• Buying Land and Building November 30 - 11:01 am

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• Mortgages September 10 - 9:45 pm

• Renting a House January 17 - 12:24 pm

• Tenant Landlord Relations October 20 - 11:44 am

We are a foreign couple thinking of buying a Mansion in Tokyo. We have been in Tokyo for 18 months. Can anyone answer the following:

1. Can foreigners on a 3-year work visa buy real estate?
2. Can foreigners get a mortgage from a Japanese bank (or Citibank)? Is a Japanese guarantor required?
3. Are there any other obstacles we should be aware of?

I have not had this experience myself, so the following is heresay from over the years.

At the very least, you would need a Japanese guarantor who owns property and is willing to be responsible for your debt. Pretty tall order.

It is a long a difficult process to get a bank loan on real estate from a Japanese bank. Not sure if Citibank even does it.

I wouldn't be surprised if it takes all of your 3 year visa to figure it out. :)

>1. Can foreigners on a 3-year work visa buy real estate?

Legally, yes. Anyone can buy real estate in this country. Financing it is a different story (see below).

>2. Can foreigners get a mortgage from a Japanese bank (or
>Citibank)? Is a Japanese guarantor required?

Practically speaking, it is impossible to get a mortgage from a bank in this country-- Japanese bank, foreign bank, whatever-- unless you are married to a Japanese national. Your financial situation does not enter into the picture at all, nor does the existence of a guarantor. You can try, though. Eventually the banks are going to figure out that a good credit risk is a good credit risk regardless of nationality.

Note that if you have permanent residency you must be treated as a Japanese, and can even apply for the very cheap loans from the national kinko, just like Japanese can. (The national kinko helps finance the first 10-20 million yen for many people and charges cheaper interest than the banks-- your real estate agent will be able to give you more details. Permanent residency changes the picture entirely.

There is now a lawsuit (I believe in the Tokyo courts) from a foreigner who is sueing three (?) banks for rejecting his loan application even though he has sterling credit, an unusually high salary, etc. (I think this is the president of the International Press Club, but not sure on that one). FYI, for a Japanese national, an annual income of even only, say, 3.5 million yen can be enough to get a mortgage in many cases (it depends on who your employer is if your salary is that low).

You may be able to get a "personal loan" (at about 5.5% interest) from a bank with the final repayment date no later than the date your visa expires. Don't even bother trying to explain that you can get that visa renewed. They don't care; your loan will be due no later than the date your current visa expires.

It probably goes without saying that a bank in another country won't be of any help because the collateral-- the land/house themselves-- are in Japan, so the bank wouldn't be able to collect on the loan via the collateral should you default. (Well, they *could*, but it would be too expensive for them to even consider.)

>3. Are there any other obstacles we should be aware of?

No, but just to put this in historical perspective, the average Japanese could not get approved for a mortgage either until about 20 years ago. Banks only lent to corporations, not individuals. Talk to older Japanese about it; they will tell you how awful the situation was 30 years ago. Buying a house was pure fantasy for most of the population.

In the early 70's the economy (and personal income) grew enough that the average Joe wanted to buy a house, but the banks lent to individuals only rarely. This is when the Jusen corporations started. (Jusen are "non-bank" institutions which deal only with mortgages.)

By the time the early 80's came around, Japanese corporations were doing so well that they could sell a sizable amount of bonds. Corporations derived so much income from this that they didn't need to borrow so much from the banks anymore to fund R&D and whatnot, and so the banks were forced to go looking for new business. It was at this time that the banks finally deigned to lend to the average Joe.

Hopefully, with the "average Joe" in Japan being a much bigger credit risk than he was ten years ago because of the state of the economy, banks will once again look for other business and start lending to non-Japanese who meet lending criteria.

Tara Collins

Foreigner sues bank over loan rejection
(JAPAN TIMES, Feb 8, 2000, pg 2)

An American journalist filed a lawsuit Tuesday against Asahi Bank after it refused his application for a housing loan because he does not have permanent residence status.

The suit, filed with the Tokyo District Court, seeks 11 million yen in damages for the mental anguish inflicted by the bank's refusal.

According to the documents filed with the court, Steven Herman, 40, current head of the Foreign Correspondents' Club of Japan, decided to purchase a condominium in Tokyo's Yoyogi district in June, making a down payment through a real estate agent.

He then applied for a mortgage of 68.5 million yen from the bank, but its officials told him that the bank's internal rules did not allow loans to be extended to foreigners without permanent residence.

Although Herman said he intended to live permanently in Japan and pointed out that he earns more than most salaried employees, the bank still refused, adding that the semigovernmental Housing Loan Corporation adopts the same policy, the documents said.

The failure to secure the loan forced Herman, who has lived in Japan since 1990, to cancel the contract he had already signed, according to the documents.

"This is discriminatory treatment based on nationality and violates both the International Covenants on Human Rights and the Constitution, which spells equality under law," Herman said.

He added that he was shocked by the way he was treated at the bank, which does not even bother to screen foreign loan applicants but simply treats all foreigners in a uniform manner.

Asahi Bank officials said the same day that they could not comment on the suit since they had not yet seen the documents.

ARTICLE ENDS

Mr. Herman clearly knew the score before he put money down. It seems he was ready to do battle. Thank you Mr. Herman! This is a battle which I would not have the resources to fight, but, if won, a battle from which I stand to benefit.

Incidentally, Tara Collins of the previous post bought a house in Japan on her own funds, after trying it the "conventional" way.

There's more! The following issues have been posted on the Community Website Issues page:

SIMON JACKSON on being denied credit both by JACCS Credit Corp. and by Takugin because he is foreign.

DAVE ALDWINCKLE on what he did when Jouguchi Atomu tried to defraud his family with an insurance policy and tried to use his foreignness as an excuse. (David is married to a Japanese, so his case is already a bit different from many of ours.)

Dave Aldwinckle - "A little background on the issue. It is a well-known fact to anyone who tries to get a house loan from a major Japanese bank that these loans are reserved for people with Permanent-Resident status (Eijuuken)--the equivalent of a Green Card in the US. Problem is that the Eijuuken is not received as easily as, say, a Green Card. The Eijuuken takes a minimum of five years' continuous residence in Japan IF you are married to a Japanese (on the other hand, a Green Card comes after about two years of bonafide marriage to an American--residing anywhere, then coming to America, in my case). If you are NOT married to a Japanese, the Eijuuken will take at least ten and more often twenty years (yes, twenty--a friend of mine got it
after receiving a letter of recommendation from the Mayor of Sapporo!). The plaintiff has been here a decade himself.

Individual cases and stories will vary, of course. The point is the length of wait (nearly a third of a lifetime) for an Eijuuken in Japan can be a barrier to assimilation.

For more information on Permanent Residence problems, see The Community Website section on Eijuukin:
(http://www.voicenet.co.jp/TheCommunity/communityissues.html)."

Thanks to all those who responded. Your answers were very comprehensive and much appreciated. Needless to say, we will be continuing to rent (aka financing someone else's mortgage) for a few more years.

Perhaps we can all re-visit this issue if Japan ever introduces class action lawsuits.

One more very important item to take into consideration when buying land or real estate in any country:
What will it cost to sell it?

Due to bubble economy speculation, the Japanese have an interesting way of taxing a sale of land held less than five years.

