Buying a pre-owned condominium is one of the larger purchases in life. To prevent contract-related trouble before it happens, it is essential to review the Important Matters Explanation and the attached equipment list. This article explains the contract process for a pre-owned condominium and four important points to check.
What is the contract process for a pre-owned condominium? Steps through to purchase
A contract for a pre-owned condominium is generally completed through a real estate company acting as the intermediary. The process proceeds as follows.
Introductions and greetings
The seller, buyer, and broker gather to begin the contract process. If the buyer is married, it is advisable for both spouses to attend so that there are no differences of opinion after the sales contract is signed.
Explanation of important matters
The broker representing the seller explains the important matters to the buyer. This work may only be carried out by a qualified real estate transaction specialist, and the specialist is required to present their certification before the explanation begins.
Execution of the sales contract
After the explanation of important matters, the parties move on to the explanation and joint review of the sales contract. The settlement date and handover date are decided, and once both parties agree, they sign and stamp the documents to conclude the contract.
Payment of deposit and brokerage fee
A deposit is paid as part of the purchase price, and the contract becomes effective. A brokerage fee must also be paid to the broker, and there are two common methods: paying half at the time of contract or paying the full amount at settlement.
What points should you pay attention to when signing the sales contract?
To prevent problems after the contract is signed, be sure to confirm the following points.
Obtain the Important Matters Explanation in advance and review it
The contents of the Important Matters Explanation are specialized and complex. Because it is difficult to fully understand it on the day of signing, it is important to receive a copy or email in advance and review it beforehand. At a minimum, you should confirm the following items.
- Exclusive floor area and building structure
- Whether pets are allowed
- Whether replacement with wood flooring is permitted
- Conditions for using the parking area and bicycle parking area
- Any arrears in the repair reserve fund
- Whether defect liability applies and for how long
- Conditions for cancellation or termination
Do not forget to review the attached equipment list and property condition report
The attached equipment list is a document describing the equipment to be handed over. Equipment marked as "available" will remain at handover, while equipment marked as "not available" will be removed. If unnecessary equipment is left behind, the buyer may bear the removal cost, so this should be checked carefully.
The property condition report includes information known to the seller, such as leaks, termite damage, plumbing failures, and the impact of nearby construction plans. Because it may contain information that a buyer could not otherwise know, it is important to review it in advance.
What tax points should you be aware of after purchasing a pre-owned condominium?
Many taxes are associated with purchasing a condominium. In particular, you should understand the following two points.
Property tax rates may differ for pre-owned properties
Property tax is the tax imposed on land and buildings you own. For pre-owned properties, it is generally lower than for newly built properties, but the amount varies by municipality, so it should be confirmed before purchase.
Make use of the real estate acquisition tax deduction system
Real estate acquisition tax may be reduced if certain conditions are met. Conditions include using the property as a residence and having a floor area of at least 50 square meters and no more than 240 square meters. To receive the deduction, an application must be submitted to the prefectural tax office.
Frequently Asked Questions (FAQ)
Q. When can I receive the Important Matters Explanation for a pre-owned condominium?
In general, you can obtain it in advance by asking the broker for a copy or email before the contract date. Because it is difficult to review it thoroughly on the day itself, you should request it beforehand.
Q. If the attached equipment list says there is a defect, will it be repaired?
As a general rule, the seller is not obligated to repair equipment with defects. It may be handed over in its defective condition, so it is important to understand the condition before purchase.
Q. What taxes are charged when purchasing a pre-owned condominium?
The main taxes are property tax, real estate acquisition tax, registration and license tax, and stamp tax. The amount varies depending on the age of the property, its price, and its location, so it is advisable to run a simulation in advance.
