2 million JPY or less:   5% or less

Commission for the portion over 2 million JPY and 4 million JPY or less:   4% or less + 20,000JPY

Commission for the portion over 4 million JPY:   3% or less + 60,000JPY

With this calculation method, there is no need to calculate the contract price by dividing into the price ranges, and if the contract price is applied directly to the above formula, the same agent commission amount can be calculated immediately.

 

Example)

When the contract price is 10millionJPY

10million JPY x 3% = 300,000 JPY

300,000 JPY + 60,000 JPY = 360,000 JPY

 

When the contract price is 3million JPY

3million JPY x 4% = 120,000JPY

120,000 JPY + 20,000JPY = 140,000JPY

*The contract price is the price that does not include the consumption tax. Consumption tax is not imposed on land transactions and on single-family houses and condominiums (mainly pre-owned properties) sold by individuals, but is imposed on newly built condominiums and other cases where the seller is a corporation. When calculating the agent commission amount based on the sales drawing, it is necessary to confirm in advance whether the displayed price includes consumption tax.

Lease Contract

It is stipulated to be the amount of one month’s rent or less.

*Rent set forth above is the amount that does not include consumption tax. Rent for residential properties is tax-exempt, but since rent for properties used as offices is taxable, the rent prices including consumption tax are often described on the recruitment drawings, so the agent commission amount should be calculated excluding the consumption tax.

Is a consumption tax imposed on agent commissions?

A consumption tax is imposed on agent commissions for both sales and rental contracts. Since it is paid as consideration for services performed by a real estate agent, it is subject to consumption tax.

Is it possible to reduce or eliminate agent commissions?

Some real estate companies advertise their services with "no agent fee required" or "half off agent fee," but as explained at the beginning of this article, agent commissions are paid as consideration for the various services provided by real estate agents. Due to the nature of contingency fees, even if the agents spend a lot of money and show their clients numerous properties over a long period of time, they cannot charge agent commissions unless the contracts are concluded. Therefore, the agent commission paid at the time of the conclusion of contracts becomes the main source of income for the real estate company.  In many cases, the real estate companies which provide their services with reduced agent fee may charge their customer fees other than the agent fee, such as a "property disinfection fee" or "document preparation fee," in order to secure their income, and in some cases, the customer may have to pay the same amount or more than the agent fee as a result.

A reduction of the agent fees, etc. may be applied only to the properties that the seller or lessor really wants to close their contracts quickly. In such cases, you may have to choose a property from a limited number of options, and you may not be able to find a good property.

Summary

The agent commission is a necessary fee to find the best property for you and assist your responsibly until the conclusion of the contract.

It may be difficult for you to decide whether to spend less and compromise on the services you have, or to spend more but have adequate services and contract a satisfactory property. However, we believe that purchasing or renting real estate is one of the major events in your life, so we would like you to choose a reliable real estate company and find a wonderful property so that you will not have any regrets.

  • Is Now the Good Time to Sell Real Estate in Tokyo? 2025 Market Predictions & Price Trends

    Discover why Tokyo’s real estate prices are soaring! Since the pandemic, condo prices have exceeded 100 million yen, driven by wealthy foreign investors. PLAZA HOMES’ experts analyze key factors behind this surge and future market trends. Watch our video for insights into Tokyo’s booming property market!
  • Options for Newly built Houses

    If you want to live in a newly built house, you have the choice between a custom-built house that you build yourself from scratch or a ready-built house with a fixed plan and price. In addition to degrees of freedom in the design, there are major differences between custom-built and ready-built houses, such as financial planning and the schedule for moving in, so let's review the characteristics of each.
  • Luxury Residential Areas in Tokyo – Your Guide

    Discover Tokyo's luxurious residential areas, such as Hiroo, Azabu, and Akasaka. This guide will help you choose the perfect luxury neighborhood to call home.
  • Tokyo Interior Design Services with English-friendly Agents

    Are you in need of an interior designer in Tokyo? Be it your home or office, these English speaking interior design firms can design your space to suit your preferences and needs without worrying about any language barriers.
  • Putting Holes in Rented Apartment Walls in Japan

