Guide to Foreclosure Properties in Japan

When a debtor cannot repay a loan, the creditor asks the court to sell the real estate such as land or a building that was pledged as collateral. This property is called a property auction.
A real estate auction is a system that allows you to purchase real estate through the courts.

Anyone is free to bid for an auction property, and those interested in purchasing a property submit a bid to the court within a certain period of time.
Among the bidders, the one who offers the highest bid will be the successful bidder.
If the successful bidder pays the price by the date specified by the court, he or she will receive title under the court’s authority.

Now, with the amendment to the Civil Execution Law, anyone can conduct transactions fairly and safely.

For those considering auctioning their property

Private individuals can also bid on properties sold at court auctions.
The laws governing auctions have improved in recent years, and I think the barriers to participation are lower than they were some time ago.
However, if you have to make multiple trips to the courthouse during the weekday to inspect the property, bid or win the bid, or if the property is occupied, the successful bidder may have to vacate the property at their residence. Currently, it is quite difficult for the average individual to attend an auction for the first time.
From safe and secure bidding to property acquisition, we recommend that you read up on the various laws and consult with an expert.

Features of Auction Properties

The most important feature of auction properties is that, in principle, you cannot view the property and bid on it.
To make its decision, the court will use property survey materials and photos of the site's appearance.
Also, unlike regular real estate transactions, there is no “explanation of material real estate matters,” so you will need to read and understand the court documents yourself and research any missing pieces at the government’s office.

Therefore, you are basically in charge of the transaction, so you have to be familiar with real estate.

Instead, I think the attraction is that you can successfully bid (buy) at a price below the general market circulation price.

Are auction properties cheap?

The price of an auction property varies from property to property.
However, currently around 70-75%'s successful bids are made by businesses (mainly real estate agents). Since there are still dealers buying and reselling properties, their prices tend to be cheaper than those on the general market.
However, nowadays, especially in the Tokyo metropolitan area, prices are indeed not as cheap as they used to be. Therefore, it becomes more important to "find out" property.

Can I get a "mortgage loan" or "property investment loan" from a bank even if it is an auction property?

If it is a mortgage

For properties purchased for personal residence (own use), you can apply for a so-called "mortgage loan" at a low interest rate.

However, even if a bidder (generally an individual) goes to a financial institution for advice and says "I want to borrow money to buy an auction property", they will hardly accept it. This is not limited to auction properties, even for properties that are listed normally, if a real estate agent is not involved in the brokerage and sales, banks generally will not issue mortgage loans.

In order to obtain a mortgage loan for an auctioned property, expertise is required at the stage of consulting a financial institution before making a bid. Full members of the Real Estate Auction Circulation Association are professionals among real estate professionals. I believe that if you consult me, you will be able to get appropriate advice.

For real estate investment loans

When buying an auction property for investment purposes, many financial institutions require that the property be backed by a real estate agent, just as it would be the case with a mortgage. The processing of mortgages on auction properties varies from financial institution to financial institution, so it is best to consult with an auction backing agent local to the property location.

Type of financial institution consulted

If you are buying an auction property for investment purposes, be aware that this can be difficult to do with city banks as appraisals often take a long time. In recent examples of actually making loans, local banks and credit unions have been proactive.

Of course, the availability and conditions of the loan will vary depending on the quality of the property being purchased and the attributes of the purchaser, so it is best to consult Masu, a regular member of the real estate auction distribution.

By the way, for investment loans for auction properties, non-bank financial institutions review actively and quickly. Although non-banks have higher interest rates, they are faster in screening and obtaining job opportunities, so one option is to meet with full members of the Real Estate Auction Dealers Association in advance and use them as a "bridge" in certain situations.

Regardless, if you are using a bank loan to purchase an auction property, it is very important to establish a close relationship with the "auction support agent" in the area where the property is located in advance (preferably before deciding on a property to bid on) as retention is important.