What Most Sellers Overlook | 3 Signs You Are Losing 3 Million Yen to 'Enclosure'

You have put your investment studio apartment on the market, but there are no viewings or offers. The agent keeps repeating, 'The market is bad right now.' The truth behind that silence is often not the market, but 'enclosure'.

Furthermore, enclosure is designed to be invisible to the seller. So, by the time you notice, the amount remaining in your pocket has been whittled down by millions of yen.

The reason enclosure happens is not the market, but the structure of brokerage fees.

The compensation for brokerage firms is capped by Article 46 of the Building Lots and Buildings Transaction Business Act and Ministry of Land, Infrastructure, Transport and Tourism notifications. For sales prices over 4 million yen, it is 'Price x 3% + 60,000 yen + consumption tax'.

The problem starts here. If they engage in 'double-sided brokerage,' receiving fees from both the seller and the buyer, this compensation doubles.

That is why some companies intentionally block buyers brought by other firms. They stall for time until they can find a buyer themselves. This is enclosure.

Let's calculate specifically. You have a studio apartment that should sell for 20 million yen, but it sits for three months due to enclosure. Then, they make you lower the price to 17 million yen, saying, 'There is no response.'

In this case, the fee the company receives is about 1.25 million yen (including tax) from the double-sided deal at 17 million yen. If they had sold it to another company's client for 20 million yen with a single-sided fee, it would have been about 720,000 yen.

The company gains about 520,000 yen, and the seller loses 3 million yen. This is the economic reality of enclosure.

3 Signs to Spot Enclosure

Sellers have three ways to verify the agent's true intentions based on facts alone, without having to guess.

■ The registration certificate does not arrive, or the deadline has passed — Companies that have signed an exclusive brokerage agreement or an exclusive agency agreement have an obligation to register the property with the designated distribution organization (REINS). The deadline is set by law.

• Exclusive Agency Agreement: Within 5 business days from the day after the contract date

• Exclusive Brokerage Agreement: Within 7 business days from the day after the contract date

• General Brokerage Agreement: No registration obligation

Once registration is complete, the company issues a 'registration certificate' to the seller. A company that does not provide this document even after the deadline has passed is not fulfilling its legal obligations at that point.

If it only appears after you prompt them, or if the date is backdated, this is the first sign.

■ The transaction status is something other than 'Public' — The registration certificate contains a dedicated ID and password for the seller. If you use these to log in to the 'Property Confirmation for Sellers' screen,the seller can check the REINS registration details themselves.

What you need to check is the transaction status. There are only three categories.

• Available: A state where requests for referrals from other companies cannot be refused in principle

• Written purchase offer received: A state where referrals can be refused in principle

• Temporarily suspended at seller's request: A state that can be displayed based on the seller's intention

If the status shows 'Written purchase offer received' or 'Temporarily suspended at seller's request' when the seller has not seen any offer or requested a suspension, that is a problem.

If the seller's understanding and the status do not match, that is a factual anomaly. This is the second sign.

■ The report only contains 'impressions' and no mention of other companies — For exclusive agency contracts, business reports to the seller are mandatory at least once every two weeks, and for exclusive brokerage contracts, at least once a week.

Reports from companies engaging in double-ending have common traits. They only show numbers they can generate themselves, such as portal site views, and never show the number of property inquiries from other companies.

In practice, it is almost impossible for a property to have zero inquiries from other companies for three months. There are companies whose tone in reporting changes the moment you ask in writing, 'How many inquiries were there from other companies, and how were they answered?'

This is the third sign.

In January 2025, double-ending became subject to administrative disciplinary action

This is worth noting. With the amendment to the Enforcement Regulations of the Building Lots and Buildings Transaction Business Act, which came into effect on January 1, 2025, the handling of double-ending has changed.

It has been clarified that if there is a discrepancy between the actual sales status of a property under an exclusive brokerage or exclusive agency contract and its registration status in REINS, it will be subject to disciplinary action under Article 65 of the Building Lots and Buildings Transaction Business Act.

