Post updated: February 21, 2019
Real Estate Japan recently conducted an e-mail interview with Shinichi Kawamura on questions we frequently receive about buying a home in Japan, including how to get financing, what due diligence is recommended and the fees and taxes to be aware of. Mr. Kawamura is CEO of LINC Inc., a real estate consulting company and brokerage in Tokyo.
Q1: What kind of due diligence should buyers do when buying a home in Japan? For example, what are some issues that may arise when buying a previously owned home? How can an agent help with due diligence?
Checking the repair history is essential when you are buying a home. Among other things, it is important to know when large-scale repairs have been carried out and when waterproofing work on the roof has been carried out. This is true whether you are researching a free-standing home or an apartment unit.
Please obtain the “Important Research Report” (Juyojikou-chousa-hokokusho) document for the property from the agent. There should be a repair record for the property detailed in this report.
You should also check the repair reserve fund in this report to make sure that there are sufficient funds to cover expenses for repair work which will be carried out in the future. Condominiums for which repair work is not planned may gradually deteriorate in appearance, causing the value of the asset to decline.
Therefore, it is recommended that you ask your agent to obtain the Important Research Report and go over it carefully with them.
Q2: What are some common misconceptions that foreigners have about buying a home in Japan?
We have provided consultation for many foreigners and Japanese interested in buying a home, and I do not really think there are common misconceptions, as such.
However, in general, I think that whether you are a foreigner or Japanese, you need to have a clear idea of your future plans for the property. For example, will you sell the property when you return to your home country, rent it out to obtain regular income, or live in the home for an extended period of time, and so on.
Some people shop for a home on a whim or for emotional reasons, but I think it is important to look at properties based on analytical data and with a firm plan. For example, even comparing properties at nearby stations, there may be a price difference depending on the distance from the station.
Even within the same district, property prices may be rising or falling. When choosing property, I do not want you to change your hopes and dreams, but I do think that if you take a data-based approach, it will be a better home purchase.
Q3: Would you advise people to buy and renovate a vacant house? What are some issues people may not be aware of with respect to buying a vacant house?
In the case of a house, remember to check the structure and building diagram. In the case of an apartment, be sure to check the management agreement.
With respect to a free-standing home, there may be restrictions imposed on the building structure and water supply and drainage equipment. For apartments, the management agreement may place restrictions on what you are allowed in renovate.
Therefore, there are cases where it may be difficult to create your ideal home, depending on the existing restrictions.
Q4: Is it common for there to be multiple offers for a home? How much flexibility is there to negotiate on the listing price?
Multiple offers are common in Japan. However, basically it is first-come, first-served, and the right to negotiate is obtained as a result of moving quickly. However, when multiple offers are submitted at the same time, most cases are decided on the highest offer. There are cases where negotiations may be disadvantageous, even if you submit the first bid. So, it’s still possible that the party submitting the second bid may be the one to proceed with the purchase.
Q5: For foreigners, what are the main requirements for getting financing for a home mortgage through a Japanese bank?
The amount of down payment you are required to provide will vary depending on whether you have permanent residency status, a work visa, the amount of your annual income, and so on.
Basically, however, the bank’s main concern is whether the purchaser will stay in Japan. During the loan re-payment period, the bank wants an assurance that the the buyer will be residing in Japan.
For banks, it is difficult to insure that a borrower will make prompt payments if they are outside Japan.
Therefore, if you are financing your purchase as a foreigner, you need to prove that you will continuously reside in Japan during the re-payment period.
Q6: What are the main fees and expenses people should be aware of when buying a home?
There are various expenses depending on the specific property. Below are the main ones. You should check with your agent for exact fees and expenses for the property you are considering buying.
- Stamp duty
- Registration license tax
- Judicial scrivener’s compensation
- Property Tax
- Property acquisition tax
- Brokerage fee
- Financing commission
- Guarantee charge
- Fire insurance premium
- Earthquake insurance premium
- Group credit life insurance premium
Q7: What are the main running expenses and annual taxes potential home buyers should be aware of?
- Property tax
- City planning tax
- Administration fee
- Reserve fund
Editor’s note:
Real Estate Japan Inc. and LINC Inc. are pleased to present a brand new series of seminars on buying your dream home in Japan. The seminar will be led by Mr. Kawamura (interviewed above) and Mr. Yasa from LINC Inc., with interpretation provided by Real Estate Japan staff.
In this seminar, we will cover the basics of buying a home, including:
- The process of buying a home in Japan
- How to get financing as a foreigner
- Tax benefits and tax deductions
- And much more
To learn more and to register, please visit one of the following available seminar dates:
How to buy your dream home in Japan: Including 2019 tax issues (March 2, 2019)
How to Buy Your Dream Home in Japan: Including 2019 Tax Planning and Incentives (March 26)
Investment Seminars
How to Get an Investor Visa in Japan by Investing in Japanese Real Estate (February 26)
Investing in Tokyo Residential Real Estate for Beginners (February 28)
Selling property in Japan
Making the Decision to Sell Your Property In Japan and How to Maximize the Asking Price (March 12)
Getting Permanent Residency in Japan
Lead photo: iStock