For most sales of residential real estate in Osaka, those properties will be publicly advertised on Japan’s REINS MLS system, or on online property portals. For commercial real estate, for apartment buildings for sale in Osaka and other multi-family properties, and for some newly-built, high-end luxury condominiums, Osaka is yet another example of a real estate market that strongly favors off-market transactions.
“[A] startling amount of real estate deals happen ‘off-market.’ Real estate changes hands without ever being officially ‘listed’ with anyone. Relationships are important everywhere, but they are crucially important in Japan.”
— Anton Wormann, real estate investor
Buying off-market property is a popular strategy for many experienced real estate buyers. Working with the right agent can help you unlock the potential of off-market property as part of your investment strategy for real estate in Osaka. To find an agent in Osaka, contact us now.
Why Osaka Real Estate Investors Prefer Off-Market Real Estate
Off-market real estate sales in Osaka are so common because they create a lot of value for both buyers and sellers. While some off-market sales involve naïve sellers, for experienced real estate investors, off-market real estate transactions are often the preferred way to buy and sell property.
Most off-market property sales in Osaka begin when an agent or broker connects a buyer and a seller for a private sale. While a well-marketed public sale can often get the seller a higher selling price, the traditional public sales process forces the seller to spend time, effort, and expense to prepare the property for market. If the seller or the broker is experienced, the value for a given property in Osaka may be relatively easy to determine, and bids and negotiations via a public sale may not be as necessary; the broker simply presents a realistic price to experienced buyers in the community, and the sale proceeds quickly and easily between insiders.
The kinds of buyers invited to purchase these off-market listings often have a reputation for being experienced, easy to work with, and well-funded; all of which makes them attractive partners for off-market sellers.
Osaka Real Estate Brokers Drive Off-Market Transactions
Access to off-market sales of property in Osaka is especially dependent on developing a relationships with the local real estate brokers and real estate companies.
Osaka real estate agents that are capable of arranging off-market deals play an even more important role than agents in traditional sales; their inside knowledge of the needs of local buyers and sellers, and their ability to ensure the transaction is smooth and easy for all parties, help the deal come together. Because of their special knowledge and connections, agents that can be trusted to create these kinds of sales often earn a commission from both the buyer and the seller.
In an off-market sale, the agent involved is more of an active deal maker, personally creating the deal behind the scenes.
Why Some Osaka Real Estate Agents Prefer Pocket Listings
Many Osaka real estate agents work hard to list local property; they want to represent the seller, preferably with exclusive rights to the property. Once an agent has an agreement to represent the seller, that agent will earn a commission when the property is sold. When the seller and the agent agree that the property is not going to be publicly marketed, that property is said to be “in the pocket” of that agent, otherwise known as a “pocket listing” or a “quiet listing.”
“Undisclosed properties are real estate information which are not listed on REINS or any portal site but held by a real estate agent. Undisclosed properties are often shown to the real estate agent’s top customers, and it is possible to expect that they are excellent properties with good yields.”
— From the book Real Estate Transactions in Japan
If the agent can then also find a buyer for that property, the agent can potentially earn a commission from both the buyer and the seller, earning twice the commission as compared to a traditional sale where the total commission is shared with another agent.
In some cases, when the agent is experienced, and has a good local network, that agent can find a suitable buyer with a few phone calls; there are known buyers in Osaka that will consider buying property that meets certain criteria. If the agent can show that the property meets the investor’s criteria, the sale can proceed quickly for everyone involved.
Dual Agency in Real Estate Transactions in Osaka
When one agent represents both the buyer and the seller, that practice is called “dual agency” in Osaka, or what is called “double-ending” the transactions in other markets. Dual agency in Japan is the practice of representing both the buyer and the seller on the same deal.
While dual agency can and does create conflicts of interest – particularly in residential property sales – in off-market property deals, the dual agency itself is what enables the transactions.
It is possible to have two agents (one representing the buyer, and one representing the seller) in an off-market property transaction, and in that case each agent will earn something like the traditional 3% commission. But because one agent can potentially “double-end” the deal, and earn more commission, these agents are highly incentivized to create off-market deals. Because off-market deals can pay a double commission to the agent, local agents are motivated to cultivate these deals, often personally creating a deal that might not have happened at all without that agent’s energy.
The Best Properties Are Available Off-Market in Osaka
What makes a property high quality or attractive depends on the perspective of the buyer. For investment properties in Osaka, high quality real estate may mean that the property is in an ideal location, that it generates exceptional income, or that it is available at an attractive price. Because high-quality properties are desirable, they attract many offers – sometimes even when the property is not considered available for sale.
For the most desirable properties, buyers will actively approach the seller to see if they might consider selling the property. For this reason, many of the best properties will never be found on online property websites for Osaka real estate.
