"We Buy Homes" Companies in Japan

I recently wrote some content on the topic of “Cash For Your Home” real estate businesses. I originally wanted to know if there were “Sell Your Home for Cash Now” companies in Japan (and it turns out there are, and that shouldn’t be a surprise), but the topic took on more meaning for me as the piece progressed.

From my time in America, I have (of course) seen ads to “Buy Your Home Now for Cash.” These ads are designed to reach property owners that are not actively trying to sell their home (but could), or have property that isn’t primary for them (and thus have less reason to care about it, or try to realize the full property value). I have never been a part of one of those deals, but general business sense tells me some of these companies are fishing for under-valued properties (and potentially naive sellers). But there is more to the story than that, which has made it a good topic to write about.

There is a long tradition in America of these companies placing signs on the exit ramps of the freeways - “We Buy Homes, Any Condition” - working a low-cost, guerrilla marketing tactic to identify home owners that wanted to essentially dump a property for a quick cash settlement. I can imagine scenarios where a quick cash payout for a home is a “win-win” (even if that isn’t always the case).

In today’s market, “outdoor” ads are probably still used to attract attention from would-be sellers, but many of these real estate businesses are doing their marketing on the internet. A good example of a company in this space is WeBuyAnyHome.com in the UK.

They have exceptionally honest and transparent marketing (which I admire).

We make sure our customers are aware that, whilst we cannot offer full market value, what we can offer is a guaranteed sale in the time frame you want, with none of the stress or uncertainty you’ll experience on the open market.
— WeBuyAnyHome.com

In the FAQs at We Buy Any Home, they are crystal clear that they are going to give you less money for your home than you would likely get if you took the property to market in traditional way.

There is sometimes a tradeoff for the seller when they want a quick, easy, all cash offer: the promise is a “fast and easy” route to “sell your property in less than a week” (and that seems to be true), but the compromise is that you will likely receive 50 - 80% of what your home would be worth in a more traditional sale. Do buyers really understand the value of their home and the inherent tension in that compromise? To the degree they do, the deals are “high end” and respectable. To the degree they do not, they could be seen as exploitive.

As part of my research for the piece, I checked with some real estate marketing circles to see if these companies were limited or banned from advertising in any way (like “payday loans” companies, or online gambling, etc). For the record, they are not. And as you see the full spectrum of operators in this space, that might become more obvious.

All cash buyers are a special breed. And while the original focus of my piece was about these cash buyers that focus on “less experienced” sellers in the market, there is more than one model for all cash purchases.

In theory, an all-cash buyer is a possibility for every property sale.  For some types of property, and in some markets, there is a high percentage of all cash sales

That is true. Property in Niseko is typically sold for all cash.  In that market, there are special reasons; like the high percentage of foreign buyers in Niseko, and that the banks see Niseko’s market as speculative (and thus rarely ever offer loans).

But for most property transactions (both residential and for many investors), the buyer will secure a property loan to finance at least part (and probably most) of the transaction.

It is true that most property sales involve a loan. Even for professional investors (maybe especially so, see cash on cash return), paying all cash isn’t typiucally recommended.

But there are very good reasons to pay cash, sometimes when there is no loan available, and there are often benefits for investors that can offer all cash terms. Simple market-making logic tells us there are also benefits to sellers in these transactions, or the market would not exist.

“Sell Your Home for Cash” businesses are not the only kind of buyer that prefers all-cash deals.

There is a kind of cash-buyer that is a type of savvy real estate investor (maybe all of them are). They “buy low and sell high.” And while that is a painfully basic business lesson, that is the objective for many all-cash real estate purchases. I suspect some of the businesses do market themselves to the uneducated seller (or those desperate for money). But there is another segment of all cash buyers in real estate that operate in a private, high-end, exclusive space, that basically works the same way, and for the same reasons.

In the article I wrote, I pulled some quotes from my research into the best books about Japanese real estate written in English. Here is a pertinent quote:

Finding those properties is really the key to success. Distressed or otherwise attractive properties are normally not listed online. Instead, that information is typically circulated discreetly between agents.
— Toshihiko Yamamoto
— From the book The Savvy Foreign Investor’s Guide to Japanese Properties

As I wrote about “Cash for Your House” businesses, the concept of off-market sales (sometimes call “pocket sales” in Japan) was a related way to see this same segment of the real estate market.

In that quote, Yamamoto is saying two things that interest me: First, that “distressed” properties can be attractive. While some residential home buyers might want to pay a premium for a home that is move-in ready, many professional investors want a property that “needs some work.” Or rather, what they really want is a property they can buy below market rate, and either flip or improve for a profit.

In that quote, Yamamoto goes on to say these properties are “not advertised online.” And in that comment, the companies that “put signs on the side of the highway” (or in today’s marketing mix that have professional and convincing website websites) are trying to solve the same problem:

”How can can I find sellers that are eager to accept below-market payment in exchange for a fast, clean transaction?”

As I wrote this story, I happen to mention my interest in this topic to my mother. I was describing these “We Buy Any House For Cash” companies, and she said, “Oh, yes, I know, we get something in the mail every week.” Interesting. Maybe you put a sign next to a busy road. Or maybe you send fliers to my mom every week. Or maybe…

Maybe, as a professional investor, you have cash on hand, and you let several real estate agents in your market (or in several markets) know it. And then as a buyer wants to dump a property (for any reason), those agents know you’re ready.

When an investor has the cash on hand, can complete a sale quickly, and agents in the area know it - sellers that want a quick sale can complete that sale in just a few days; the liquidity alone has some appeal.

As I wrote that piece for Find Hokkaido Agents, I listed several reasons why sellers sometimes prefer a quick, all cash deal, even if it’s below market rate. But I focused on three ideas in particular:

All cash sales for homes are faster, they are often perfect when you want to sell your home “as is,” and they are more private than traditional sales. That is a wide range of reasons, and it captures a wide variety of sellers.

The related concept of “off market” real estate sales is interesting. This year, I will write more about it (particularly off market real estate transactions in Japan). But I was surprised at the connections between the concept of “Cash for Your Home Now” and more high-end “off market” private deals. In many ways, they are successful for exactly the same reasons.