"Separate taxation by the amount that is the greater of the following:
(a) Capital gains x 40%
(b) 110% of the difference between

[1] the tax amount on the taxable income including the capital gains: and

[2] the tax amount on the taxable income excluding the capital gains

plus inhabitant tax calculated similarly (tax rate in (a) is 12% instead of 40%)"

[Taken from the following website: http://www.mof.go.jp/english/zei/report2/zc001f01.htm]

IF you think you will be holding on to the property for longer than 5 years, then the tax is much kinder. Also note that although people are saying that generally land values are still decreasing, the tax still may penalize you if you sell before 5 years, even if the value of your property has gone down! (If I understand it correctly.)

The Japan Times article posted was generally correct -- a few minor errors (I am a former President of the Foreign Correspondents Club of Japan and currently the Chairman of the Foreign Press in Japan.)

The home in question we were going to purchase was not in the Yoyogi area (that's actually where we have been renting.)

And just an aside, a couple of months ago I received permanent residency -- it was a nine-month process utilizing a professional middleman. I also was advised to wait until I had ten solid years of continuous residency under my belt. My previous residency spells apparently wouldn't be added on to get to this magic number. And as noted in the other posts, it helps enormously to have a Japanese spouse -- who is seen as a kind of guarantor (more so if the foreigner is female and the Japanese is male).

Feel free to contact me for more info, but a Google search on the internet under key phrases "Herman" and "Asahi Bank" will get you most of the English articles.

Steven Herman vs Asahi Bank.

Mr Herman, was refused a house loan nearly two years ago from Asahi Bank because he lacked Permanent Residency (eijuuken).

The verdict is to be delivered today, Monday, Nov. 12 at 13:30 in courtroom #713 of Tokyo District Court.

For more details on the case, there's a number of stories that can be accessed online by doing a www.google.com keyword search ("Asahi Bank", Herman, discrimination) -- that should bring you up the articles in USA Today, Kyodo, Japan Times, Tokyo Weekender, etc.

For more details on the person, see http://tvtokyo.com/steve.html , or email stherm@tvtokyo.com

>>To whom it may concern, Can anyone give me advice on how to buy a home in Japan?<<

Don't.
Admittedly that is simple advice, and there may be exceptions, but... Land prices are still deflating and new places depreciate in value quickly, especially condominiums. Figure depreciation by about half in 7 years and to about 1/4 in 20 years, unless there is a radical change in all kinds of things. Generally, the value of a house is about zero and you have only the land value after 20 years. Loans are difficult to obtain to buy old places, which is another reason the value goes down. The general perception is that only new is good and all of the market forces support that.

Interest is very low, which sounds good, but watch out for 35 year loans--make it 20 max.
If the prices have bottomed out, great, but I wouldn't bet on it.

I would recommend buying an old place if you have cash, but that is about it. If you later tear down the house and build a new one, you could sell at a higher price than you paid for it.

I remember before the high inflation before the bubble burst, an old house for sale for 17.5 million yen. A month later, the house was gone and the land was for sale for 25 million yen. Typical, I would say, even now...and that house was well built...

As to how?
If you have permanent residency and have worked at the same place for 10 years or more, it is easy to get a loan, probably to the age of 55 or so. VERY easy, which makes the dangerous temptation even greater.
Otherwise, you will have to pay cash in full.
SP

Anyone with experience or who can point me to useful information. Thanks.

Hi Julian,

Here's a very informative article written by Imtiaz A. Chaudry that you might find interesting to read:

http://www.tabunka.org/newsletter/immigration_p2.html

Here's an excerpt:

"In February 2000, an American journalist Steven Herman filed a lawsuit against the Asahi Bank after it refused his application for a housing loan of Y68.5 million because he did not have permanent residence status. Bank officials told him that the bank's internal rules did not allow loans to be extended to foreigners without permanent residence although Herman said he intended to live permanently in Japan. The suit, filed with the Tokyo District Court, sought Y11 million in damages for the mental anguish inflicted by the bank's refusal.

I did some research on this issue, mostly by calling all major banks in Japan and all Japan bankers associations as well. I found the story behind the picture to be quite different from what has been stated by the Asahi Bank."

Good luck! Hope this helps, Karen

Here is a link to four detailed essays on Mr. Arudou's experience in this regard:

http://www.debito.org/residentspage.html#HOUSEBUILDING
Getting a loan. Buying land. Building a house. Signing a building contract. Chicanery and corruption. Importing appliances,materials and other goods for personal use (not resale) from the USA.

Here is an information page from a real estate company on buying real estate in Japan. I'm introducing it here because it does tell a bit about the costs of a real estate transaction above the simple price of the property itself.
http://www.realestate-tokyo.com/sale/guide/

Re loans for non-permanent resident foreigners - actually Lloyds doesn't do that (sorry, Cornelia, I found out I was misinformed - they do yen loans but only for property overseas). I have now heard of a few non-PR foreigners who have managed to get a home loan from Japanese banks, but it seems to be very much a case-by-case, branch-by-branch decision-making process, rather than an overall policy on the part of the whole bank.

I think it helps if you have been here a while, speak/read/write Japanese (so that you can deal with all the paperwork), can put down a substantial deposit, and obviously can prove that your income will be more than sufficient for the repayments. Oh, and you often need a Japanese guarantor, though not always.

We're investigating the issue at the moment, so if I come up with any more useful info, I'll post it here.

Just a comment in response to Bethan's note on bank loans. Tokyo Mitsubishi Bank will grant housing loans to foreigners including those without PR status. I was granted an amount 5 times my annual salary without ever having to go to the bank for an interview. I just filled in the paperwork and the real estate agent did the rest. I have 4 other gaijin collegues friends all of whom have gotten loans from Tokyo Mitsubishi Bank. The best part is that we all work for an American company that at the time had just filed Chapter 11... didn't seem to matter as far as the bank was concerned.

I can verify that foreigners without a PR visa may qualify for housing loans at TM, but TM doesn't (not to us, anyway) offer its best rates. For every bank, the case-by-case aspect depends more on your realtor's relationship with the bank manager. No guarantor was required in our case.

Here's a quick update on housing loans for foreigners without permanent residence.

I have now heard of the following banks lending to non-PR foreigners on at least one occasion recently: Bank of Tokyo-Mitsubishi, Mizuho, SMBC.

Loans seem to be made on a case-by-case basis, so you aren't guaranteed a favourable response, but at least there doesn't seem to be a blanket policy of "no loans to foreigners" at these banks. It might be worth mentioning this if you are initially fobbed off with the "no permanent residence, no home loan" explanation.

I recently also heard that Shinsei was actively interested in lending to foreigners, but I don't know anyone who has tried them yet - it might make sense, since they are part foreign owned/foreign managed and less hidebound than some other Japanese banks.

The standard route for getting a home loan is to be introduced to a bank through your real estate agent - they usually have established links with one or two banks, and obviously have a vested interest in smoothing the path so that you get your loan, so that they make the sale and get the commission. Direct approaches to a bank sometimes work, but you're more likely to get results by going through an estate agent. There doesn't seem to be any such thing as a mortgage/home loan broker in Japan.

Other factors, as mentioned above, which seem to be helpful include: being able to speak/read/write enough Japanese to deal with the whole process; being able to prove you have a stable job and regular income; having a Japanese spouse (though not essential); having the intention (or at least saying you have the intention...) to stay in Japan permanently/long term; having a Japanese guarantor for the loan (again, not essential, but can be asked for sometimes).

