2017-07-19
[Interview] Tom-san’s First Experience in Purchasing Real Estate in Japan: Part 2/2
- Interview
[Difficulties Faced by Tom-san]
How long did it take from the showing to closing?
It took quite a long time. It took around 3 months from the showing to closing the deal. 3 months isn’t unusual but in my case, I wanted a fast settlement since I wanted to get out of my Shinjuku apartment before the rental contract ended.
Were you able to close the deal before the rental contract ended?
No. This was one of the negative points of the purchase. When I looked into the place, I had about 6 months until I had to move out of my apartment. So, when I put in the offer, I thought I would be able to negotiate the date once I decided and be able to move fast. But it turned out the vendor's agent did not negotiate. I ended up homeless for 2 or 3 weeks. I had to pay a lot of money for accommodation (Airbnb).
I asked whether I could put my belongings in one of the rooms before the settlement. They allowed me to do so, which was nice (Tom-san was asked to sign a contract to do so). However, because they allowed me to do that, they were not open for any other negotiations at all. For example, when I requested for them to sort things quickly so I can move in as soon as possible, their response was surprising. They said, “You have already asked too much by requesting to put all your belongings in a room, no more negotiation, it should be at our client’s convenience”.
I thought they would be happy to negotiate but they delayed quite a lot of things. It took about 2 months after I put in my offer to the settlement. The settlement deadline was about 2 months from the contract day. I wished to settle within a month but they ended up using the 2 whole months, only leaving a couple of days from the settlement deadline.
Why did it take so long?
The land boundary was not clear so they had to get that sorted before the settlement. It was the vendor's agent’s responsibility to hire a surveyor to survey the land and find the exact boundaries. They took a very long time to organize it which delayed the process. They could have done it much faster.
If they found that there was a problem with the boundaries, then it would have taken much longer. Luckily, the were no problems with the boundaries and everything turned out to be okay. Though, I felt the survey should have been arranged much sooner just in case there had been a dispute over the land boundaries.
I felt that there was no room for me to negotiate or any chance to express my wishes. I realized that I should have negotiated at the time of offering. Part of my offer should have been that I wanted to settle within a month and if that was not possible, then they could have turned it down. Once the offer was accepted, they had 2 months to close the deal. They used the full 2 months and legally that was fine for them. On the other hand, it was extremely inconvenient for me as I had to stay in 2 different Airbnb places.
You bought the property with cash. Did you have any difficulties transferring the money from England to Japan?
No, but of course the bank did a security check to prevent money laundering and such. You cannot transfer that kind of money without anybody questioning it. They made me call the head office to explain where all the money came from. So far, everything seems to be fine.
Did the money take a long time to transfer from England to Japan?
No, it was very easy. My bank in Japan, Shinsei Bank is very good with international customers. They accept foreign currency. If you transfer foreign currency from overseas, it will go into your Japanese bank account unconverted. You can convert it to Japanese Yen on their website. It may not be the best conversion rate, but that was just what I did. Overall, the process was very smooth.
Were there any fees applied for converting the money?
No fees. I think the sender may have had to pay a fee in England to send it to Japan but in terms of converting the money, no fee was charged. You just have to accept their rate. I’m guessing the fee is included in their transfer rate.
Before your purchase in Japan, did you have any experience buying properties in other countries?
Yes, I have experience buying property in London. Not my own property, but with my family’s company, a property investment company. We have a small portfolio.
What were the differences in buying in Japan and in England?
It is more straightforward in England as we do not have the traditions that you have in Japan. There are also some differences in the market. In England, we don’t have many natural disasters such as earthquakes and floods. Houses last for 100 to 200 years and that is not rare. If you have a house that is 50 years old, it is still a great house to sell and gets a lot of competition. On the other hand, a 50-year-old house in Japan is not as popular and can be difficult to sell. So that makes a very different dynamic in the property market.
The house that I bought in Japan has no competition and I was not used to that. I was probably the only bidder. I put in quite a low bid, expecting them to say too low, come up a bit, and give a counter offer but they accepted my offer. I was both happy and surprised because I was paying lower than what I expected to. The seller was probably quite lucky because not many people want an old house like this. I particularly liked it for its size and character. But if a Japanese person bought something as old as this, they would want to rebuild it. However, as this home cannot be rebuilt due to restrictions, it had no competition. They probably thought that this house was going to be on the market for a long time so they must have been happy that I came along.
Do you think that the Japanese property market is done on the seller’s terms?
It seems to be based on my experience, but again I have only had one experience. In England, the seller and the buyer are the two most important people, the agents are there to get the connection. I noticed that in Japan, the selling company felt that they were very important, deserved respect, and things were done on their terms. It was difficult for me because I always had to ask that I want this and that. Back home, they will treat you with respect. But in Japan, they said, “You are asking for too much”. So, I think in terms of customer services that Japan is famous for, was lacking. In my opinion, there is much more respect given to the buyer in European countries.
There was even a stage where I was going to give up buying the place and go back to renting because the selling company was not meeting any of my wishes. They were taking so long with the survey and being homeless was quite scary. I had second thoughts during the process.
What made you continue with the purchase?