“Besides, properties of better quality are now usually circulated among insiders with mutual trust.”
— Yutaka Matsunaga, Asset Manager (from the book Winning Strategies for Japan Real Estate)
One way to begin to understand that the best investment properties in Osaka are typically found off-market, is to look at the investment properties that are in fact listed on public real estate listing websites in Japan. We recently did a brief review of some small, rental income multi-family properties in Osaka. While all of the properties in that review were in excellent, central locations, the only one that included rental yield was listed 2.29% (the other two could offer no details on rental income).
Most successful real estate investors in Osaka will want a rental yield well above 2.29%. There are high-rate-of-return real estate investments in Osaka, but most of the best properties are traded in these off-market transactions between Osaka real estate brokers and insiders.
What you see online are mostly unwanted properties. For better properties, you need to work through local brokers.
Examples of Off-Market Transactions in Osaka
An example of an off-market transaction in Osaka might be when a well-connected local agent meets a qualified investor, works with that buyer to confirm their budget, chooses the local Osaka City wards where they might want to buy, ensures they have a commitment to buy, and then makes several strong offers for properties in the area until an owner that will accept the offer is found. In other scenarios, an agent works with the seller, and begins to tell investors and other brokers that a property might be for sale, and that networking encourages offers to buy the property.
In either of these examples, the buyer and the seller find each other via a skilled agent, and there is no need to ever list the property on REINS property listing service or on Japanese online real estate portals like Suumo, AtHome or Nifty.
If you only look at properties online, you will generally find properties that have already been passed over by experienced buyers. Those properties are listed online when an off-market buyer cannot be found, potentially indicating the property is not particularly attractive or valuable to insiders. Sometimes the only way to get access to the best properties is to work through a local Osaka broker to gain access to off-market deals.
Off-Market Deals for New Construction in Osaka
Another example of how off-market real estate works in Osaka is related to new construction of commercial, multi-family rental property, or even for new luxury condominiums in Osaka.
“Japan’s rich, seeking privacy and assisted by private bankers, often turn to off-market deals in which properties aren’t listed. With new, high-end apartments, developers tend to shroud price details in secrecy.”
— Lisa Du, Bloomberg
In some off-market deals, a developer buys some land. Before construction begins, that developer works with local Osaka real estate agents to find a buyer (or buyers) for the finished property. Even before construction has begun, the future structure or units are sold off-market to investors or to special buyers in the agents’ networks. When the building is complete, many if not all of the opportunities for that building are already sold.
That is another example of how many of the best opportunities are never made available to the public. Without a relationship with local agents, many properties for sale in Osaka cannot be discovered.
How to Buy Off-Market Property in Osaka
Osaka’s off-market real estate is sold between insiders. It is unlikely that a new buyer will be invited to participate in the best deals. However, even relatively new buyers in the market can have the opportunity to buy pocket listings in Osaka if they know brokers that have access to those deals, and if they can prove that they are prepared to make a reliable offer to local sellers.
Because Osaka real estate investors cannot find off-market property online, buying off-market property in Osaka begins with establishing a relationship with a local Osaka real estate broker. Once you have made contact, you work with your agent to establish your goals.
“[A]ttempting to navigate the real estate market alone can be overwhelming. This is where working with brokers can be a game changer. Not only do they possess the expertise and market knowledge, but they also have valuable connections that can unlock off-market deals, giving you access the properties that may not be publicly listed.
— Anton Wormann, from Free Houses in Japan
Agents that can create off-market deals will want to be sure you have the funds available, that you can conduct the transaction like a professional, and that you can complete documents and signing with minimal delays in communication. If you can wire your funds to the agent in advance, or otherwise show the funds are already in Japan, you may increase the agent’s confidence that you are prepared for these “insider” deals. Once your agent knows what you want, and that the funds are available, that agent may be willing to work with personal connections to create a new deal for you, or to work to get your offer to sellers that want an off-market sale.
Introductions to Local Osaka Real Estate Agents
At Find Osaka Agents, we make introductions to local real estate agents that are available and ready to help you buy real estate in Osaka. While not every client needs an off-market deal, in some cases we might be able to introduce you to agents that can source off-market Osaka property for you. To get started, contact us.
See also:
— Our outline of the process for buying Osaka investment property
— Different types of real estate for investment in Osaka
— Some examples of small, multi-family properties for sale in Osaka
— Details about paying property tax in Osaka
— International Schools in Osaka
— Domestic contact for real estate purchase in Japan
And:
— Examples of investment property for sale in Kobe, Japan
— Examples of condominiums for sale in Sapporo, Japan
— Dual Agency in Real Estate Transactions
— Investment Property in Hokkaido
— Details of special zone minpaku in Osaka