In one case I heard of, a bank insisted as a condition of making the loan that the person concerned should apply for permanent residence. He put in the application, which satisfied them, but had no intention of actually taking up PR status because it would have lost him his expat status and related perks at work. When the bank chased him up a few months later (after the house purchase was completed), he explained the situation, and they said it was no problem - in fact it had been the insurance company providing cover for the loan which had been putting pressure on the bank to put pressure on him, for some reason, but once the loan was in place there wasn't much they could do about it.

Do any of the banks give loans to buy a property in homelands?

Lloyds, ANZ do but only for certain countries and states. Think the chance of a Japanese bank doing it is nil.

I'm thinking of buying a 30-year-old apartment(mansion) that has been refurbished and is near a station. Does anyone know if these older mansions are razed at some point? How much will it go down in value? I'm told it's prime rental property. Any advice would be appreciated.

Well, from what I've heard, the building code changed in 1981 and from that point on you get a better guarantee that the building was built to withstand some earthquakes. Older buildings are supposed to be a lot cheaper per meter squared. I saw a two story house listed for Y10 million near Ikebukuro built on rented land and the land rent listed as Y10,000 per month. The maximum period 20 years. I figured it pays for itself if I live in it (for Y50000 plus Y10000 per month) after 16.6 years. Long enough to seriously flirt with the odds of a major earthquake. Not
close enough to a station, but still cheaper than the approximate rental cost for the same thing of about Y80000 - Y90000 per month.

Resale value nil. All the owners of the apartment building have to agree to demolish the building. If you are an owner you can evaluate the risk (are there 4 owners or 100?) of being able to agree to anything.

Vicki - Interesting possibility.
But, Pato points out some important things to consider. Are you really prepared to be one of X number of owners faced with proposed demolition? My guess is that such a process is very obscure in the usual Japanese way. At 30 years old, it seems to me the need for demolition goes up every day.

I guess Pato is saying if the demo gets proposed, you don't have much resale value. I wonder if this means, if in 2 years this gets proposed, you stand to lose your investment?

If you're planning to borrow from a bank, I would hope they could explain where the value goes.

Let us know what happens.

A worse scenario is being a condo owner in a delapidated building where the other owners don't have money for upkeep (e.g., retired) and no place to go if the building were demolished. So as Scott mentioned, the need for demolition is probably going up, but nobody in the building wants to demolish it. My wife mentioned such an "obake-manshon" the other day, after she saw one on TV.

BTW, though it may be "prime rental property," the condo is seriously overpriced to any sane investor. Just do the math.

Steve

I wonder if it's a uniquely Japanese situation where you could end up being your own slum landlord?

Looking back at Vicki's original post, I have to think that "30 years old" + "prime rental property" can only be true if "property" means the land. It cannot be true if "property" means an apartment with no rights to the land its on.

No amount of "refurbishment" is going to increase the value of a 30-year old building. It sounds as if the "refurbishment" was done to lure unsuspecting or eager would-be apartment owners.

And, I have to repeat myself as above and point out the extremely unpredictable and murky realm of Japanese legal arrangements.

Scott

Buying property in Japan - I went to a useful seminar last night - "Thinking of Buying a Home in Japan?" - organised by the joint foreign chambers of commerce in Tokyo. This was, I think, the second seminar they have had, and it was packed out, so there is obviously a lot of interest out there.

One speaker was a representative from Shinsei, and yes, they definitely are targeting the non-permanent resident foreign population in Japan. They have just moved a new manager, Darryl Knopp, over from the US to build up that section and (it sounds like) try to make the process a little simpler.

For details you would need to contact Shinsei, but here are the basics of what they are offering, according to the talk last night: home loans of Y5m to Y100m, terms up to 35 years (depends on your age etc), choice of five-year fixed or floating interest rates; you don't need to be a permanent resident or hold a long-term visa - as long as you have an alien registration card (ie are not here illegally or on holiday) and have at least six months to go on your visa, they will consider your application. Obviously they will also want things like evidence of employment/stable income etc. Contact details: Shinsei Housing Loan Center, Aya Asunuma, (03) 5511 5899. I presume she speaks English. They also promise to have information in English on their website within a few weeks.

Other issues covered at the seminar included:
- general state of the housing market, eg residential land prices in greater Tokyo have bottomed out and are actually rising in some of the more popular areas;
- steps you need to go through if you are building your own house;
- house hunting - how to go about it, issues to be aware of (eg some properties which are unpopular with Japanese because they are too big, near a graveyard etc, can be a good deal for foreigners who are not bothered by the same things, though you have to think about resale value);
- it's not standard here to get an independent building inspection or valuation before buying, so you have to look very carefully at the property and any potential problems;
- older mansion blocks - problems which can arise over the need to agree on redevelopment.

Given the level of interest, it sounds like the chambers will probably run similar seminars in the future, but I think they are for members/guests of members only. For more information, contact whichever chamber seems most relevant to you - American Chamber of Commerce in Japan (ACCJ), British Chamber of Commerce in Japan (BCCJ), Australia & New Zealand Chambers of Commerce (ANZCCJ), Finnish, German, Swedish, Swiss etc. If you don't know how to contact the chamber of commerce for your country, ask your embassy.

Dear Sunshine (above Feb 11, 2005),
There seems to be a generic product available from the financial planning firms, that makes yen mortgages at about 1.65% currently for overseas properties limited to Great Britain, New Zealand, Canada (B.C. and Ontario only), and the following USA states (Hawaii, NY, CA, WA, CO, and Florida). The brochure I'm looking at is from Magellan Tresidder Tuohy(http://www.magellantt.com) and the minimum loan is US$100,000, but I know the others also have the same thing to offer.

Vicki, I think what happens if the whole building is torn down, hopefully the new one will be so much better built that everyone makes some money on the new condos sold. The whole thing would be organized by a builder anyway. So the question is would a builder be interested in that lot of land under the old building, and can he combine it with some other lots adjacent. Then there might be some real potential. But as is, the condo has no investment value if the rent doesn't top the costs and offer some sort of return on the original investment. The resale value continues down unless the location is quite remarkable somehow, and the building association has an excellent reputation for high maintanence. You can ask the neighbors (say within 3-4 blocks) about the reputation of the building maintanence association.

I read and heard about all the trouble so many people go through to get a mortgage and spend 30 years of their lives paying off the bank (with sometimes disastrous results when they can't pay) that we decided to look seriously into another route to home ownership. We bid on (successfully) a home that was auctioned off by the court in our prefecture for non-payment of a debt by the previous owner. I bid 1.5 million yen for a home that was valued at 8 million yen by the court estimators (very conservative). This method is not risk free and we had to do a lot of things normally delegated to a real estate agent, but we eventually got a pretty good place to live (a large old farm house in the country) a lot of land, and our own home. Not a typical way to go but one that is possible given limited financial means. We didn't need to take out a loan. I have since bought other properties including a mansion that was auctioned by the court which I rent out for income.

My question is: would anybody be interested in hearing the details of how we did it (including evicting the previous residents, reselling the property, managing a rental property, getting a loan, for example) and be willing to participate in a discussion of their experiences and lessons learned? If so I also would gladly participate in this as I also want to know what others have done and learn from each others experiences. Other forums I have posted in seem to be dead ends in this regard, at least about this topic. I believe this is what these discussion forums are supposed to be about. How about it?

As a gaijin going through the typical obstacle of not being able to obtain a loan, I would love to hear how you did it.

David, I think it would be absolutely fascinating and helpful to many if you agreed to post any part of the process you went through. You've got two eager readers, at least!

I also would like to know more about this. I am going to be moving to Japan sometime in the next year or so (Kyoto) and this could help me find a nice place to live.