Mostly it was because the deposit was too much to just give up (Tom-san would not have been able to reclaim his deposit if he had canceled the contract) and I did want this house. I had fallen in love a little bit with the house because it was quirky and big. In the end, I thought I should see it through as I had already committed to it. Had the survey taken a long time to solve problems, I could have always rent a place and use the home as an investment. I could rent it out to a family or turn it into a share house.
Do you think it is difficult for a foreigner to buy real estate in Japan?
Yes. Obviously, it is possible but very difficult. I don’t think the system is adapted to foreigners. I received a lot of help from Beyond Borders who were very helpful in facilitating it and guiding me through the process. But it may not be easy with the existing system, by the people selling and just by the legal framework. What you are required to do, the certificates you must get are in Japanese, and sometimes you are signing things that you don’t fully understand even though there is a translator.
These are the extreme level of difficulties. The language barrier, the tradition on how things are done in Japan which we are not familiar with, and the culture gap. I should probably mention that I made it slightly more difficult for myself as well. As most people who are buying properties from English-speaking real estate agencies, they can just go to an English website and find the best one for them. I personally went through Japanese websites which did not have English assistance (As they have much more listings on Japanese websites). That made it more difficult. It would have been much easier for me if I had found the property on an English website.
[Tom-san’s Suggestions for Future Buyers]
Are you satisfied with your purchase?
Yes, even though there were many difficulties. I like living here and having lots of fun moving in. Overall, I’m satisfied and Beyond Borders was very helpful.
Do you have any suggestions in terms of our services so that we can improve in the future?
One thing that I would like to have improved, would be the help at making an offer. The stage when you say, “I want to buy this, I’ll make an offer.” I think that was the stage where I was badly prepared. I told the Beyond Borders agent that I would like to make an offer for the home and he very happily did it. I think it was better if I was told, “Okay, we will do that, but first, consider this, this and this.” Things like contract settlement date and moving costs. Consider if you can’t move in, where would you store your belongings, because that was one of the problems I had. So, I suggest people prepare before putting in an offer. If I have done a bit more at that stage, I would have fewer problems later I think.
In England, if you want the contract to be settled quickly, you make the offer first and then you will negotiate after. But here in Japan, it’s something that I really should have negotiated at the offering stage. Maybe I will suggest Beyond Borders to make a document saying things to consider when you make an offer. To consider the closing date, consider the moving cost, consider storage of your belongings if there is some delay. I think that would be a good idea.
What do you find different about staying in a house in Japan and in England?
There are many differences. The Japanese style bathroom is very different as the bath talks to me when I press buttons. Another thing is the windows. There are a lot of these door style windows and all of them are frosted like this.
In England, we only have this in the bathroom but every single window in my Japanese house is like this, there are no clear ones, which is unusual for me. In England, a which you can see the view from, you can see the garden. But I guess it is because, in Japan, the houses are very close to each other. If you have clear windows, you might just see your neighbors.
Insulation, of course, makes a difference. In most other countries, houses are much better insulated. If you make it cold, it stays cold for a long time. If you make it hot, it stays hot. They have gaps between the walls with insulation inside. Japan doesn’t have any of that. So, the house gets colder much easier in the winter, hotter much easier in the summer. We have to use air-conditioning all the time.
Is there any advice that you would like to give to foreign buyers?
You should always keep in mind that this is Japan and the rules are a little different. Be prepared for that, because if you are used to buying or investing in other countries, the rules are not the same, you may be surprised. Make sure to do your research and prepare.
Also, I think people should be aware of the Japanese requirements for buying properties. There are some things that are necessary in Japan, but not necessarily in other countries. For example, I was required to get a registered seal. In Japan, instead of a signature, they require you to have a stamp (Hanko). Not only a Hanko but a registered one. To get a registered one, the writing must be the same as on your ID. Beyond Border’s agent helped me with it, we had to go to several places to find a place that made English lettering Hanko. We then had to go to the wards office and register the Hanko. That was part of the property buying process. If you don’t live in Japan, I am not sure how it will be handled.
There is another thing as well. In Japan, you are expected to pay 10% of the sale price as the deposit, but it also has to be in cash. Paying a deposit is normal, but it is usually done by a bank transfer. I know I said earlier I came to Japan because it is a very safe country, but crime still does happen. If you are buying a luxury apartment for a billion yen, that is 100 million yen you have to take in cash to give on the day of the contract, that is a lot of money. If you get mugged on the way, that’s 100 million yen that the thief takes.
I think it is pretty dangerous as a system. If you buy an expensive apartment, you probably want somebody to protect you when you carry that much cash. If you are in New York City, you probably won’t want to carry that amount of cash because it would be too dangerous. I think it is a strange tradition and made me uncomfortable having a million yen in cash. Firstly, it is inconvenient to withdraw from the bank. Secondly, it is scary to carry around.
Beyond Borders agent (left) and Tom-san (right) on settlement day
Postscript:
Just after we finished the interview, Tom-san took me around his house. I was told that it was initially a very old and empty house at the purchase. However, I was impressed with the renovation and arrangements made by Tom-san himself. From what I have seen, it is now a very cozy and unique Japanese traditional house. Surprisingly, it belongs to a foreigner who values the beauty of a Japanese-style home.
The living room
A small pond being built by Tom-san in the front yard (In process)
Japanese sliding doors
Japanese dining table on tatami mat
DISCLAIMER: The views and opinions expressed in this article do not necessarily reflect the views of BEYOND BORDERS CO., LTD.
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