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For those of you who love manga and J-dramas, I recently came across Shojiki Fudosan (which literally translates to Honest Real Estate), a manga written by Mitsuhiro Mizuno and illustrated by Akira Otani based on a concept by Takeshi Natsuhara. It's a light hearted comedy that follows the top realtor of Tosaka Real Estate - Nagase Saichi, who after destroying a monument on a construction site, gets a supernatural curse that prevents him from ever telling a lie.

Together with the rookie Tsukishita Sakura whose motto is "customer first", the series follows the two and other supporting characters such as rival agents, construction firms, bankers and a varied cast of customers, each with their own unique situation and challenges to face.

The series is available on NHK and Amazon Prime (with the English title slightly changed to The Honest Realtor). I thoroughly enjoyed watching the two seasons (including the Minerva Special) and highly recommend it to anyone looking for a light hearted fun drama (with a bonus if you like real estate also). Aside from the entertainment value, you also get some basic real estate concepts explained and can pick up on some good tips.

In this series of articles about Shojiki Fudosan, I want to share one of the most basic concepts in real estate from the second episode of the first season which are the three types of brokerage contracts and what should you know about them.

During the second episode of the first season, Nagase and Tsukishita explain to a new customer looking to sell his property about the three types of brokerage contracts. I'll try to avoid spoilers in this article but there are minor plot points here so don't read on if you plan on watching the show! (However, please do browse other articles in our site that might interest you 😉).

Nagase explains the contract types. Credit: Shojiki Fudosan by NHK

When a seller wants to sell their property, they can choose either a General Contract, Exclusive Brokerage Contract or Sole-Exclusive Brokerage Contract. It is important to understand the merits and demerits of each contract type so that the seller can select the best one for their situation.

• General Brokerage Contract - This contract type allows the seller to approach multiple real estate companies and has the highest level of freedom for the seller. This is ideal for sellers who wish to control their sales activities and do not want to rely on just one real estate company. (Real estate companies however do not have any reporting obligations on their sales activities when in this arrangement.)

  This contract type allows for "self discovered" transactions or "private sale" transactions. This means that if the seller finds a buyer and completes the sale through their own efforts without the involvement of the real estate agency, they will not owe any commissions.

  Registration of the property is also optional in Japan's REINS* which means that sellers who do not wish to widely publicize that they are selling their property for privacy reasons (maybe they don't want neighbors to know) can opt for this approach.

  REINS - Real Estate Information Network System designated by MLIT (Ministry of Land, Infrastructure, Transport and Tourism)

• Exclusive Brokerage Contract - This contract type will designate only one real estate company as the broker of the property. The brokerage is expected to register the property in REINS within one week of signing the contract and must provide progress reports at least every two weeks for the contract duration which is up to 3 months. If the property is still unsold, the seller can renew or change brokers / contract type. Self discovered transactions by the seller are also possible.
  This is ideal for sellers that wish to delegate sales activities to a real estate firm while also keeping the flexibility of being able to find a seller themselves through their own network.
• Sole Exclusive Brokerage Contract - This contract type is almost the same as the exclusive brokerage contract but does not allow for self discoverd transactions by the seller. In turn, the sales activities of the real estate company is expected to be higher. Progress reports are expected weekly and registration of the property in REINS must be done immediately upon contract signing.

The show gives a quick explanation on the three contract types. Credit: Shojiki Fudosan by NHK

Having a rival broker within the agency to spice up the story wasn't exactly an out-of-the-box plot twist. However, what's nice about Shojiki Fudosan is that characters are usually not so one-dimensional as we learn of Kiriyama's intentions.

Nagase and Tsukishita confront the "bad guy" Kiriyama at the office rooftop afterwards with Tsukishita saying that Nagase was thinking about what's best for the customer, that's why he recommended the general brokerage contract.

At first glance, having the freedom to work with multiple real estate agencies can seem like the best situation for the customer. Having multiple agencies selling your property casts a wider net and surely this would be the best option than just relying on one agency right?

