When a Redditor got down to promote his Tokyo residence, he had no concept the rollercoaster experience that awaited him. But via shrewd negotiation techniques and taking part in competing companies off one another, he managed to slash the usual 3% company fee all the way down to an unprecedented 0-1%.
His wild however extremely academic saga, posted on the JapanFinance subreddit, gives an illuminating glimpse into the quirks of Japan’s actual property market.
Buying Property as a Foreigner
The Redditor’s property adventures started 5 years in the past when he bought a 50 sq meter 2LDK residence in central Tokyo for 50 million yen ($325,000).
Key takeaways for foreigners seeking to purchase:
- Permanent residency isn’t required to get a mortgage
- Banks like Prestia provide the identical rates of interest to PR and non-PR holders
- Non-PR holders want a 20% down fee vs 0% for PR holders
- Japanese language capability helps however isn’t important
However, he cautions that some banks discriminate towards pregnant girls, deeming them a better danger of defaulting in the event that they don’t return to work. While frequent follow in Japan, that is unlawful in Western international locations.
Finding an Agent and Getting a Mortgage
When it got here time to promote, the Redditor first tried renting out his residence. But the maths didn’t work out after factoring in greater funding mortgage charges, renovation prices, and property administration charges.
With his Sumitomo financial institution mortgage requiring he promote inside 6 months, the clock was ticking. He engaged the identical Sumitomo agent who helped him purchase his new Saitama property, signing an unique gross sales settlement at a reduced 1.5% fee.
Cutting Commissions to the Bone
When that agent didn’t ship outcomes after 3 months, the Redditor started working with 3 different companies on a non-exclusive foundation. Sumitomo raised their charge to three%, however by saying he had 1.5% affords elsewhere, he negotiated the identical from the opposite huge companies Mitsui and Tokyu Livable.
Tokyu Livable hustled arduous and inside 3 weeks introduced in a motivated purchaser. When Sumitomo immediately discovered a competing purchaser, Tokyu Livable made the unprecedented transfer of dropping their fee to 0% to safe the deal for his or her consumer.
The Redditor received Sumitomo to match.
Financing Fall Through
In a gut-wrenching twist, Sumitomo’s purchaser, who was pre-approved for a mortgage, ended up being denied the mortgage as a result of the spouse was a most cancers survivor. Banks deemed this too dangerous, one thing that may be blatantly unlawful within the U.S.
With the clock ticking once more, the Redditor went again to Tokyu Livable. They managed to herald one other purchaser inside a month, in the end getting the deal finished at a 1% fee.
The Bottom Line
When all was mentioned and finished, the Redditor bought his property for 63 million yen after buying it for 50 million 5 years prior. After paying off his mortgage, he walked away with 13 million yen (~$85k USD) in revenue, an impressive return on funding.
Advice for Sellers
This Redditor’s key items of recommendation:
- You don’t want PR or to talk a lot Japanese to get a housing mortgage. You in all probability simply want a good paying job and 20% down fee.
- Most banks that he spoken to have the identical rates of interest for PR and non-PR. The solely distinction is with PR you may get 100% of the mortgage and with out you want a 20% down fee.
- Banks can provide ‘pair loans’ which you’ll be able to apply for collectively along with your partner. He thought this was simply attention-grabbing as you’ll be able to’t have joint financial institution accounts right here.
- It appears most individuals promote the property they’re residing in earlier than they purchase a brand new property. He did the alternative. It labored out ultimately for him however he understood why most individuals don’t do it.
- Many (most?) banks won’t give pregnant girls loans as a result of a variety of girls don’t return to work after giving start. This is totally authorized discrimination in Japan however unlawful in different components of the world (just like the US).
- It appears banks don’t like folks to have multiple mortgage, and in case you have multiple private mortgage, some banks offers you a timeframe that you need to promote one of many properties so that you solely have one mortgage
- If you lease a property you beforehand lived in, legally you’re supposed to change your mortgage kind to an funding mortgage, after which your curiosity skyrockets. Some folks don’t inform the financial institution (although this isn’t what he did, and he would by no means advise it)
- When you signal as much as promote a property, many companies have three varieties of contracts: two variations of unique and a non-exclusive settlement. The time period is often 3 months.
- Suumo is a common itemizing web site that can be utilized by any company and never completely operated by Sumitomo
- When you signal unique agreements, you’ll be able to nearly at all times get a reduced charge, often half (1.5%).
- If you’ll be able to negotiate effectively sufficient, you’ll be able to even get 1.5% non-exclusive charges with companies, even massive ones
- Though uncommon, it’s attainable to recover from an asking worth. But sure, he thinks that is fairly uncommon as ‘bidding wars’ aren’t actually a factor
- Though uncommon, an individual pre-approved for a mortgage is also denied the precise mortgage in that 1-2 month-ish software course of. He had brokers say there’s like 1-5% probability of this with some brokers saying they’ve by no means seen this occur (although it did occur to him).
- Banks can deny you a mortgage when you’ve had an unlucky medical historical past, even when you’ve recovered
- On most paperwork, you’ll be able to in all probability write your handle, identify, and so on in English as an alternative of Japanese. It’s nearly by no means ‘required to write in Japanese’ in my expertise besides possibly on the ultimate paperwork on closing day.
- At least in his expertise, he would by no means advise somebody to signal an unique settlement with any company until they’ve confirmed expertise working with that agent. He believes it finest to work with a bunch of companies, discover which one you want after which go unique if there are good advantages.
- A possible purchaser might wish to provide much less of a deposit than 5%. Lots of issues in actual property are negotiable.
- Selling actual property is a tense expertise, however when you do your analysis and consider realistically within the worth of your property, one thing ought to come up, particularly in case you have a superb agent
Comparison to the U.S.
While negotiating commissions all the way down to 0-1% is unprecedented within the States, the place sellers sometimes pay 5-6%, this Redditor reveals it’s attainable in Japan for savvy negotiators.
The requirement to promote inside 6 months or have the financial institution seize the property additionally differs from the U.S. the place house owners can sometimes take their time to promote.
Finally, the blatant discrimination towards pregnant girls and most cancers survivors in lending would end in main lawsuits within the U.S.
User Comments
“As a fellow real estate purchaser, I felt that I should add that you can indeed get loans without PR but your choices will narrow significantly. Of course you’ll have to pay a bigger down payment and you might get worse terms.”
“Two points to add: this entire experience is in Kanto. Major city vs more inaka will be a very different experience. Many of the large central banks won’t lend outside of the metro areas, and the banks in the sticks can be really picky, if not outright racist.”
“I agree with you, it’s frustrating/insulting to be making good money with no intention of quitting only to be completely discounted as an income source if you happen to be pregnant. It was my SECOND kid too, so I’d clearly already had a kid and gone back to work once before!”
“Probably a salient point, specially central Tokyo’s real estate market has seen large, outsized gains in the recent years. But applaud the info rich post, very useful and worth the read to Tokyo long term residents.”
“Negotiations are doable in Japan, believe it or not. You just need to stick to your guns.”