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5 Steps to Purchase Property in Japan

Purchasing property in Japan as an overseas foreigner may seem like a challenging task at first, but with the right guidance and understanding of the process, it can also be a smooth and stressless experience. In this article, we’d like to go through the procedures and considerations so you can prepare well in advance.
 
Step 1: Know what you really want
Properties in Japan can be as cheap as a million yen for 3 bedrooms, but also as expensive as a billion yen for the same size. Property prices can vary widely depending on area, distance to the closest train station, train line, age of construction, structure, view, etc. Start off from clarifying your priorities (what you can compromise and what you can’t), so you can narrow down your options when looking into properties.
 
Step 2: Talk to a real estate agent
There are multiple listing sites where agents list their properties. However, those listing sites are ran by different companies with different services. Many agents only use a few of them, and listings found on a certain site are often not found on the other. In addition, there are only limited listings published in English, and also off market listings which agents only share personally. Surfing through the internet can only get you to limited properties, and is easier and more efficient to reach out to an agent to receive the right recommendations.
 
※Major consideration: Finance options
Unfortunately, it is very challenging for overseas foreigners to acquire finance in Japan. Most banks (especially those who offer the best terms) require the contractor to speak Japanese, reside in Japan, have a permanent residence, etc. However, there are a few banks which finance individuals who reside in specific countries or speak specific languages, and local corporates owned by overseas foreigners. Eligibility will depend on the background of each individual, therefore is easier to talk to an agent who can guide you to the right bank.
 
Step 3: Look at properties and understand the market
As you look through properties, you will realize how construction age, facility, structure, location, land shape, road attachment, etc. can affect the property price. Also, how atmosphere can vary on different sides of the same train station, etc. I’m sure you will feel more comfortable and confident in choosing your property by going through this process and getting a feeling of the market.
 
Step 4: Purchase
Make an offer. Clarify your requirements (price, deposit, finance, signing date, etc.) and your agent will provide a letter of intent to sign. Many agents these days offer electrical signature, and the signing can be as easy as a click. Once the seller agrees on the terms and provides all necessary documents on the property, get your agent to revise the details and ideally get an English translation of the contract draft. Keep in mind that you will need to pay the deposit (usually 5-10% of the purchase price) at signing, and the remaining balance and acquisition costs (approx. 6% of purchase price, including brokerage fees, registration tax, insurance, etc.) at settlement.
 
※Good to know: Both the seller and buyer each hire their own broker and pay brokerage fees
Unlike western transactions, both the seller and buyer hire their own broker and each pay 3% brokerage fee. This system enhances the seller agent to list their properties (as they won’t need to share fees) and the buyer’s agent to have access to them. In Japan, only licensed realtors can handle a real estate transaction. In other words, people are hiring a licensed realtor instead of a lawyer to secure a transparent deal.
 
 
※Major Consideration: Overseas remittance
Depending on your residence, you may have restrictions on overseas remittance (either limit, and/or necessary days to transfer). Double check in advance, which bank you are remitting the deposit from, the limit of remittance, and necessary days for the recipient to receive the money. You shall arrange an escrow and transfer the funds prior to the contract so your deposit can be transferred right after the signing.
 
Step 5: Deliver
Your agent will arrange a judicial scrivener, responsible of confirming the seller’s ownership, double check of fraud, and of safe deliver of the title. Make sure your funds are in Japan by the settlement, so you do not breach the contract. At the settlement, the buyer will transfer the remaining balance and acquisition costs, then the seller will pass on the keys and the one and only non-reissueable title deed. It takes 2-4 weeks for the title deed to reflect the new ownership, but the buyer is capable of moving in any time after the settlement.
 
Purchasing property in Japan as an overseas foreigner requires research, planning, and being respectful with the Japanese real estate custom. By working with an experienced professional capable of navigating each step, most of the burden can be taken off of the buyer and can be a smooth and comforting process.
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