Guide to Selling Property in Japan
Method of Sale
When selling real-estate in Japan it is possible to list the property exclusively with one agent (referred to as a “senin” exclusive agreement) or with multiple agents (“ippan” general agreement). In either case the vendor enters into a simple contract with the agent or agents, usually for a period of 3 months. The main benefit of using an exclusive agent arises from the obligation it places on the agent to make your sale happen. By entrusting the sale of the property exclusively, the agent is very motivated to invest the time and resources required to sell the property. Also, with an exclusive agent it is much easier to control who is visiting you property and when. For occupied property this can be a major negative of using multiple agencies.
Setting the Listing Price
Based on the condition of your property, location, age, type of construction and recent sales prices for similar properties, your agent will make a recommendation of an appropriate listing price. As most of the transactions in Japan are negotiated private sales there is usually some price negotiation which takes place. For most properties, buyers in the current market expect a discount of around 10% from the listed price. The vendor is of course free to set the price at any level but a realistic listing price is the key for a timely sale of the property. Listing a property with an inappropriately high price can result in the property being on the market for a long time and then having price reductions which can make it look less attractive in the eyes of a buyer.
Your agent will work with you to determine the appropriate marketing strategy for your property. Depending on the marketing budget a selection of print and web advertising is used to achieve maximum exposure of the property. We recommend that professional photos are used in all marketing materials to different the property from others on the market.
Presentation of your property is a critical for achieving the highest possible price. A buyer is far less likely to pay a good price for poorly presented property. Some of the negatives include; pet odors, cigarette or strong food odors, door and windows which don’t work properly, rubbish or untidy personal belongings and dirty floor coverings or bathrooms.
For vacant properties, Housing Japan can help arrange for cleaning, general touch-up and new wallpaper and floor coverings. If the property is unfurnished we also recommend the use of decorator furniture for the period of the sale. Advice on the best type of furniture can be obtained from our furniture leasing partners. The cost to furnish a two bedroom apartment for 3 months is in the range of Y250,000 to Y400,000. This can be a good investment as a furnished property is much more likely to find a buyer.
In Japan it is common for a buyer to present their interest to purchase in the form of a written “purchase application”. This one page document, usually a fax, is non-binding but is intended to demonstrate that the buyer is serious. The buyer will note the price as well as any conditions for the purchase such as a requirement for financing or extended settlement period. This is the stressful part of the sales process as there is always negotiation and it can be hard to understand or trust what is going on. It is important to have a good relationship with your agent and trust that your agent is working for you. It is common for the buyer to get pre-approval from a bank before submitting a purchase application.
Once the price negotiation is complete the sale will move to contract. Usually the vendor’s agent will prepare the contract based on a standard sales contract available from the real-estate association. Once both parties agree with the contents the date for the execution of contracts is set. Often the buyer, seller and their agents will meet at the agents office and sign the contracts.
As a vendor the key details in the contract are 1) the cancelation clause and 2) the period of liability.
In most sales, at the time of contract the buyer will pay 10% of the purchase price or JPY 10 million for higher priced properties. This deposit is paid to the vendor. This deposit is generally not refundable, although a contract which has a “finance clause” will allow for the contract to be cancelled if the buyer is unable to get financing for the purchase. The deposit is refundable in this case.
The guarantee period (known as the Kashitanpokikan”) is another important consideration for the vendor. In most sales of apartments or buildings the vendor is required to provide a guarantee on (1) water leakage (2) Termite damage (3) water and sewerage plumbing. The guarantee applies for a period of time after the settlement, usually 3 for an individual vendor and 12 months for a corporate vendor. Under the law if there is a problem with the property that was known (by the agent or owner) but not disclosed at the time of the sale, the agent or vendor still have liability regardless of the guarantee period specified in the contract.
Finally the settlement day arrives. The proceeds of the sale are transferred to your account and the ownership registration of the property is changed to the new owner. If the property is going to be mortgaged the settlement will usually happen at the buyers bank. First the notary will check all documents and if they are fine, the bank will transfer the amount to the vendor’s bank account. The settlement process should be very smooth and relatively stress free for the vendor.
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