There are many things to think about when buying a home in Tokyo or elsewhere in Japan. Here are five key things you should not do when making what will probably be one of the biggest purchases of your life.
1. Don’t underestimate the importance of working with the right agent
One of the first steps in buying a home is finding an experienced real estate agent you can trust. It is also recommended to find a close friend or colleague to give you a second opinion once you have narrowed your choices down. If you know someone working in the real estate industry who will give you a second opinion, you will have a lot more comfort when it comes time to pay the down payment.
Here is a searchable list of bilingual agents who deal with For Sale properties throughout Japan: Bilingual Real Estate Agents in Japan
Real Estate Japan also works with select partner agents to provide English support and free, no-obligation consultations for people just getting started in the home buying or property investment process. Our partner agents have experience working with buyers and investors of all levels, from beginning to advanced and can provide consultation on the entire transaction, as well as, of course, helping you find, negotiate, and close on your purchase. To learn more, please see: Real Estate Investment Support Services for Foreigners in Japan
You can also attend one of our free seminars to meet local agents and learn about the basics of buying property and getting financing. See a list of current an upcoming seminars here: Real Estate Japan Seminars
2. Don’t fail to educate yourself about local risks
One thing that many buyers neglect to research is the potential for a natural disaster to damage their new home. Generally, the main risks in Japan can be summarized as earthquake (and fire) risk, flooding, or tsunami risk.
In order to check potential earthquake risk, there are publicly-available hazard maps that most municipalities and real estate companies use to assess the likelihood and degree for shaking in a given area.
You can check the Japanese government’s official earthquake probability map in English here: What is the probability of an earthquake striking your neighborhood in Japan?
In addition, when you receive the Explanation of Important Matters prior to signing the purchase agreement, there should be information regarding whether the property is on a flood plain or area highly susceptible to earthquake damage.
The Explanation of Important Matters is the the legal disclosure document meant to provide buyers with the material information you should know before finalizing your property purchase. Here is an overview of some of the information that is covered: Explanation of Important Matters: What to know before you buy property in Japan.
In addition, when buying your home, you can be sure the building was constructed in accordance with the newest earthquake resistance standards as long as it was built after 1982. For an overview of earthquake building codes in Japan, please see: Earthquake building codes and technology in Japan and Top 3 factors that affects a building’s earthquake resistance
For flooding and tsunami risk, check the 海抜 (kaibatsu) or sea level on the local hazard map, and keep in mind the rule of thumb that the higher you are in a building, the less risk of damage from all types of natural disasters.
3. Don’t fail to minimize your financing and initial costs
Once you have found the place right to purchase, you will want to make sure and keep your financing and other initial costs as low as possible. You should time your application for financing with your work experience in mind. One of the criteria banks use to assess borrowers is how long the borrower has been working at the same company. If you have recently changed jobs, you will likely pay more for your home loan. There are a lot of miscellaneous costs when buying a new home, and costs range from 6-13% of the purchase price of a pre-owned home, and 3-5% for a new home (new homes are usually sold directly by the developer, so there are no separate broker fees).
- Which Japanese banks lend to foreigners to buy a home or investment property?
- Cost of buying real estate in Japan: Breakdown of purchase fees and taxes
As a foreigner in Japan, your residency status can significantly affect the financing terms for which you are eligible. If you are a Permanent Resident of Japan, local banks will give you much better financing terms than they would for working-visa holders. You can learn more about this at one of our upcoming seminars.
4. Don’t fail to think about whether the property will retain value over time
Another important thing to think about when buying a new home is whether the property will retain its value over time. Certain neighborhoods in Tokyo are always going to be popular, so buying in one of these areas lowers your exit risk. In addition, there are some famous real estate developers who always seem to find a market for their properties. Finally, it doesn’t matter how nice a property is when it is new if the upkeep is lacking. Regular maintenance usually saves money in the long term. Good property management is not just about lowering operating costs but also about extending or enhancing capital values.
How can you tell if a property is well maintained and will be attractive to future households? There are a few places to check that can be quite significant. Is the garbage area well organized? Are the parking areas clean? Who are the types of people who live in the building? Is the property in an area where there is relatively more crime? Are there children in the neighborhood, what school do they go to? How close is the nearest station, and how many train lines are you near? Is there shopping nearby?
5. Don’t underestimate the importance of viewing the property and the neighborhood in person
Perhaps the most important piece of advice of all is common knowledge in the real estate market however. No matter how well you research a property or how many times you look at a property online, you have to go and look at the property. In fact, you have to go and look at many different houses. Only by actually walking in can you get a feel for the place. And the more places you tour, the more you will learn what you really like and dislike, what you are ready to compromise on, and what the property is worth to you. It is also important to walk the neighborhood at least one time as well. Is there a noxious factory down the block or a major (noisy) construction project taking place nearby? You should find out who your neighbors are going to be before you are locked into a long-term loan.
Lead photo: Stock image via fudosan-pro.me