What You Should Know Before Closing a Contract
Once you have drafted and reviewed all the important contractual details and agreed upon conditions, you can finalize a contract with the seller. Although real estate companies are obliged to explain all the important matters to a buyer, you are responsible for making a contract. Thus, it is important that you fully understood and agreed on the contract terms.
The legal contents of a contract can state any terms. There are laws to promote fair contracts, but both parties need to agree on all the contract details. If you leave conditions in the contract ambiguous, there may be consequences such as an incompleted transaction.
Deposit (tetsukekin 手付金）
When you make a contract with a seller, you need to make a deposit known as tetsukekin(手付金). Tetsukekin is a deposit that a buyer has to make, and it proves that you made a contract with a seller. Although you pay tetsukekin prior to the property’s payment, it is included in the price. However, if you cancel the contract, you cannot receive a full refund. If the seller cancels the contract, he or she has to pay the buyer double the price of the tetsukekin paid. Tetsukekin is usually 10% of the price, but you can decide how much you pay.
canceling a contract
Once you make a contract, it is not easy to cancel the contract except in the following cases:
| Cooling Off System | If you buy a property from a real estate company and meet the contract conditions, you can cancel the contract. |
| Giving Up Deposit (or pay back double price of deposit) | |
| Risk of Loss | If a seller cannot give the property to a buyer because of an inevitable incident such as fire or disaster, the buyer can cancel the contract. |
| Liability for Defect Warranty | If there is a large fraud of the any property defects and the seller is unable to give it to a buyer, a buyer can cancel the contract. |
| Loan Covenant | When a buyer cannot get a loan from a bank, a buyer can cancel the contract in case he made a contract with a certain condition. |
| Agreement | If a seller and a buyer agreed on the annulment of the contract, both parties can mutually cancel the contract. |
Therefore, you should confirm the following points before you making a contract:
Land conditions
→Is there enough road width? Is the shape of the land standard? Are there clear boundaries? Is the location near a station or other facilities? Are the surrounding environments around the property ?
Property conditions
→Are there any defects on the property?
Contract details
→Are the details of contract favorable to you?
Payment plan
→Is it affordable for you to purchase a property?
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