    You may be wondering if it is allowed to drill holes in the walls of rented properties in Japan, and if so, what size holes are permitted. You may or may not be responsible for the cost of restoration of the property depending on the size of the hole. Find out how to decorate your apartment's walls, what precautions you need to take before putting a hole, and what happens if you drill or make a large hole in the walls.
  • Renting an Apartment in Japan: A Guide for Foreigners

    Planning on renting an apartment in Tokyo? This starter guide for foreigners will help you avoid common pitfalls, learn key customs, and know they key terms.
Exterior of Park Court Aoyama The Tower
Sale Property tag

Located in Minami-Aoyama 2-chome, Minato-ku, Tokyo, Park Court Aoyama the Tower, formerly sold by Mitsui Fudosan Residential and Iconique Special Purpose Company and constructed by Obayashi Corporation, was completed in March 2018. It is a large-scale tower condominium with a total of 163 units and 26 floors above ground and one basement floor. The stylish and modern form with graceful curves is eye-catching. Park Court Aoyama the Tower offers a wide range of common facilities and amenities, including an infinity pool, jet bath, fitness gym, sky lounge, club lounge, guest rooms, etc. A private garden surrounded by greenery on the second floor and a concierge who will support your comfortable living and provide attentive services. The 24-hour manned management system and auto-lock system at the entrance linked to the intercom with TV monitor support the security of your residence. The nearest station to Park Court Aoyama The Tower is Aoyama-itchome Station on the Tokyo Metro Ginza Line. It is a 3-minute walk from the station to the apartment. Aoyama-itchome Station on the Tokyo Metro Hanzomon Line and Toei Oedo Line is also a 3-minute walk away, and Nogizaka Station on the Tokyo Metro Chiyoda Line is a 7-minute walk away, providing convenient access to transportation. In preparation for disasters The latest technology employed for maximum safety of the building. Emergency generators placed available for 72hours Stockpile warehouse place on all the floors for storage of disaster stockpile.

JPY 598,000,000

Exterior of Qualia Meguro-ohashi West
Sale Property tag

Qualia Meguro Ohashi West was built in February 2004 by Maeda Corporation and formerly sold by Tokyu Fudousan Corporation. The building is a 5-minute walk from Ikejiri-Ohashi on the Tokyu Denentoshi Line and is located along the Meguro River. During the cherry blossom season, the rows of cherry blossom trees along the Meguro River provide beautiful scenery. Popular Shibuya, Nakameguro and Sangenjaya are within living distance. This 12-storey, 106-unit apartment building has an auto-lock system and pets are friendly (subject to terms and conditions).

JPY 94,800,000

Exterior of SEBON DAIKANYAMA
Sale Property tag

JPY 248,000,000

Exterior of Bellevue Azabu
Sale Property tag

JPY698,000,000

Exterior of Park Court Azabujuban the Tower
Sale Property tag

It is one of the Park Court branded luxury condominium apartments sold by Mitsui Fudosan Residential Co.,Ltd. Completed by Taisei Corporation. It is surrounded by busy and active Roppongi area, urban constructions such as Tokyo Tower and Tokyo Midtown, and rich nature of Arisugawa-no-miya Memorial Park within a walking distance. Hotel-like front desk services and common facilities such as guest rooms and various lounges are attractive. The dwelling units are mostly from 1LDK to 3LDK having 440 units in total. There are many embassies in the neighborhood giving very international atmosphere to the area. Azabujuban Shopping Street, where many old and modern stores are coexisting along sophisticated townscape, is within a living area. Supermarkets are close and support everyday life in the area. The refined locality and nicely designed facility give it the impression of Mansion House beyond the ordinary condo image making high quality urban life possible.

JPY 469,900,000 - 568,000,000

Exterior of Gentle-air Jimgumae
Sale Property tag

High rise mansion close to Kitasando, Kokuritsukyogijyo and Harajuku stations. Built with strong earthquake resistance. Front desk service offers convenience for residences.

JPY 249,900,000