Yes David, this is exactly what these forums are supposed to provide: A place for those who are more knowledgeable about a topic sharing with those who are still learning!
And to all of you lurkers out there, we all have something we can share that someone else is still struggling with. Get off your bums and WRITE!

More precisely on this topic, when purchasing through [tax!] debt auctions you generally can't be too choosy about location or style or quality, etc. Usually these properties are more like investments than "home sweet home". But if you are business minded then these investments can lead to a "home of your dreams" eventually. It would take time though. And it doesn't hurt if you know a bit about doing repairs yourself.

First of all I apologize if this is too much for what anybody really wants or needs. Also this is a repeat of what I have already posted on 'other' forums so if anybody has already seen this, sorry. I am putting it up on this one as I hope to get feedback from others who also have done or may like to try this method.

I am not a real estate professional, I am just saying this is what we learned the hard way. I am sure others will have insights that they find can work just as well or better than the way we did, (and are) doing this. PLEASE SHARE THEM! that is my only request.

What we did

In our case the property we bid on was estimated to have an 8 million yen value by the court and we got it for 1.5 million yen. (no one else put a bid in for it). It is an old Japanese style farm house with several out building and a new smaller house built recently for Grandma. There are some problems with this route (evicting the previous residents) and also Permanent residency is required, but it can be done and we did it. I just told the court that this was my first time and they walked us through it. They were helpful enough.

http://www.athome.co.jp/kankou/#

This is a web site for real estate pros but anybody can make use of it. It lists properties possessed by the court for non payment of taxes and settlement of debts (kyoubai and koubai) all over the country with pictures.


As far as the how to do it goes, it is not too difficult. I had to submit a 'gaijin toryoku kisai jiko shomeishou' from the city office which proves I have permanent residency.
If their is a property you are interested in you can get everything the court has on it by going to the court house in that area. It will tell you the particulars, including a picture of the property and any structures, a diagram, the owners, the sort of debt, and so on. Also will be how much the minimum amount for a bit to be accepted will be. In our case we put down just a little over the minimum amount and it was the second time it had been auctioned. It was not desirable for the pros because people were living in it at the time so would have to be evicted. Then if you want to put a bid in on it, you have to fill out some forms, but they aren't difficult, then put 290,000 yen as a deposit (20% of the minimum aceptable bid set by the court) into the courts bank account. If your bid is successful this amount is applied to the purchase of the property and if not successful, it is returned to you. Then you put your bid into a box and wait to see what happens. We went to the opening of the box 'ceremony' at the court house, it was very interesting because of the reaction of the 100 or so people present when my GAIJIN name was put on the board as the winner, but you don't have to be there.

You can get a property for a good price and not have to compete with the pros if there are some 'difficulties' with the property that make it tedious and time consuming for the pros who are in it for the business. If you compete with them, the bids will be higher and your chances of getting it less. One thing is that you aren't allowed to go into the property before you buy it so there is no telling what sort of condition the interior is in. Another thing is that if someone is living in it, you can't walk around looking at the property or do anything that would cause them 'stress.' You can call around though. We did, and asked relatives about the inside. They pretty much gave us honest answers. This was one advantage of living in the same town in which we purchased the property.



after I posted this someone asked me this:

'Since only permanent residents can bid and purchase, can I ask a relative to do this for me and then let him resell it to me? Basically, how long must he hold the property before he can resell it, if there is any rule like this?'

Answer:
Any native or permanent resident can bid on a court auctioned property, and if the bid is successful, as soon as the court processes the paperwork, (which takes a few days or so) the new owner can immediately do whatever he/she wants to do with the property. There is no time limit. Often a native relative in Japan will buy a distressed property and let the current occupant live there just as a favor, and to keep the property in the family. Anyway, any successful new owner has immediate rights to the property and can pass it along to anyone for whatever conditions they mutually agree on. It LEGALLY belongs to the new owner.



someone else had these questions:

1. When buying an old house through the government foreclosure auctions, are the old debts/taxes assumable by the next owner? In other words if I buy a house, do I take over and have to pay the previous owners unpaid debt? I heard this is sometimes usual practice in the USA with regular house sales, but in Australia we have a different system, so I am just wondering. For example if the previous owner had a monstrous unpaid debt would I have to take responsibility after purchase of the property?

2. You seemed to say that the auctions require payment in cash. Do the auctions insist on cash for the whole payment? Is this because they are looked upon as "risky" by the banks? Do banks refuse to lend money on these foreclosure auction properties?

3. Are there any other risks involved?

I know in Japan that banks require guarantors so I am wondering if someone did go into foreclosure with a bank, wouldn't the guarantor have to take financial responsibility? Can you give any insight into this?

To tell the truth, I am just trying to see through the "smoke and mirrors." I would like to buy a house through the government foreclosure auction system, but my Japanese friends and quite a
few foreign friends when asked have said, "oh, be careful", "it might be dangerous," "you may have to pay out extra money after purchase" ... etc. I think this is basically paranoia, as they didn't know such an auction existed in Japan before I asked them!

My answers:

1. The property is sold off in the court auctions to pay off the previous owner's debt so logically the previous owners other debts would not carry over to the new owner. Usually the buyer gets it free and clear. There are exceptions (aren't there always). If for example the previous owner took out a mortgage at three different banks and just one of them forecloses on the mortgage, the remaining banks who hold mortgages can claim payment on the loans with the subsequent owner(s) of the property. This is negotiable though. Another case: If a mansion (condominium) is auctioned off for payment of the monthly maintenance fee, the mansion operators (managers) can ask the new owner to pay for the previous owners unpaid maintenance fees. The laws here are murky, but the mansion operators can prohibit the new owner from entering his newly bought property, until the fees are paid by building a barricade in the hallway for example, or do something more dastardly like shut off the water, electricity, gas or take away or block off his parking space, and so on. You get the idea? If you buy a house for example and the previous owner didn't pay the yearly water fee in the local water coop, most likely someone will come around and try to get the new owners (you) to pay up for past unpaid fees. I had a neighbor come to me once and and say that the previous owner refused to trim his trees, or pay to have somebody trim them, so the neighbor had to have them trimmed, and he tried to get me to pay him for having them trimmed so they wouldn't shade his property, during the previous owner's residence. I turned this down. Another time a fellow knocked on my door and said I had to pay him some money because I and the previous owner had walked across his property to access mine. We had to settle this in court. finally. I won. You have to know the laws and stick to your guns with these sorts of people, or choose to pay them if that seems the more reasonable approach (like wanting to keep good relations in the neighborhood). This is a tough call.

2. The courts require full payment in cash. The bank loan system in Japan is based on the requirement that some property that can be mortgaged exist before a loan can be made. My guess is it would depend on your relationship with the bank and whether you have any other property that the bank would want you to back the loan up with. My understanding is banks shy away from these sorts of things, but I have never dealt with a bank myself so don't have any first-hand experience.

3. The guarantor (hoshounin) is there for the bank's benefit. If the borrower doesn't pay, the bank has the option of having the guarantor pay the money, or foreclosing on the loan with the borrower. Sometimes it's easier and quicker for the bank to go ahead with the court process, and get rid of the bad loan completely (and off their books). If they ask the guarantor to pay, and they don't, then they can auction off the guarantor's property (through the court) to get their money. This is more indirect, but sometimes better for the bank when the borrower is old and destitute, and the guarantor has valuable property, or is in a better position financially.

