In Japan’s real estate market, the practice of “Kakoikomi” (囲い込み) has been a growing concern. This refers to a situation where a seller’s agent intentionally prevents a buyer’s agent from scheduling property viewings or introducing a particular property to clients. The reason? The seller’s agent wants to find a buyer independently to secure commissions from both the seller and the buyer.
While dual agency—where one agent represents both the seller and the buyer—is not illegal in Japan, it creates a conflict of interest. Instead of working in the best interest of the seller, the agent may prioritize maximizing their commission. In some cases, agents engage in Kakoikomi for an even more self-serving reason: they intend to buy the property themselves at a lower price to later resell it for a profit.
This article explores the mechanics of Kakoikomi, why it persists, and the negative impact it has on sellers, buyers, and the overall market.
How Does Kakoikomi Work?
Kakoikomi is directly linked to the agency system in Japan. When a property is listed, the seller’s agent is responsible for marketing it and finding potential buyers. Ideally, the property should be made widely available to all real estate agents, allowing buyer’s agents to introduce their clients.
However, if the seller’s agent finds a buyer on their own, they can earn a double commission—one from the seller and one from the buyer. This creates an incentive for them to block outside buyer’s agents from accessing the property. To do so, they employ tactics such as:
- Withholding information on REINs (Real Estate Information Network System), Japan’s national real estate database, to make it difficult for buyer’s agents to obtain full details.
- Claiming they cannot reach the property owner, delaying or preventing property viewings.
- Suggesting that the property is already under negotiation, discouraging other agents from pursuing it.
- Convincing the owner that they will buy the property themselves if no buyer is found—but with the hidden intention of reselling it for a higher profit later.
These practices not only reduce transparency in the market but also prevent sellers from receiving the best possible offers.
Why Does Kakoikomi Persist?
Despite being ethically questionable, Kakoikomi continues for several reasons:
1. Financial Incentives for Dual Agency
- In Japan, real estate commissions are regulated by law. An agent can charge up to 3% of the sale price + 60,000 yen (plus tax) from both the seller and the buyer. By handling both sides of the transaction, the agent doubles their earnings.
2. The Agent Wants to Buy the Property Themselves
- Some seller’s agents know how valuable a property is and realize that they can make a significant profit if they buy it themselves and resell it later.
- To achieve this, they tell the owner:
- “If no buyer is found, I will buy it myself.”
- This reassures the seller and makes them less likely to push for more aggressive marketing efforts.
- However, the agent is deliberately avoiding selling the property to others, waiting for the right moment to purchase it at a lower price.
3. Lack of Seller Awareness
- Many property owners do not realize they are being affected. Since they rely on their agent’s expertise, they assume that a lack of buyer interest is natural rather than a result of Kakoikomi.
4. Difficulties in Detection and Regulation
- Because the seller’s agent can control information flow, it is difficult for sellers to verify whether their property is truly being marketed to the widest audience.
- There are currently no strict penalties against Kakoikomi, making it a low-risk, high-reward practice for agents who engage in it.
Impact on Sellers, Buyers, and the Market
Negative Impact on Sellers
- Fewer potential buyers: Sellers miss out on competitive offers, leading to lower sale prices.
- Longer selling periods: With fewer viewings, properties take longer to sell.
- Selling below market value: If the seller’s agent intends to buy the property themselves, they may intentionally downplay its market value to convince the seller to accept a lower price.
- Lack of transparency: Sellers are often unaware of the full extent of the market demand for their property.
Challenges for Buyers
- Limited property access: Many potential buyers never get the chance to see or bid on properties due to restricted access.
- Higher prices and fees: If a buyer is forced to work with the seller’s agent, they may end up agreeing to less favorable terms.
Damage to the Real Estate Market
- Unfair competition: Honest agents who follow ethical practices lose opportunities to unethical practices.
- Market inefficiency: Transactions that should be quick and competitive are artificially slowed down.
- Distrust in the industry: Both sellers and buyers become skeptical of the real estate process.
What Can Be Done?
For Sellers
- Work with transparent agents: Before signing an exclusive contract, ask about the agent’s policy on working with buyer’s agents.
- Request marketing proof: Ask for records showing where and how the property is being advertised.
- Be cautious if an agent offers to buy your property: If your agent insists on buying your property themselves, consider whether they are acting in your best interest or simply waiting to profit from it later.
- Consider multiple listing contracts: Some contracts allow the property to be listed by multiple agencies, increasing exposure.
For Buyers
- Work with trusted agents: If you suspect a listing is being withheld, consider looking for other properties.
- Look for direct listings: Some properties are listed by sellers themselves on real estate platforms, avoiding agent interference.
- Handle the dual agency system carefully: If you really want to buy a specific property only available from an agency utilizing “duel agency”, work with said agency with extra caution, especially with regards to property price and the conditions of sale.
For the Industry
- Stronger regulations: Japan’s real estate authorities could introduce penalties or monitoring systems to prevent Kakoikomi.
- Transparency in REINs listings: Making full listing information mandatory and trackable could prevent agents from selectively hiding details.
Dovetail’s Thoughts
Kakoikomi is a major ethical issue in Japan’s real estate industry, benefiting agents at the expense of sellers and buyers. While it may not be illegal, it creates a conflict of interest that distorts the market and reduces trust in real estate transactions.
For sellers, understanding this practice and choosing the right agent can make a significant difference in achieving a successful property sale. Buyers should also be aware of potential roadblocks and seek alternative approaches when facing uncooperative agents. Ultimately, increased awareness, stronger industry regulations, and a push for transparency are necessary to eliminate Kakoikomi and create a fairer real estate market in Japan.
If our clients really want to consider buying Kakoikomi properties because these properties are their dream homes, we will share the contact information of the seller’s agents to them so that they can access to these properties. It means that we will lose an opportunity to earn a commission as Dovetail. However, it is very important that our clients buy their dream homes in Japan after all. We really hope that practice of Kakoikomi and dual agency will be put to an end soon and the Japanese real estate industry will solely focus on helping customers in the near future.