Understanding the Priority Rules for Submitting a Purchase Application for Japanese Real Estate

A popular property may receive many purchase applications at the same time. However, the rules for purchasing real estate are not very clear, are they?

This time, we would like to talk about the order of priority of purchase offers for those who are considering purchasing real estate. Knowing how the purchase order works will help you avoid unexpectedly missing out on a purchase.

To begin with, there are no clear rules for the purchase of real estate.

First of all, it is necessary to know that there are no legal rules or industry-unified restrictions, and that transactions are based on the unspoken rules of transaction practice. Although the order of priority of purchase may vary depending on the real estate company and the sales situation of the property, we will explain the rules that are generally accepted from the practice of real estate transactions below.

First-come-first-served priority for purchase applications under the same conditions.

For example, let’s assume that there are two offers to purchase. If both sellers have the same purchase price, both have been pre-approved by the bank for financing, etc., and both have the same level of purchase conditions for the seller, the buyer who made the earlier offer will have priority. As an extreme example, if one of the buyers made an offer at 12:00 pm and the other made an offer at 10:00 am on the same day, the offer at 10:00 am will be given priority.

This is why the better the property is, the more the real estate agent rushes the purchase application to the buyer. In order not to miss out on buying a housing that the buyer really likes and wants to buy, they suggest an early purchase application in order to hold the housing. It is not rushing unnecessarily for the convenience of the real estate agent.

Even first place can lose to second place.

Now, unlike the previous example, what happens if the terms of the purchase are subordinate? For example, let’s say you are the first to make an offer to purchase a property. Immediately after that, the second offeror applies to buy the same property.

If the second offeror’s purchase terms are superior to yours (the first offeror), you (the first offeror) will be asked to decide whether or not you (the first offeror) can purchase the property on terms better than the second offeror’s purchase terms. If you are not able to keep up with the second party’s purchase terms, the second party, as the buyer, obtains the right to preferentially negotiate the sales contract.

Thus, even if you are the first to make a purchase offer, you may fail to make a purchase if someone else makes a purchase offer with more favorable terms during the period between your purchase offer and the sales contract.

What to do if you want to hold the property even if the conditions are inferior

If you have negotiated a discount or other terms and conditions have been agreed upon with the seller, the following methods are effective in securing the property until the sales contract is signed.

• Ask the seller to stop selling the property until the date of the purchase agreement.
• Conclude a real estate sales contract as soon as possible.

When you agree on terms and conditions, ask the seller through the real estate agency to stop selling the property until the date of the sales contract and to treat your application as “first in line”. This means that even if there are other offers to purchase the property, they will be rejected until the date of the sales contract.

In addition, the seller will not like it if the date until the date of the sales contract is too long. This is because until the date of the purchase agreement with you, the seller will refuse any other purchase offers with good conditions, resulting in a big opportunity loss.

Of course, since the adjustment of the date of a sales contract is also the seller’s convenience, you cannot force it, but please set a date as early as possible from the time you agree on terms to the date of the conclusion of a sales contract. (Since the real estate brokerage company needs time to draw up the sales contract and prepare the deposit, it is generally a good idea to conclude the sales contract within 5 days to 1 week from the date when the terms were agreed upon.

Final thoughts

Knowledge of the purchase offer is essential in the purchase of real estate. It is not that difficult if you just keep in mind the principles of transaction practices.

The important points are to make a purchase offer as soon as possible when you find a property you want, and to negotiate firmly with the seller to secure an advantage during the period up to the date of conclusion of the sales contract.

I wish you all the best in finding a great property.

Thank you again for reading this far!