The problems with buying property this way are working out the rights of everyone involved. You have to understand the relevant laws, or ask somebody who does. If you buy something that is foreclosed, everyone will know who bought it, (you) which might cause trouble for you, so a third party professionals services are good in this way. They can buy it for you and handle all the messy stuff. Another drawback is there is no guarantee your bid will be enough to buy the property, you might be outbid. Don't put your eggs in one basket if you are needful of a place to live in a hurry.

It is the job of the courts to make sure everything legally relevant about the property is known by anybody who might bid on it. On the other hand, lots of unscrupulous real estate agents will hide (or just fail to mention) that there is some problem with the property to the buyer. This has happened to me a few times. The court on the other hand is obligated to find out and make everything clear to the potential buyer. If they don't, the successful bidder could sue the court for negligence. That would make the papers for sure, Ha! That is why you have to go to the courthouse to get everything they have on the property. For all this effort, you can save yourself a bundle on real property in possibly the most expensive real estate market in the world.

Dear David

I read your post with interest as it is
something I am planning to do myself in a
couple of years. There is an excellent
account of buying in this manner on the
Frugal Japan website, Sam Perry is the
author and its called 'A Different Way to
Buy a House'.

http://www.frugaljapan.com/
encyclopedia/encyclopedia.html

I think its interesting that so many
foreigners are interested in doing this.
There is a new book out called "Saying Yes
to Japan, How Outsiders Are Reviving a
Trillion Dollar Services Market" which has a
fascinating chapter on real estate. Its by
Tim Clark and Carl Kay.

I'm wondering how you managed to evict
the residents. Were you able to hire a
company that specializes in evictions? This
is my main concern with this process.

Anyway sorry I don't have anything more
substantial to add but I do look forward to
others posts on this topic.

Sarah, I was just getting ready to put this up and saw your message, THANKS Again, this is just what we did, I am sure there are more creative ways.

If you buy a property (through a court auction for example) and there are people living there (the former owners or whoever) who you want to get rid of, you have several options: 1. Offer to continue to let them live there for a period (like 6 months) rent free or until they can find another place to live. 2. Negotiate a contract with them stipulating rent to be paid and vacating the property at the end of the term. 3. Offer them a sum of money immediately to leave within 30 or 60 days if you are in a hurry to make use of the property. If they refuse to pay rent, agree to any contract or offers of settlement (which you make in writing), leave, or contact you about any other options, your only choice is to take them to court. You can file a choutei petition or a full soushou petition and begin the eviction process. It is possible to do it yourself and save a lot of money on lawyer fees if you know what you are doing. If not you can get help from a Shihoushoushi who can help you prepare court documents you will need, but not represent you in court. They are much cheaper than lawyers and work on piece rates. It will take time, maybe a year or more. If you have time, but not so much money, this is the way to go. If you have neither, you could try to harass them out, this is not a lot of fun unless you enjoy playing the wicked gaijin landlord of the west, but it can be done.

Most likely in the end you will have to pay the occupants some amount of money or give them time in place of rent to find another place to live. Eventually even if they don't want to leave and have lived there from countless generations past, if the owners change and can't agree to mutual terms, the occupants will have to go. Figure the cost (and stress) of this as part of the cost of the property you bought.

Things to look out for

If you buy a property and the previous owners have a store or something on the ground floor for example, and live on the second story, the courts don't like to double whammy people by evicting them from both their residence and livelihood. In this case the evictor would have to either find a new suitable location for them to go on supporting themselves, or compensate them accordingly. Even if they are unable to find other suitable housing, this does not in any way mean that they are exempt from paying rent though, they still have to pay. Good rental income property perhaps.

Thanks for your reply David, can I just
clarity this point to put my mind at ease
once and for all. So after a year of legal
process, if I succeed, the court will send
round the tough guys to haul them out?
My main concern is that the court will just
issue a written demand that they leave the
premises but not actually do any of the
strong arm stuff, in which case, I won't be
any better off. I sound really appalling
here with my fixation on eviction, but I
don't expect to get any help from my
family here if I have this type of problem,
so I need to be sure of what I'm doing.

Good question. In my experience they (the court) put up a notice on the door which said occupants have one month to get out. After the 30 days they showed up with a moving truck and two guys to load stuff. By this time though the occupants had already left and took everything they had with them. Anybody have any other experience? Can's say any more than this.

In my experience the court put a notice on the front door telling the occupants they had 30 days to leave. At the end of thirty days they sent a truck and two guys to load stuff, but the former occupants had already gone and took everything. That is as far as I have ever had to go. Can't say any more.

This is an important point so I checked with my resident expert and this is the answer I got. Say an eviction notice has been issued by the court. This means the evictor has the right to remove the property of the occupant (and maybe the occupants themselves) by court authorized methods, supervised by the court. The court officer comes to the residence to supervise this. The court does no evicting or actual removing of property. The evictor has the 'right' to remove from the premises the items belonging to the evictee. What this means is the evictor has to pay somebody to remove the belongings of said evictee. For this the court supervises the process and guarantees that the evictor will not be in trouble for removing the evictee. They also are there to ensure that the evictee is not physically harmed while being removed from his residence. Then they supervise the change of locks and the person(s) removed are evicted. If necessary the court can call the police to remove someone physically from a place if that is needed, or protect the evictor and his property from the evictee if needed. Thats my understanding.

This is just an ideal, in real life it is probably quite different. Anybody?

Dear David, thanks again for clarifying
everything. I'm sure there are lots of other
silent readers out there who feel the same.

As a nonpermanent resident, I am planning to buy a mansion in Tokyo and trying to get a loan. Does anyone has recent experneice dealing with the banks in getting a housing loan and can give any update? Anyone tried the Sensei bank as suggested by Bethan above? Thanks.

We were able to get a loan from Mizuho (eventually....).

Problems we ran into were not having permanent residency, but having an application in was enough to convince the loan manager's bosses that we were serious.

The other problem was that some higher-paid job contracts in Japan are not structured like the 'life-time employment' contract that some Japanese get - I did, but my wife did not.

Therefore our loan officer at Mizuho had to come up with a creative way of financing this deal. Eventually we got it done, though...

Get ready for some typical Japanese way of doing business, lots of patience and persistence.

We were in the process before this guy at Shinsei got put in charge - that may help, although I am a bit sceptical about how much influence he will have once a request goes up the food chain...

Good luck and let us know how you fare.

Thanks for posting the info and your experience with us, David. But my problem is that, as a gaijin woman, I cannot get a loan (even though I have permanent residency). So if I were to successfully bid on a reposessed property, I couldn't get a loan for it.

Vicki, You could try a dairi nyusatsu gyosha, they have a loan system for this sort of purchase tied up with a bank. I am just saying this is a possibility.

Does anyone know of any financial/ brokering companies that offer yen mortgages for overseas properties (besides Magellan)? I know that the yen mortgages are done through Lloyd's of London and ANZ Bank from Australia. Is there a way to apply to them directly? Do any other banks offer this service? thanks

Does anyone have any bad stories about buying property at a foreclosure auction? In particular, what experiences have there been with yakuza?

A few additions in regard to court property:

Although rules may differ from courthouse to courthouse, this information was personally verified:

1) PR is not a requirement for purchasing. Residency is.

2) Some houses and farms require a farmer's certificate/license

3) "Since only permanent (sic) residents can bid and purchase, can I ask a relative to do this for me and then let him resell it to me?"

