When letting go of real estate, there are two options for the sale method: "agency" and "purchase. In particular, "real estate purchase" is a method suitable for those who hope for a sure sale at an early date. However, many people have the anxiety, "Will not a purchase sell at a low price? However, many people have concerns such as "Will the purchase result in selling at a low price?
In this article, the merit and demerit of a real estate purchase are accurately understood, and thepoint to draw out a high price appraisal as much as possible is explained. We will deliver practical know-how based on our experience cultivated as a professional of real estate, such as purchase market prices, points to note in selecting a vendor, and even failure cases and their countermeasures.
We hope that those who are considering a real estate purchase will be able to realize a satisfactory deal with reference to this article.
A real estate purchase is a sales method in which a real estate company purchases a housing directly from a seller. Unlike general agency sales, there is no process of looking for a buyer, and since the real estate company directly purchases the property, it has the great feature of completing the sale quickly and surely.
The greatest appeal of a real estate purchase is that it can be converted into cash in a short period of time without conducting sales activities. This is a particularly effective option for those who are having trouble repaying their mortgage or want to sell inherited real estate quickly, or when there are time constraints.
There are "purchase" and "agency" in the sale method of real estate, and each has its own characteristics. Let's compare the main differences in the following table.
| Comparison item | Real estate purchase | Real estate agency |
|---|---|---|
| Buyer | Real estate company directly purchases | Third party (general purchaser) |
| Sale period | Minimum 1 week to 1 month | 3 months to 6 months or more |
| Sale Price | Approx. 60-80% of market price | Close to market price (market rate) |
| Brokerage Fee | Not required | Necessary (3% of sales price + 60,000 yen + tax) |
| Certainty of sale | High (immediate contract possible) | Depends on the buyer (uncertainties exist) |
| Liability for non-conformity to contract | Often exempted | May be incurred by the seller |
As described above, purchase is suitable for the person who values early sale and simplicity of procedure, while mediation is suitable for the person who wants to sell as high as possible. Since which is better depends on the needs and circumstances of the seller, it is important to choose after clarifying one's own priorities.
In a real estate purchase, the purchase price is generally 60-80% of a market price (assumed sale price in agency). Reasons for this price difference include the following
Because resale is assumed: The buyer's business model is to earn a profit by remodeling, etc. and reselling the property after purchasing it. Therefore, the price is set based on resale costs and profit.
Because they bear the risk: Since the vendor purchases the property with its own funds, it bears the risk of unsold properties due to changes in market trends.
The price of a speedy sale: In exchange for the benefit of an early sale, the relationship involves a certain concession by the seller in terms of price.
The lower purchase price is an unavoidable aspect of this business structure. However, it is possible to sell the property under the best possible conditions by following the points for a high appraisal as described below.
The most important point to obtain a high appraisal in a real estate purchase is to request an appraisal to several contractors. Since different buyers have different property types, regions, and resale strategies that they specialize in, there can be a large difference in assessed value even for the same property.
In the case of buyers in particular, we recommend that you compare assessments from at least three or more companies, as purchase prices fluctuate depending on the assumed price and resale strategy at the time of resale. In recent years, it is possible to easily receive assessments from multiple companies by using bulk appraisal sites.
During the appraisal process, conveying the property's appeal to the maximum extent possible may increase the appraisal value. The following are points that should be particularly appealing.
Organizing this information in advance and conveying it concretely at the time of appraisal will lead to a fair evaluation.
Selecting a reliable buyer is also important to achieve a high valuation. The following points should be considered when selecting a vendor.
It is also important to determine if the builder is trustworthy by actually talking to the person in charge. The content of the answers to questions during the appraisal and the attitude of the vendor will also reveal the vendor's attitude.
Before the purchase appraisal, a little effort can be made to increase the property value. It does not necessarily require extensive remodeling, but small preparations such as the following will lead to a higher valuation.
In particular, since buyers assume resale, the closer the property is to a ready-to-sell condition, the more likely it is to lead to a higher appraisal.