In other words, sellers can now speak based on the fact that 'the registration status and reality are different' rather than just 'suspecting' it. There is no longer a need to fight based on emotion.

3 NG behaviors that sellers fall into

■ The assumption that choosing a general brokerage contract prevents double-ending — General brokerage contracts do not have a REINS registration obligation. There is also no reporting obligation. As a result, no company works on it seriously, and the seller loses the very means to verify the situation.

Choosing a general brokerage contract as a countermeasure against double-ending is like removing security cameras to prevent crime.

■ Entrusting the sale to the company that gives the highest appraisal — An appraisal amount is not a promise. The tactic of securing a brokerage contract with a high price, doing nothing, and then steering the seller toward a price reduction still exists today.

What you should look at is not the appraisal amount itself, but whether the comparable sales data that serves as the basis for that amount is presented.

■ Accepting a price reduction proposal within 3 months of listing — There is a specific order to check things before considering a price reduction. Check the REINS status, the number of inquiries from other companies, and the number of viewings. Unless you have cleared these three things, a price reduction is just cleaning up after a double-ending scheme.

Before you act, just organize the situation

Before deciding whether to sell, first understand the current status of your property. This is the starting point.

I am distributing a 'REINS Registration Status Self-Checklist' for free. It summarizes in one page what to look for on the registration certificate, how to verify the status, and what to demand in the report.

You can receive it via the LINE link below. No phone number is required, and you can remain completely anonymous.

I will not pressure you to sell. I treat the decision not to sell with equal weight. You can consult with me while in difficult situations such as being underwater on your loan, having a master lease, or being behind on management fees.

First, let's just check together whether you are currently being 'double-ended' (kaikomi). Even just doing that can change the amount you end up with.

FAQ - Frequently Asked Questions

Q1. Can the seller personally view REINS?
A. Yes, you can. By logging into the 'Property Confirmation for Sellers' screen using the seller-specific ID and password listed on your exclusive or exclusive-agency brokerage registration certificate, you can check the registered details and transaction status.

Q2. What should I do if I haven't received a registration certificate?
A. Request the issuance in writing. Since the registration deadline is 5 business days for exclusive brokerage and 7 business days for exclusive-agency brokerage, if that time has passed, state the fact that the deadline has been exceeded and demand a response.

Q3. The status was 'Purchase application received in writing.' Is this a confirmed case of double-ending?
A. It is not confirmed. There is a possibility that an application has truly been received. Request to see a copy of the application form; if it does not exist, there is a discrepancy between the actual situation and the registration.

Q4. Where can I consult if I suspect double-ending?
A. The licensing authority (the real estate brokerage division of your prefecture or the Regional Development Bureau) is the point of contact. From January 2025, this will be subject to disciplinary action under Article 65 of the Real Estate Brokerage Act.

Q5. Can I cancel a brokerage contract midway?
A. The contract period is a maximum of 3 months, and you can choose not to renew it. Cancellation within the period depends on the contract clauses and provisions for reimbursement of expenses, so you must first check the relevant clauses in your contract.

Q6. Which is more advantageous, general brokerage or exclusive brokerage?
A. It depends on whether you have a means of verification. Exclusive brokerage comes with REINS registration and reporting obligations, allowing the seller to verify the facts. General brokerage has neither.

Sources and References

• Real Estate Information Network for East Japan (REINS) 'Brokerage Contract System' https://www.reins.or.jp/contract/

• Real Estate Information Network for East Japan (REINS) 'Frequently Asked Questions (Property Confirmation for Sellers)' https://www.reins.or.jp/qa/

• Fudousan Japan (Real Estate Transaction Promotion Center) 'REINS Transaction Status Management' https://www.fudousan.or.jp/keywords/vol42/index02.html

• Real Estate Brokerage Act Article 34-2 (Brokerage Contract), Article 46 (Remuneration), Article 65 (Disciplinary Action)

• Enforced January 1, 2025: Amendment to the Ordinance for Enforcement of the Building Lots and Buildings Transaction Business Act / Interpretation and Operational Guidelines for the Building Lots and Buildings Transaction Business Act (Regarding Article 34-2)