- yes, but remember that the resale will cost 5% sales tax plus name registration fees (thousands of DOLLARS) -these fees are not charged if purchased directly from the court

4) "Do banks refuse to lend money on these foreclosure auction properties? "

Getting a bank loan for auctions is possible (difficult though) - here PR would be an invaluable asset

Note:
#5 has not been verified by myself, it was told to me by an expensive lawyer I consulted with before the auction

5) "what experiences have there been with yakuza?"

The yaks try to have their paws wherever large sums of money change hands and real estate in no exception. There is a lot of background activity.
There have been cases where the auctioned property was not classified as vacant (due to a single can of beer left inside, for example). The previous digitally-challenged "tenant" may rock up and demand some money. From you. Or your spouse. Or your spouse's family. Or in-laws of your spouse's family. Whoever's pockets look deepest.

There is also a lot of Chimpira activity in this field, as well.

All for now...

Upcoming seminar for foreigners thinking of buying property in Japan - I heard about this via another mailing list I'm on. (I'm not connected with any of this, I'm just passing the information on as there seem to be quite a few people out there who are interested.)

The seminar will be held on Thursday, September
29th, at the Shinsei Headquarters building in Uchisaiwaicho
(Hibiya), Tokyo, at 18:30. Presenting will be Darryl Knopp
of Shinsei; Hiro Senaga of Plaza Homes, a well-known
realtor with foreigner-sized properties; and Chris Cleary
of Banner Japan with more mortgage options. You need to
pre-register at
http://www.japaninc.com/mortgages/index.html

The seminar is connected with Japan Inc magazine and its Personal International Investor newsletter, which has also been featuring lots of information on buying property here. The latest issue of the newsletter is here:
http://www.japaninc.com/newsletters/index.html?list=pii

Every time I turn around I hear another good remark about Shinsei bank.

This came off the Community e-list on Nov 27, 2005:
"Shinsei is a stunningly well-run and progressive bank in all things, from the ATM service to their home loans. Foreigners in Japan require, in essence, just one year of proven steady income as a base to setting up a mortgage; permanent residence is not required. With mortage rates as low as 1.7%, it's almost like getting free money..."

Double Gaijin Barrier .I am a Canadian and my wife is Korean we both have long term visas along with all of our children .We have tried 10 different Banks to get a loan in Japan .The Real Estates agents were very positive about it, as our incomes exceed and have filed taxes in Japan every year .We always have passed the first step but are refused at the next stage .They never tell us the reason ,but some people at the banks say Canadians and Americans are high risk .Does any one out there have the same trouble ?.I think the same also applies to Credit cards. Happy New Year to everyone . Tom

The bank financing on real-estate purchases question by "Tom" has been moved here.

Tom,

Have you tried Shinsei Bank? The "Canadians and Americans are high risk" excuse is just that, an excuse. The only obstacle to foreigner-only mortages seems to be getting the appropriate Japanese paperwork involved in such transactions (but the realtors should be helping you with that). For example, I was surprised when our original lender, a Japanese bank, asked me to sign a "promissory letter" stating that I would not leave Japan or otherwise leave them high and dry with ONLY the house as collateral (despite our rather large down payment). Its wording rung like a demand loan, but our realtor promised that it had no such effect. To this day, I wonder if he was blowing smoke up my...

Anyway, good luck.

Steve

Has anyone tried and managed to get a loan from a Japanese bank for the purchase of a property overseas? Eager to hear your comments.

re loan for purchase of overseas property:
if you mean from a Japanese branch of an overseas bank ie: ANZ.....it is easy as falling off a wall. if you mean a normal Japanese Bank....never heard of it.

Dear Steve we did try Shinsei Bank are were refused over the phone at least with the other banks we made it to the second step .I am self employed as well as my wife ,that is the problem .Also another factor may be the 20 per cent land and 80 per cent building factor .I know of number of Canadinns and Americans who are self employed who were not able to get bank loans ,they had to use a Japanese friend of relative to do so .Steve by the way are you self employed ? Thanks Tom

hi Tom
We, my husband and I, are self-employed
and we were able to get a mortgage with
UFJ to buy an existing house. Also, we
know of another self-employed couple out
here in the countryside who were able to
get bank loans with the local banks to
build their own house. We were all indeed
turned down by banks, especially the
foreign banks like citibank, who only loan
money to people with a lot of it. Shinsei
being new to the market operates under
the same caution.
Best advice I can give is get to know your
local bank, ask your real estate agent to
help and keep trying.
Other obstacles are - you should be a
registered business for more than 3 years
and you should have a permanent resident
visa.
Hope this helps.
cheers
anne

Anne I have permanent residence and have being self employed for over six years .My wife also has permanent residence and has being self employed longer .We are in a high taxes bracket so our children do not get children allowance from the goverment . .The Loan center never tells us why we are refused. We have found a Korean Bank which does not discriminate and offers a 15 year mortage rather than a 35 year .Have just applied waiting for the result .Will keep you posted Tom

Hi Tom,

No, I'm not self-employed, not yet anyway. My employment status (shaky at the time) was why we kind of rushed through our home purchase. As you know, long-term and stable employment is a big plus with mortgage officers at Japanese banks. My status was this: over three years of steady employment by a big-name employer, average income, spouse visa (re. the last item, the surprising thing about the initial process is that my wife's income (she was working full-time then) was not considered applicable to our credit-worthiness). The only minus was the lack of a PR visa.

Anne's advice is good, especially the part about finding a realtor to help you. I don't understand why your current realtor, who is trying to sell a home with a land-to-building valuation ratio of 20:80, isn't working harder to find a bank for you? Each realtor, in my experience, has business relationships with several bankers. I guess every realtor is positive when they learn how much money you are able to spend on a home, but how many are willing to go through the extra steps to help foreign buyers secure mortgages for their homes?

BTW, this month's Japan Inc. magazine has articles on buying a home in Japan. I haven't read them yet. Perhaps you could e-mail the magazine's editors or the article writers and ask them for advice re. your situation. After all, they spoke with the experts. All we can do here is relate our personal experiences and knowledge.

Steve, thank for the info, but we are trying to purchase a bulding we are currently renting. It is a three story building. The first floor is a Korean Restaurant which my wife operates the second floor is an English School, we live on the 3rd floor. This is a problem of the 80 per cent 20 land so they tell us. The bank also told me if I worked for a Japanese company, which would mean my income would be lower the loan would be possible. The fact that I am self employed and make more money as well as my wife hurts us for a bank loan. We have also offerd a collateral house which we bought on Auction but still are turned down. So much for the Japanese Drean. Thanks for the info about Japan Inc

hi Tom. I think there are couple of things going against you that would be the case for anyone but I need more info.

The 20/80 percent ratio is quite normal in Japan so that in and of itself is not the issue. The issue is the value of the building and the land vs. what you need to pay for it. If the loan you need is more than 150% of the value of the property than you will have difficulty no matter where you go. Actually, Banks really only want to loan 80% of the value of the property - if the truth be known.

There are couple of options for you to consider.
* One - build. Since your businesses are obviously viable you may be able to find reasonably priced land and be able to get small business loans to build. I know of other non-Japanese couples who have done this.
* Two - look for a newer commercial property that has just been developed. They may not have as much space but current new developments are hungry for buyers and good values are to be had. Also, developers are very good at persuading the bank to give loans.
* Three - have you tried applying for Government - Regional or National - loans to help small business? The interest rates are lower than the banks.
* Four - if you have any cash - you may want to check out the auction. Commercial properties that need fix-up often sell for a quarter of their value especially large
ones. The last option is a longer shot since the Korean restaurant needs to be located centrally but still its not a bad idea to check it out. I cannot read Japanese but was able to learn how to read the notices and source out properties. If you or your wife do not read kanji - you would have to enlist the help of a friend.