However, Kiriyama exclaims that Tsukishita is naive and this is actually not the best for the customer. Here we see the perspective of what drives the real estate company according to Kiriyama. First, he berates Nagase for recommending the general contract because the exclusive contract types are better for their company as this will ensure brokerage fees when the property sells. He then drops the real honest truth of the industry - brokers will not work hard for general contracts.

The series often uses helpful graphics to help explain real estate concepts. Here Kiriyama explains why exclusive contracts are preferred by the real estate companies over general ones. Credit: Shojiki Fudosan by NHK

Kiriyama gives his point of view why non-exclusive general brokerage contracts are not good for the customer and the real estate company. The additional graphic illustrations help with the explanation. Credit: Shojiki Fudosan by NHK

Reality of the General Brokerage Contract:

• A property which only has a general brokerage contract presents a risk to brokers who invest too much time and effort on trying to sell properties with this contract type. This is because despite them working hard to promote, market and sell the property, they will earn no commission if another agency swoops in with a buyer first. This means that all their effort will be wasted.
• It stands to reason that any promotional effort like real estate photos can be easily appropriated by / benefit other agencies. While one agency may take the time to do marketing thereby making the property more attractive with its listing, all another agency needs to do is to swoop in with a buyer and they will get the commission.
• Because there is no obligation anyway in the general brokerage contract to report sales activities, real estate companies will usually prioritize the properties in their portfolio which are on exclusive contracts as the commissions are more or less assured.

Kiriyama asserts that proposing a general brokerage contract actually isn't doing the customer any favors because despite being able to contract with multiple real estate agencies, the reality is that the property will not get prioritized and get any effort therefore will remain unsold.

There is definitely some truth to this and upon further reflection, presents a different perspective on what is "best for the customer". This makes choosing what contract type not as straightforward and you should consider your personal situation.

What about virtual tours? The show is actually in touch with trends and shows this in future episodes. Credit: Shojiki Fudosan by NHK

Watch out for more articles on real estate lessons we can this from this TV series in the future. Credit: Shojiki Fudosan by NHK

At SHIBUYA360° we are imaging experts first and we strive to understand the real estate market better so we can provide better services and support this important industry through our real estate photography and virtual tour production services.

Similar to the perspective shared by the show, it is not clear cut that one contract type is always better than the other. It will depend on each seller's unique situation and considerations. Are you in a hurry to sell? Do you want to keep the fact that you are selling your property private from your neighbors? Do you already have a trusted real estate company that you know will put 100% effort into selling your property?

Because our company helps with promoting real estate properties through real estate photography and virtual tours, we recommend you consider the following:

• Be careful when going with an sole exclusive contract especially as you cannot sell to a prospective buyer that you find on your own (i.e. self discovered). You may want to have the flexibility to be able to sell the property if you find a buyer through your own network. However if you don't anticipate this, and want to delegate 100% of the sales activity to the broker, the sole exslusive contract may be a good option.

• If you go for an exclusive or sole exclusive contract, confirm the lock-in period (3 months). If you are not happy with the service or sales progress, you can change from an exclusive contract to a general or keep working with that real estate company by renewing the contract.
• Check at the past + current listings of the real estate agency you want to work with. Are they using quality real estate photos and promoting their property portfolio effectively? Ask them how they plan to promote your property if you were to enter into a brokerage contract.
• When going for general brokerage contracts, consider the reality that the real estate agencies may only do minimal passive effort (or none at all) on trying to sell your property. Rather than relying fully on them, you can proactively invest in real estate photography and even 360° virtual tour materials through an independent service provider and then turn over these materials for the various real estate agencies to use. This way, you ensure quality materials (which you yourself can use) and are able to take advantage of the sales networks of the various agencies.

Whatever your unique situation is, don't hesitate to reach out to us in case you want to consult how to promote your property with real estate photography and virtual tours.