So, you have decided to give up your gypsy lifestyle as a renter and take the big plunge of becoming a homeowner—king or queen of your castle! However, you have never bought residential property, let alone in Japan. Read on to see the 7 steps involved in buying a condo or home in Japan for your residence. After an offer is made, a purchase agreement is usually signed within 1-2 weeks, with the closing occurring 3-4 weeks after that.
- Finding the Right House or Condo (and the Right Real Estate Agent!): Although you can search through ads and online listings, this can be very time-consuming and may not provide you with enough information to decide if you want to take the next step. Using a real estate agent, preferably a bilingual one, will help greatly in narrowing down the list of properties you are interested in. Having a bilingual, experienced agent can also help you understand the entire purchase process, evaluate risks, and best of all, introduce you to properties that are being sold privately or off-market. In Japan, unlike many other countries, many of the best available properties are offered privately or off-market. In choosing a real estate agent, make sure you find one who has a wide network of connections in the geographic areas you are interested in.A real estate agent will want to know where you want to live, your ideal type of property, your budget, and how you plan to finance. They will then give you several property descriptions matching your wish list and likely accompany you on viewings.
- Financing: As a general matter, most foreigners should be prepared to self-finance their purchase since it can be difficult, but not impossible, for foreign nationals to qualify for mortgage. Recently, however, some banks have somewhat loosened these hitherto strict requirements and are making housing loans to foreign nationals who meet certain criteria. We have heard that Shinsei Bank, Mizuho Bank, and Mitsubishi Tokyo UFJ Bank offer mortgage loans to foreigners with permanent residence status who meet certain criteria. The number of years of residence in Japan, a steady income, having a Japanese spouse, and the intent to live in Japan long-term are all factors that the Japanese banks consider. Approval process generally takes 4 weeks.Otherwise, you may want to consider mortgage loans from a bank in your home country. The Commonwealth Bank of Australia lends to foreigners from countries wherever is has a branch office. (It also lends to foreigners living outside Japan and investing in properties here.)
Your real estate agent can provide you with more information about locating foreigner-friendly lenders, the requirements, and filling in any applications. Even with the right visa status, you may need minimum annual earnings sufficient to make mortgage payments (usually least ¥3 million to ¥5.5 million).
- Submit Application to Seller. When you have settled on the property you want to buy, the next step is to fill in a “purchase application form”. You must indicate your offer price, the payment method, the closing date, and any other conditions. This is considered a formal offer which becomes binding when the purchase agreement is signed.
- Explanation of Important Matters: Before signing the purchase agreement, your real estate agent is required to explain certain important details about the property, including various legal limitations, management of the building, if any, limitations of use, the agreed upon payment method, terms of warranty, and the like. This explanation is called juyo jiko setsumeisho (explanation of important matters) and often takes place on the day you sign the purchase agreement. Make sure to keep a copy of this explanation document for your records.
- Signing the Purchase Agreement: This usually takes place at your real estate agent’s office and can take a few hours to finish. You will need to pay a deposit equal to about 10% of the total purchase price. You will need your hanko (personal seal), your down payment and other fees, and your Alien Registration Card.
- Closing: This often occurs at the bank and will be handled by a judicial scrivener (shihou shoshi). Upon the transfer by buyer of the balance of the purchase price to the seller’s account, the title to the property will transfer to the buyer.
- Registration: Your title to the property must be registered by a shiho-shoshi (judicial scrivener). The purpose of the registration is to make third parties aware of your ownership. Make sure you keep the proof of the registration, as you will need it to resell the property later.