The market price of real estate purchase differs depending on the property type. The following table summarizes general purchase price quotations in comparison with market prices (agency prices).
| Real estate type | Purchase market price (compared to market price) | Remarks |
|---|---|---|
| Condominiums | 70-80% of market price | In popular areas, it can be more than 80%. |
| Detached Houses | 60-75% of market price | Varies greatly depending on location and building condition |
| Land | 60-70% of market price | Rebuildable, well-shaped lots are highly valued |
| Investment property | 65-75% of market value | Properties with high profitability will be valued higher. |
However, this is only a guide and will vary depending on the condition of the property, local market trends, and the buyer's strategy. It is important to obtain assessments from multiple vendors in order to know the actual assessed value.
The following are the main factors that affect the purchase appraisal value. These factors are evaluated comprehensively to determine the final assessed value.
Location
Age and condition of the building
Marketability
Property characteristics
Based on these factors, the buyer will offer a purchase price considering its own resale strategy and profit plan.
The market price of real estate purchase varies greatly by region. In general, purchase prices tend to be close to market prices in areas of population growth and metropolitan areas, but the differences can be large in areas with declining populations.
For example, in urban centers such as the 23 wards of Tokyo and Osaka City, purchase prices may rise to as much as 80% of market value in some cases due to expected demand at the time of resale. On the other hand, in depopulated rural areas, the price may be as low as 50% of the market price due to the difficulty of resale.
Based on these regional differences, it is important to compare and consider how much your property will be valued by requesting an appraisal from multiple buyers.
The flow of a sale by real estate purchase is simpler than a typical agency sale. The following are the basic steps
Advance preparation and information gathering
Request assessments from multiple vendors
Assessment and price presentation
Determination of buyer and contract
Settlement and delivery
Finalization of income tax returns as required
These processes are usually completed within one month and may take as little as two weeks in case of urgency.
The following is a summary of the time required for each step of the real estate purchase process and the preparations necessary at each stage.
| Process | Duration required | Necessary Preparations |
|---|---|---|
| Preliminary Preparation | 3-7 days | Certified copy of registration, property tax notice, floor plan, building permit documents, etc. |
| Request for valuation | 1 to 2 days | Property information, desired time of sale, contact information, etc. |
| On-site appraisal | 1-2 hours/company | Property cleaning and tidying, preparation of repair history |
| Receipt of appraisal results | Same day - 3 days | Charts and documents to keep and compare each company's appraisal reports |
| Selection and negotiation of contractors | 1 to 3 days | Listing of questions, organization of points for negotiation of terms and conditions |
| Conclusion of contract | 1 day | Seal registration certificate, personal seal, ID card, etc. |
| Settlement and delivery | 1 day | Keys, instruction manual for equipment, account for transfer of settlement money, etc. |
The entire process takes a minimum of 2 weeks, and usually 3 weeks to 1 month. This compares to 3-6 months for an agency sale, indicating that a sale can be completed in a very short period of time.
Be sure to confirm the following important points when concluding a purchase contract.
Conditions for finalizing the purchase price
Delivery conditions
Handling of liability for nonconformity to contract (liability for defects)
Burden of expenses
Conditions for cancellation
Checking these points in advance and making sure they are clearly stated in the contract will help prevent problems later on. If there are any points that are unclear, be sure to ask questions before signing the contract, and make sure you are satisfied with the contract before signing it.
The following is a list of common failures in real estate purchases and their countermeasures. By knowing these, you can avoid the same mistakes.
Low-priced purchase by easy one-company request
Reduction of purchase price after signing a contract
Pitfalls of the Guaranteed Purchase Price
Unclear basis for appraisal
Trouble by unscrupulous companies
Most of these failures are caused by "lack of information" or "too much haste. It is important to gather sufficient information and make comparisons without being hasty.
The following is a list of checkpoints to identify reliable buyers.
Legal reliability
Sincerity of response
Transparency of transactions
Track record and reputation
Follow-up service
By comparing multiple contractors based on these points, you will be able to find a reliable contractor.
Before signing a real estate purchase contract, use the following checklist to confirm the necessary items.
✓ Is the purchase price appropriate compared to the market rate?
✓ Are there any conditions under which the purchase price can be changed
✓ Is the settlement and delivery schedule clear?
✓ Is the handling of liability for non-conformity to contract (liability for defects) clear?