Sorry for the redundancy - if you mentioned that you have pursued these options already. Hope this helps. cheers, anne

Anne thanks for the options ,the 80 per cent to 20 per cent means .That a building must not be over that limit .In other words you must have 20 percent land and 80 percent buliding .Some older building have added additions and are overbuilt .So it can become a problem when it is up fo resale .My student works in the loan section for a bank and says that is sometimes a problem . Second the land vaule here is higher than the building since we are 4 minutes from the station .That is not a problem .My wife is fluent in Japanese and speaks directly to the Japanese Real Estate Agents .When applying for the loan at all the banks we have paseed the first step ,but we are refused by the Gurarantee Center . They do not tell us why but the real estate agents tell us because we are both foreingers .That is the bottom line .I know of 6 or 7 other people in the same boat ,they had to get loans in a Japanese friends name . Our children go to school here any we really do not want to relocate . Korean Restaurants can do well in the countryside as well. The Japanese Banks are very powerful ,but not as powerful as God in which we have great Fatih . We will never Give Up . Tom

Yes, Tom, sadly we were turned down because I was a foreigner from our local bank where we have our business account, believe it or not. The bank actually had the gall to tell us this directly. Another couple also. Both couples though were accepted in a local credit-type bank. Maybe this is what Tara meant in a much earlier post by the term Jusen bank. I'm not sure if ours was that type of bank - but have you tried one of those types of banks? Also, we were accepted by UFJ with the help of our real estate agent. Have you tried the larger banks like UFJ or a bank with a different guarantee center? There are many different guarantee centers.
cheers
anne

Quote: "we are refused by the Gurarantee Center . They do not tell us why but the real estate agents tell us because we are both foreingers"

First, try and get that statement in writing. (It helps to start communicating by fax or email. They sure aren't going to be signing a statement to that effect, but a friendly email along the lines of, "Just to confirm, are you saying that it is your belief that we were rejected because we were foreigners?" might elicit a useful response. This won't be enough in, say, a court case, but it will help you to put pressure on them, if you want to do so later.)

Then get a photocopy of the lending guidelines for the bank/agency(ies) involved. (Most have a line in their lending guidelines that permanent residents are to be treated exactly as Japanese.) I know for example that the old Fuji Bank stated that explicitly in their Guidelines for their branches, and I think most (if not all) will have some sort of policy laid out in the branches' lending guides, so that they don't have to contact the Head Office every time a permanent resident walks in the door asking for a loan. You could try going to a different branch of the same bank to get the photocopy, as it will (of course) be a standardized guide for all branches.

Tara, how does that help? Does it mean one might be able to get a loan from them if you point out that they have just spoken something that is in direct contradiction to the policy? I guess they might actually divulge a different reason for refusing the loan, and the person saying the "both are foreigners" reason having to apologize profusely for the mistake (but actually in this case stated above the real estate agent saying that is not really going to worry the bank at all since not a bank employee). Might it change the refusal to an more positive outcome? (just playing devil's advocate here)

"Does it mean one might be able to get a loan from them if you point out that they have just spoken something that is in direct contradiction to the policy?"

If it's in contradiction to policy? ABSOLUTELY, yes!

Individual branches don't formulate policy, they execute it. They follow whatever policy the Head Office has stipulated. That does not necessarily mean that the branch officer who happened to pick up the phone knows the rule or bothered to look it up. His response over the phone might be entirely incorrect and inconsistent with bank policy. I would ask to see the policy in writing.

Also, the branch manager *does* have the right to turn you down for any number of reasons -- it is his responsibility to make sure that money is lent only to good credit risks, after all. However, he cannot turn you down specifically for having an ugly necktie if there is a written policy saying "all applicants with ugly neckties are to be treated the same as applicants with non-ugly neckties."

Most (many? most? sorry, don't know) banks have a policy in writing saying that "foreigners with permanent residency are to be treated the same as Japanese." If the bank is among those that has such a policy, and you have been turned down *for being a foreigner*, then you have something worth pursuing. Either (1) the manager will apologize and run the numbers again, or (2) come up with a different reason that you were turned down. (2) is more likely, but (2) itself is also a useful result for you, because that is the info that you need to know so that you can improve your standing such that you don't get turned down next time. That said, they don't have any obligation to tell you why you have been turned down.

This is all assuming that a standard written policy exists. If no standard policy exists, then it is all at the branch manager's whim, so you could try another branch and (in theory) perhaps get different results.

Is it possible that the company at which the borrower (Tom) is (self-)employed was established somewhat recently? (Sorry if I missed that info somewhere.) "Recently" would be "established within the last 10 years." While being self-employed could in theory be problematic, it isn't even HALF as problematic as having a company that has been in operation for a short (or short-ish) period of time. Japanese would get turned down too in that situation --they would have to struggle even to get a CAR loan, much less a 35-year housing loan. So, not an anti-foreigner thing, but rather a "conservative lending policy" thing.

===============
Addenda: OK, looking back over previous posts now:

(1) Tom, your post of December 29 says you are a long term resident (Teijuu-ken); your post of January 18 says you are a permanent resident (Eijuu-ken). These are two entirely different things with entirely different privileges. Are you certain which visa you have? If it's Teijuu-ken, that's a major reason to get rejected, but you could apply for a loan that would be repaid in full before the expiry of the Teijuu-ken visa.

(2) More importantly, your post of January 18 says you have been self-employed only 6 years. Your company is not sufficiently established to qualify for a 35-year loan in the eyes of 90% of banks (probably closer to 99%, to be really honest). It is not a foreigner thing, it is a stability thing and a Japanese person wouldn't get approved either-- no way, no how. You can, however, increase the likelihood of getting approved by shortening the time frame of the loan. A 10-year loan might go through, for example.

Current profitability of your company is really pretty moot to the lender, since they are looking at a 35-year time frame. This requires a much more conservative view than back home, where the housing loans are usually only 20 years. (1986 was indeed a long time ago but 1971 was a VERY long time ago.) They would prefer to see steady but low profits over time than high profits over a shorter period.

Incidentally, people who have wildly fluctuating income also have the same problem. Let's say you are NOT self-employed, but rather work a collection of jobs at established/well-known employers. Let's say you had 5 million yen in income in 1999, then 8 million yen in 2000, then 7 million yen in 2001, then 5 million in 2002, then 8 million yen in 2003, etc. You would actually have a harder time getting a loan (or even being allowed to rent a high-rent apartment) than a person who had a constant, predictable income of 5 million every year, even though your total income is much higher, because YOUR income is "unpredictable" from an institutional (the bank's) standpoint. The fact that it has never dipped below 5 million yen is moot; they would argue that if your income can go up 3 million, to 8 million total, it can also presumably go down 3 million, to 2 million yen total.

(3) Quoting: "The bank also told me if I worked for a Japanese company, which would mean my income would be lower the loan would be possible " (from a Jan 18 post)

No, the bank doesn't care if you work for a Japanese vs. foreign company. The only issue is stability. Working for a well-established foreign entity is better than working for a "might go broke in 10 years, ya never know" Japanese company.

