For those who are considering purchasing a condominium in Japan, do you know what points you need to be careful and confirm? While having a functional floor plan or a stylish exterior is important, those are not the most crucial factors to consider.
By reading this article, you will learn the minimum essential points to keep in mind when purchasing a condominium, and we will also explain in detail why these points are so important.
From the perspective of real estate agents, we will explain what they focus on when selling condominiums.
Let’s get started!
The points to be aware of when buying a condominium in Japan are as follows:
- Identifying whether the seller is a professional real estate agent or an individual
- Ensuring that the total number of units is not too low
- Confirming that the repair reserve fund is not unreasonably low
- Knowing the property developer behind the project
- Avoiding self-management of the condominium
- Checking whether the property has a history of accidents or incidents
- Understanding the position of the real estate agency facilitating the purchase
- Final Thoughts
Reliability of this Article
This article is written by someone with extensive experience in the real estate industry. The author worked for a major conglomerate real estate brokerage firm for 17 years and has successfully mediated over 300 real estate transactions to date. They are also a certified 1st-class financial planner, CFP credential holder, and a registered land and building transaction specialist.
①Identifying whether the seller is a professional real estate agent or an individual
If a property listing includes “tax included” next to the displayed price, it indicates that the seller is a taxable entity for consumption tax. In other words, it is highly likely that a professional real estate agent is the seller. On the other hand, if there is no indication, the property is non-taxable and the seller is an individual.
When a real estate agent is the seller, there is little room for price negotiation unless there are special circumstances such as it not selling for a long time or needing to recover funds quickly.
Also, when a real estate agent is the seller, in most cases, a commission will be paid to the real estate brokerage firm upon completion of the transaction. In other words, the real estate brokerage firm will receive a commission from both the buyer, you, and the real estate agent seller.
Therefore, it’s important to remember that real estate brokerage firms may recommend properties where the seller is a real estate agent, not based on the quality of the property but rather for the sake of earning a commission.
However, it’s not necessarily bad if the seller is a real estate agent. In most cases, professional companies have good quality remodeling or can perform the work at a lower cost compared to individuals because they can order materials in bulk or because they have remodeled the property themselves. Additionally, there are benefits such as offering after-sales services for remodeling work or a two-year repair responsibility in case there is a fatal defect in the property, as opposed to the normal three-month repair responsibility for individual sellers.
②Ensuring that the total number of units is not too low
When considering a condominium, the total number of units is extremely important. The first reason is that if there are many units, the accumulated reserve funds and management fees will enable long-term, stable maintenance of the condominium.
Think about it. The total amount of reserve funds and management fees paid monthly by each unit owner in a 10-unit condominium and a 100-unit condominium is completely different. In a condominium with too few units, it may not be possible to accumulate the necessary funds for future repair work, leading to aging of the building and requests for lump-sum payments from each unit owner due to insufficient reserve funds.
The second reason is that in a condominium with too few units, there is a risk that a legitimate majority vote will not be taken. In a condominium, matters to be discussed are decided by a majority vote of all owners at a general meeting. If the total number of units is significantly small, there is a risk that the management policy of the entire condominium will be unilaterally decided by a group of long-time residents.
As a rule of thumb, it is desirable to have at least 30 units or more as the total number of units.
③Confirming that the repair reserve fund is not unreasonably low
This is closely related to the issue of total number of units discussed earlier, but it is important to avoid condominiums with significantly low repair reserve funds in relation to the total number of units. For example, if there are only 10 units in a building, but the monthly repair reserve fund is as low as 5,000 yen, it will not accumulate enough money for necessary repairs in the future even if collected from a small number of units at such a low amount.
④Knowing the property developer behind the project
If the condominium is developed by a well-known developer, such as a major developer like Mitsui Fudosan’s Park Court, Mitsubishi Estate’s Park House, or Nomura Real Estate’s Proud, it is expected to have less price depreciation when sold in the future compared to when it is developed by an unknown developer. While it may not be necessary to seek out top-class developers, it is better to avoid developers with low name recognition that most people have never heard of.
Some of the most well-known developers in Japan include:
- Mitsui Fudosan
- Mitsubishi Estate
- Nomura Real Estate
- Tokyu Land
- Sumitomo Realty
- Tokyo Tatemono
- Sekisui House
- Daiwa House
- Kintetsu Real Estate
If it is within your budget, it is recommended to target condominiums developed by developers in this class.
⑤Avoiding self-management of the condominium
Be careful with condominiums that have self-management as their management form.
The most common form of management for regular condominiums is outsourced management, where the management tasks of the condominium are outsourced from the management association to a professional management company, who handles everything from collecting overdue management fees and repair reserve funds, to developing long-term repair plans for the future, confirming that the management fees are being properly used, and managing accounting procedures.
Self-management means that these management tasks are operated by the owners of the condominium (amateurs) themselves.
The most troublesome part is that the owners of the condominium have to take turns being responsible for each of the management tasks. This can be quite a hassle.
Moreover, the owners of the condominium are not experts in condominium management, so there are often concerns such as “Are those rules okay?” or “Is that accounting a bit suspicious?”.
This management method is particularly common in older condominiums, especially in Tokyo, so be careful.
⑥Checking whether the property has a history of accidents or incidents
What you need to be careful of are the properties that have “announcement included” written at the end of their advertisements. These are properties known as “accident properties,” where incidents such as suicide or murder have occurred.
Real estate agencies generally avoid introducing such properties, but in some cases, they may introduce them to customers who are not concerned about it or are attracted by the low price.
What you need to be careful of is the possibility that the agent in charge of the property overlooks the fact that it is an accident property due to their incompetence.
One thing to be aware of with accident properties is their resale value. Naturally, if there has been an accident or incident, the fact cannot be hidden by the seller within the scope of their knowledge, and it is illegal to do so. As a result, the number of potential buyers may decrease, affecting the sale price.
⑦Understanding the position of the real estate agency facilitating the purchase
On property floor plans, you may see the characters “媒介” (mediation), “専任” (exclusive), and “一般” (general) written. They have the following meanings:
“Mediation” refers to properties that are not directly assigned to the real estate brokerage company by the seller (i.e. other companies are assigned by the seller).
“Exclusive” refers to properties that are directly and exclusively assigned to the real estate brokerage company by the seller.
“General” refers to properties that are directly assigned to the real estate brokerage company but are also assigned to other competing companies.
The important point is that with “exclusive” and “general” properties, the real estate company is in a position to directly contact the seller. Therefore, they may already know the negotiation range of the price or the personality of the seller, which can result in a smoother negotiation process.
On the other hand, “mediation” means that the seller has assigned another real estate company as their representative, so the real estate company cannot directly contact the seller. In this case, all negotiation is handled by the other real estate company.
Therefore, “exclusive” and “general” properties are more advantageous for negotiating conditions with the seller.
Final Thoughts
The following is a natural English translation of the blog post:
These points are just one aid to bring safety to your transactions, but there is a big difference between knowing and not knowing.
Of course, personal preferences such as floor plan and design are also important when choosing a property. The most important thing is that you really like the property.
I sincerely hope that you will find a good property.
Thank you for reading this far again this time.