✓ Is the amount of the deposit and the conditions for its return appropriate?
✓ Are the conditions for cancellation of the contract and the provisions for penalty appropriate?
✓ Is there an agreement on the handling of leftover property?
✓ Is the method of settlement of property tax, etc. clear?
✓ Is there an agreement on how to deal with problems after delivery?
✓ Are all special agreements in writing?
By using this checklist and making sure there are no omissions, you can prevent problems after signing the contract. If there are any unclear points, be sure to ask questions before signing the contract and make sure you are satisfied with the agreement.
When selling real estate with an outstanding mortgage, the following points should be noted.
In the case of under-loan (sale price > remaining loan balance)
In the case of over-loan (sale price < remaining loan balance)
Procedures
Even a property with an outstanding mortgage can be purchased and sold if the appropriate procedures are followed. However, special care is required in the case of an overdrawn loan, so early consultation with a financial institution or specialist is recommended.
The following is a summary of the key points for obtaining a high appraisal in a real estate purchase.
By following these points, you can achieve the best possible conditions of sale in a real estate purchase.
In a real estate purchase, the balance between "speed" and "price" is important. Although agency sales should be considered if you are aiming for a higher price, a purchase may be appropriate in the following situations
The key to success is to clarify your needs and priorities and choose a sales method that suits them.
In the sale of real estate, it is advisable to judge whether purchase or agency should be chosen based on the following conditions.
Cases in which purchase is suitable
Cases in which an intermediary is suitable
Both methods have their advantages and disadvantages. It is important to make the best choice based on your situation and priorities. Another option is to first obtain an appraisal using both methods and then compare them.
A1: In the case of a real estate purchase, from an appraisal to a sales contract and settlement can be completed in as little as one week, and usually in about one month. On the other hand, in agency sales, it generally takes 3 to 6 months, and depending on the property and area, it may take even longer. In the case of purchase, there is no buyer search process, so the time can be significantly shortened.
A2: Yes, many buyers are willing to purchase old properties or properties in poor condition. In fact, such properties are often difficult to sell through intermediaries and may be suitable for purchase. However, since purchase prices vary greatly depending on the condition and location of the property, we recommend that you obtain assessments from multiple vendors.
A3: It is possible to purchase a property even if it is so-called "overleased," but you will need to make up the difference between the sale price and the outstanding loan balance with your own funds. We recommend that you consult with the financial institution in advance and confirm whether any special measures, such as a voluntary sale, are necessary. Some financial institutions may be willing to discuss partial debt forgiveness or repayment in installments.
A4: Yes, the purchase price is negotiable. Especially if you have obtained appraisals from multiple buyers, it is effective to negotiate using those appraisals as a basis for comparison. However, in many cases, it is difficult to raise the price significantly because buyers also set the price within the range of business viability. It is advisable to consider negotiating not only the price, but also other conditions such as the timing of delivery and the handling of remaining items.
A5: In the case of a real estate purchase, a covenant is often attached that exempts the seller from liability for non-conformity to the contract (former defect liability). In other words, even if some problem is found in the property after the sale, there is basically no claim against the seller. However, exceptions may be made in the case of intentional concealment of serious defects, so it is important to confirm the content of the clause at the time of contract.
Major laws and regulations related to real estate transactions include the following
In particular, the Building Lots and Buildings Transaction Business Law stipulates the obligations and prohibited acts of builders, and buyers must conduct transactions in accordance with this law. If problems arise in real estate transactions, you may consult with the Ministry of Land, Infrastructure, Transport and Tourism or the Building Lots and Buildings Transaction Business Division of each prefecture.
The following external resources are also helpful if you would like to learn more about real estate purchases.
In addition, the latest information and best practices regarding the purchase of real estate are available on bulk appraisal websites and the websites of individual buyers. Please make use of this information when gathering information.
Real estate purchase is an excellent option that enables a quick and smooth sale if you proceed appropriately. Please keep the points explained in this article in mind and choose the method that best suits your situation to achieve a satisfactory transaction.
If you need further advice on selling real estate, please contact INA & Associates. We will suggest the best sale method for your situation. Please feel free to contact us for a free evaluation.