What is the basic process for purchasing property in Japan? (From letter of intent to final handover)

Okay, no problem! Buying property in Japan might sound complicated with all the procedures and jargon. Don't worry, I'll walk you through the entire process, from finding a place you like to finally getting the keys, explaining it in plain language so it's easy to understand.

Basic Process of Buying Property in Japan (From Letter of Intent to Final Handover)

Imagine you've found your ideal property through a real estate agent. Now, it's time to get serious about the purchase.

**Step 1: Submit a Letter of Intent (Purchase Application Form - Kaituke Shōmeisho)**

What is it? When you decide "Yes, this is the one!", you need to formally express your intent to buy to the seller. This written document is the "Letter of Intent," often called "Kaituke Shōmeisho" in Japan.
What's it like? This document is not a formal contract and has no legal binding force. It's more like seriously telling someone you're dating, "I think you're great and want to date with the intention of marriage. Can we talk?". It represents your sincerity.
What's in it? Mainly includes: your desired purchase price (could be the listed price or your offer price), your payment method (cash or loan), and your desired closing date.
Tip: This is your first step in "negotiating" with the seller and the start of price discussions. The agent will take your Letter of Intent to negotiate with the seller.

**Step 2: Apply for Loan Pre-Approval (Jūtaku Rōn Jizen Shinsa)**

What is it? If you need a mortgage, you must apply for "Loan Pre-Approval" (Jūtaku Rōn Jizen Shinsa) with a bank either at the same time as submitting your Letter of Intent or immediately afterwards.
Why is it so important? This step is absolutely crucial! Whether or not you have this significantly impacts how seriously the seller and agent take you. It's like the bank giving you a "pre-qualified buyer certificate," telling the seller, "We've checked this person and it's highly likely we can lend them the money to buy your property." Without this, why should the seller believe you can afford it?
How to do it? You need to provide the bank with documents like proof of income and employment status. The bank will quickly assess your situation and give you a preliminary loan amount commitment.

**Step 3: Explanation of Important Matters (Jūsetsu)**

What is it? Once the seller accepts your offer and your loan pre-approval is secured, you move to the most critical step before signing the contract – the "Explanation of Important Matters," commonly abbreviated as "Jūsetsu".
What's it like? Think of it as the property's "super detailed inspection report + user manual".
Who explains it? A nationally licensed professional called a "Takuchi Tatemono Torihikishi" (Real Estate Transaction Specialist, often shortened to "Takken-shi") will explain this report to you in detail, line by line, in person.
What does it cover? It contains all vital information about the property and land. For example: property ownership details, legal/regulatory restrictions (e.g., building height limits), road access, history of any unfortunate events (like crimes or deaths), building management regulations, etc.
Tip: Do not take this lightly! Pay close attention. Ask questions about anything you don't understand, no matter how small, right then and there! This is your last chance to uncover any potential risks before signing the contract.

**Step 4: Sign the Formal Sales Contract & Pay the Deposit (Tetsukekin)**

What is it? If everything in the "Explanation" checks out, it's time to get serious. Both parties sign the formal "Real Estate Sales Contract" (Fudōsan Baibai Keiyakusho).
What happens?
1. Signing and Sealing (Seals, Hanko, are very important in Japan).
2. Paying the Deposit, called "Tetsukekin" in Japanese.
How much is the deposit? Typically 5% to 10% of the total property price. This money is paid to the seller.
Important! Once the contract is signed and the deposit is paid, the deal is legally binding. If you back out later, you usually forfeit this deposit. Conversely, if the seller backs out, they must pay you double the deposit.

**Step 5: Apply for Formal Loan Approval (Jūtaku Rōn Hon Shinsa)**

What is it? Take your signed formal sales contract back to the bank to apply for the "Formal Loan Approval".
How is it different from "Pre-Approval"? "Pre-Approval" is a preliminary assessment. "Formal Approval" is the bank's detailed, final review after seeing your signed contract. They decide definitively whether to grant the loan and confirm all details like the interest rate. This process usually takes 2-4 weeks.

**Step 6: Final Property Inspection (Tachiai)**

What is it? Before the final payment and handover, the agent will arrange for you and the seller to visit the property together for a final inspection, called "Tachiai".
What do you check? Mainly verifying that the property matches the contract description. Check for any new damage to walls, if included appliances like air conditioners work, if items agreed to be removed are gone, etc. Raise any issues immediately.

**Step 7: Settlement - Transfer of Ownership & Final Payment (Kessai)**

What is it? This is one of the most exciting steps, marking the completion of the transaction. Called "Kessai" in Japanese.
What's the setting? Typically, the buyer, seller, both agents, and a "Shihō Shoshi" (Judicial Scrivener - a legal professional who handles the registration process) meet at the buyer's lending bank.
What's the process?
1. The Judicial Scrivener confirms all documents needed for the title transfer are complete and correct.
2. You transfer the remaining balance of the property price, agent fees, taxes, and all other costs to the seller and relevant parties via bank transfer. If using a loan, the bank disburses the loan amount into your account at this time, and you immediately transfer it to the seller.
3. Once the funds are received, the Judicial Scrivener immediately takes the documents to the Legal Affairs Bureau (Hōmukyoku) to register the change of ownership (changing the name on the title deed from the seller to you).

**Step 8: Handover of the Property (Hikiwatashi)**

What is it? On the day of the final payment, once funds are confirmed received, the property handover takes place, called "Hikiwatashi".
What do you receive? The seller hands over all keys, apartment management rules, manuals and warranty cards for included appliances, etc., all at once.

Congratulations! From this moment, the property is truly and officially yours!

Simplified Timeline Summary:

Find Property → Submit Letter of Intent (1-2 days) → Loan Pre-Approval & Price Negotiation (~1 week) → Explanation of Important Matters & Sign Contract & Pay Deposit (1 day) → Apply for Formal Loan (2-4 weeks) → Final Inspection & Final Payment & Ownership Transfer (1 day) → Receive Keys

The entire process, from submitting the Letter of Intent to receiving the keys, typically takes about 1.5 to 2 months if everything goes smoothly and the loan process is quick. Hope this explanation helps!