The Purchase Application
There are two types of purchase application in Japan.
If you are purchasing a new property you will need to complete an application to purchase (購入申込書 kounyuu moshikomisho). Competition for a new-build may be fierce and the developer or real estate company may have received, in relation to condominiums, more applications than actual units available. In this case a lottery may occur and the prospective purchaser may lose out. Along with the application to purchase a fee of up to ¥100,000 will be required but this will be returned if the application is unsuccessful.
If you are purchasing pre-owned property you will need to complete a letter of intent (買付証明書 kaitsuke shoumeisho) and submit it to the seller. The letter of intent serves two purposes – first to show you are serious about purchasing the property and second to kickstart the negotiation process.
Along with the purchase applications the prospective buyer will need to pay the Ernest Deposit (<10% of the total purchase price) to the seller. In the case of purchasing a new property, the up-front fee paid will be part or all the Earnest Deposit.
The Explanation of Important Matters
Before a purchase agreement proceeds it is a legal requirement that the realtor provides the purchaser a document called the Explanation of Important Matters (重要事項説明書 juuyoujikou setsumeisho) containing information on the history of the property, maintenance status, zoning, survey results, condominium management fees, penalties, etc. The document was originally conceived as a more concise and more easily understandable document than the legalese in a contract of sale. On the other hand the required contents have grown over the years and the document can be many pages long. It is read or reviewed with the buyer by a registered broker (宅地建物取引主任者 ) at the time of signing the purchase agreement. Please note: most realtors are not registered brokers, though every real estate company must have a certain number of brokers to perform such specific tasks. As a signed/stamped purchase agreement is legally binding it is important that this document is read and understood. This is where having a trusted Real Estate company to assist you can be priceless.
Sign and Seal the Deal
The signing of the contract and the purchase agreement are performed usually at a room in a bank with both the buyer and the seller in attendance. The reason this is done in a bank is that the deposit of the the funds for the purchase, usually presented in the form of a cashier’s cheque, into the seller’s bank account need to be confirmed before the deal is completed.
Once you are happy with the Explanation of Important Matters and/or have sought clarifications this document and the purchase agreement can be signed. After this the deposit is confirmed and the registration of the new owner can be undertaken by the legal scrivenor (司法書士), a type of lawyer who performs property registrations, and who has also been in attendance at the signing. The legal scrivener, by the way, is also tasked with calculating all the costs, taxes, etc., and determining the buyer’s and the seller’s share of these costs.
If the purchaser does not already have a seal, which is your name registered in Japanese characters or letters, one will need to be made and registered as it’s a legal requirement for documents in Japan. Copies of the certification of the registration will also be required at the contract signing.