<Procedures to Purchase Real Estate in Japan>
Real Estate Types and Purchase Flows
Are you aware that real estate properties in Japan can be roughly categorized into “newly built properties” and “second-hand properties” and purchase flows differ for each category? Many might think that investors usually choose to invest in second-hand properties. However, if you can only have a thorough inspection of the condition and structure of a second-hand property, we highly recommend you to buy such property not only for the purpose of investment but also for residence.
Below we would like to explain the flow for purchasing second-hand condominiums and detached houses.
■ Second-hand properties
① Second-hand condominiums and detached houses
② Renovated properties
“Reform,” compared with “renovation,” has the impression of having a long history of being used in Japan. The meaning of “reform” is limited to repair the damages made to the convenience and charm of the room and bring its condition back to “zero.” So, we can say that “just replacing the current kitchen system with a brand new one” is an example of a reform. Meanwhile, the word “renovation” is frequently used when the room as a whole is changed to become like a newly-built one, applying a specific theme. Its advantages for the buyer include being able to quickly move into a new space added with additional value and to save the trouble of repairing the damaged places, which would be required sooner or later. Even properties for investment purposes, if they have new interior and a specific theme, will be easy to lease. Some people think that you have to bet on renovation rather than just waiting for a tenant to rent your old “high-yield property”. In Japan, more and more discussions are made regarding how to make the most of existing properties before increasing the number of new ones. Therefore, the past few years have seen an increase in transactions involving second-hand properties.
■ The flow of purchasing second-hand properties (including newly-built detached houses offered on a small scale)
- You can choose to first find properties to purchase or to first select a real estate broker. It doesn’t matter which step comes first.
- When you choose to find a property, if the broker who is entitled to handle the property can only speak Japanese, transactions are difficult to carry out and the arrangement of interpreters becomes necessary. Therefore, we advise you to consult with a broker like us from the first place.
- Don’t forget to prepare a checklist for not only property details but also the surrounding environment and distance from the building next door before you visit properties.
- In general, a written offer is to be sent to the seller through a broker.
- Although it is possible to make an offer lower than the listing price of the property, we, however, recommend that you offer a realistic amount that would make the seller more likely to accept or negotiate.
- This step is not governed by law, but in principle, when the buyer and seller reach an agreement, the buyer makes an offer to the seller only when he/she has the intention of purchasing the property.
- If you intend to use a loan for the purchase, since a preliminary screening takes a considerable amount of time, you should make preparations in good time taking into consideration the possibility of being overtaken by a cash buyer.
- If you intend to make a purchase with cash, you should check the total amount of charges, and in order to earn the seller’s trust, should quickly respond to their request for proof of your identification and financial resources.
- The buyer enters into an intermediation agreement identifying the subject property, contents of the brokerage services, brokerage fees, and other details.
- Before entering into a sales and purchase agreement, the buyer will receive an explanation of important matters concerning the property to purchase from a real estate transaction specialist who belongs to the broker. As is the case with newly-built properties, you should expect it to take 60 to 90 minutes. For seals to be affixed to documents, you are advised to prepare a personal seal stamp (inkan) in advance.
- Once reaching an agreement with the seller, the buyer enters into a sales and purchase agreement with the seller.
- In general, the buyer pays 5-10% of the property price as the earnest money before entering into the agreement. As is the case with newly-built properties, the earnest money can be applied to the property price.
- The buyer enters into an official loan agreement with the financial institution from which the buyer received a pre-approval before entering into the agreement.
- The loan execution (commencement) date will be set on the date of delivery of the property.
- Charges related to the loan differ depending on the loan types and structures and each financial institution, so don’t forget to check these details.
- When preparations are completed for the delivery, the buyer pays the remaining amount of the purchase price (in the case of using a loan, the loan is executed).
- When the buyer receives the transfer of the property from the seller, formal procedures for real estate registration are conducted. The real estate broker conducts the registration procedures.