This issue affects more than just houses, of course. Have you heard about all these condos that require, say, 90% of residents to agree before they are allowed to knock the building down and rebuild? Recently, the problem is that so many people have unstable income that many condos can't get the required 90% of residents able to rebuild, so the condos are literally starting to rot out from under people. This will be a major issue in another 10-15 years, and is something to consider if anyone here is thinking about buying a condo. That is: (1) If only 70% approval is needed to rebuild, you might have to start rebuilding out before you are ready, and forced into taking out another loan; (2) if 80-90% approval is required, the condo owners' association might never get that approval, and the condo could rot out from under you. If the condo requires 100% approval from owners to rebuild (some do), run immediately in the other direction.

(4) Quoting: "Both couples though were accepted in a local credit-type bank. Maybe this is what Tara meant in a much earlier post by the term Jusen bank" (quoted from Jan 18 post)

No, credit banks and jusen are entirely different animals. Jusen are not banks; in fact, that is the point. They were created as a response to problems in the banking system in the 1970's. They ended up getting enormous backdoor funding from the banks when the property market heated up in the 1980's, so when the jusen went bust in the 1990's after the Bank of Japan raised interest rates causing land prices to drop, they burdened all the banks with losses well into the billions. Ask anyone who was here in the 90's about what a jusen is-- if you were here for the Prime Min Hashimoto era, you can't help but remember the Jusen debacle, since it was front page news every day for a year (since we spent a fortune in tax money trying to resolve it).

All excellent points Tara.
One clarification. We qualified for a loan after our business was registered for only 3 fiscal years. This was the minimum requirement at all the banks that we applied. However, in reading your comments perhaps it worked in our favor that we could prove that we had been working in the same field for more than 10 years. cheers, anne

Anne. My wife have work in the same field. I been teaching in Public schools for 10 years and My wife has had been in the Restaurant as an owner for over 16 years in Japan. We showed the banks that info. Also we both have permanent residence. Anne is your husband Japanese and is the bank loan in his name or yours. Tara informatiion about 95 of self employed peole getting refused by the bank is dead wrong. My student works for a big bank in the loan section. According to her 30 percent of all people who apply for loans are self employed in Japan. About 50 percent pass the first step if self employed 3years only. From that 50 percent pass the second step form the Guarantee Company

I don't think that Tara said 95% of self-employed get rejected. She said that in conjunction with working as "self-
employed only 6 years". I'm wondering if the time parameter was included in the stats quoted from Tom's student working "for a big bank in the loan section". Seems like the magic number is 10 years. Of course still looks like that 10 year magic was overlooked in Tom's case.

I'm going to put my toe in hot water here. There is definitely a paternalistic kind of discrimination going on and I would not be at all surprised if it is also applied to foreigner couples looking for loans. It may not be based in hatred, but rather in an assumption of superiority ? or maybe in fear of change?. And since the motivation behind it is not overtly "evil" it is a lot harder to fight against or to get anyone's sympathy.

I have been learning a lot about family court and child custody issues here in Japan over the last 3 years + ever since getting involved in Yamila's case. Here again the symptoms are entrenched thinking inside the system peculiar to Japanese bureaucracy (with it's many ambiguities and reasoning behind decisions kept secret). I know you are rolling your eyeballs and asking what has banking got to do with family court? Logically, nothing. But putting aside logic and looking for a pattern, I see a pattern. The upshot is basically that (the banks, the courts, the police)when faced with an situation not commonly encountered, the status quo will be upheld, even if falling back on the status quo is self-damaging.

It's silly for bank after bank to refuse a loan to people who obviously work their butts off and are successful. Someone could have beem making some money off this couple! (Besides the landlords). Of course the real estate mortgage is further hampered by the poor quality of Japanese buildings. I think Pato mentioned this in another thread on financial planning. A very few buildings are built to stand for a long time, but the majority are not, and thus have no value as collateral for a loan, at least not the way we are used to seeing it in North America.

Regarding the court property auctions, we are considering this route and I have been reading the posts with great interest.

I have a question: Has anyone had any experience with, or heard anything positive or negative about buyers` agents who will do a lot of the research and legwork for you? Apparantly they charge 3% if your bid is successful.

Linda

I am looking at purchasing a property in central Tokyo (either apartment or house). I have looked at Yahoo, Goo, Homewith and Nomu.

Could anyone provide other good sources of properties for sale?

Tomas, Real estate agents have access to shared data base listings and they can be really great at helping you specifically, once you build a relationship with them. When I was looking for a new apartment starting in January 2005, I went to about 12 different real estate agents. One showed real interest in working with me and my set of parameters. Another one I went back to three times, and I finally caught the owner's attention. And he was the one who found me my new place! He didn't waste my time showing me anything that didn't fit my specs, or where he knew I wouldn't be accepted by the landlord. It was amazing. I had just had another application denied (4 months down the road). He called, and said there is a place available for my price 80 meters from such and such station. And a contract was signed in 2 days. So I've got two real estate agents I would recommend if anyone wants to work with agents at Otsuka station.

The real estate agents also know about bankruptcy sales and auctions. In fact the majority of the buyers at these auctions are real estate people. One example I know of is where a house plus land was purchased for 28 million (out of bankruptcy), "reformed" and then re-sold for 40 million, by a real estate company. And the buyer thought 40 million was a good deal.

Linda: I haven't heard of buyer's agents for real estate (though I have heard of them for 2nd hand cars). I also would like to read more on that if anyone knows anything.

Dear Linda the process of buying a house at an auction can be done without an agent .My wife purchase a house next to our building .The auction center was very helpful with advice .The key is you should able to read and speak Japanese well or bring a Japanese freind with you. You can also talk to a local real estate agent and tell them after you purchase the house you want to rent it out and you and will list it with them . This way they will have more interest . Good Luck

Cornelia, thank you for the information!
We are looking primarily in Shirogane,
Kamiosaki, Azabu and Hiroo, but if you
think your agents have access to the
complete database, I would be pleased to
try one of your agents.

Tomas

A year later...

But perhaps people still read these threads.

Loans are getting easier and easier to come by.
There are now a number of entities that assist foreign residents in English.

Permanent residency not required.
They usually want to see 2 years of tax returns, but if you work for a major company or have a connection this time can be made much, much shorter.

Auction real estate is getting much more competitive, especially in Tokyo. It is no longer possible to get deals of 30-40% below market value like it was 2 years ago. Other areas of Japan still have a lot of bargains though.

http:/www.tokyoforeclosures.com is a pay service for listing info in Kanto.

http://www.foreclosedjapan.com lists a few properties around the country and offers buyer support.

The national database of real estate listings is called REINS (real estate information network service) and most agents have access to it.

Buyers agents do exist in Japan.

It is true that it is much easier for foreigners to buy and own buildings in Tokyo. I have only been in Japan for less than 2 years. However, I know a real estate agent who knows a bank officer from the loan department who is more liberal towards foreigners owning properties. I got a letter from my company that I worked in their overseas branch for 5 years and that was sufficient to get a mortgage. Most banks would require you to work in a particular Japanese company for at least 3 years if not possess permanent residence status.

Email me at philchlee@gmail.com and I will do you the favour to enlighten you on the process. You would need a downpayment of around 1.5 million yen minimum depending on the property value which would be transacted with the bank. The bank that extended the loan to me is MUFJ but it really depends on which branch you visit as you need to get it right the first time. While many mention that Shinsei bank is also liberal but they take up to 6 weeks and require you to communicate with them only through snail postal mail and that would derail any property purchase relations with building owners.

Philchlee, did MUFJ give you their best advertised rate or just their standard rate? What miffed me in our dealings with MUFJ in its earlier incarnation of TMB (5 years ago) was that it didn't offer us the super-low rate for first-time/new home buyers but treated us as though we were lucky be extended a mortgage at all.

Steve