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Negative Equity Property in Japan: Is walkin away an option?

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  • Negative Equity Property in Japan: Is walkin away an option?

    http://www.theguardian.com/commentis...egative-equity

    Seems its an option for Americans whos properties are experiencing negative equity.

    What are the options for folks in Japan with negative equity in residential property?
    And what are the consquences if you do take that path?

    Anyone ever handed the keys back to the bank?

  • #2
    Originally posted by Anamorphic View Post
    http://www.theguardian.com/commentis...egative-equity

    Seems its an option for Americans whos properties are experiencing negative equity.

    What are the options for folks in Japan with negative equity in residential property?
    And what are the consquences if you do take that path?

    Anyone ever handed the keys back to the bank?
    Banks have usually asked for guarantors – and they would be left owing the bank. Plus the bank would auction off the property, and that may not bring the best price – meaning that the guarantor would owe just that much more.

    I do know of a person who walked away from his house by declaring personal bankruptcy, but do not know if guarantors became liable.

    You might contact the folks at capserv.com, as they have a reality subsidiary (CapitalReality), and see if they can help you with your question.

    Comment


    • #3
      Yes, the mortgage loans are usually contracted so that an individual takes out the loan and the property is just there as collateral. Also, the banks usually hedges itself by requiring guarantors and a life insurance.
      So in case of 'negative value', the person would still have to pay back, unless he/she declares also personal bankrupcy as well as the guarantors.

      Note that there are even people more scr*wed up overseas up who took mortgage loans in Yen and suffered badly when their home currency weakened...

      Comment


      • #4
        Once you declare bankruptcy you can walk away from your debt and not have it come back on your guarantors. In this case everything you own ends up up for grabs by the bank(s) and your creditors and usually ends up auctioned off. I'm not sure how the rules are now but back in the 90's taking that route really screwed up a person's life.

        FYI, if Abe gets his way there are going to be some new and harsher laws regarding personal or corporate bankruptcy in Japan. One law he's looking at looks like something Dubai currently has on the books.

        Comment


        • #5
          Thanks for the good responses. An Irish cousin of mine got a loan out on a Dublin apt, and now has massive neg equity. Its a real ball and chain for him!

          Comment


          • #6
            Originally posted by Anamorphic View Post
            Thanks for the good responses. An Irish cousin of mine got a loan out on a Dublin apt, and now has massive neg equity. Its a real ball and chain for him!
            He should have considered that before he borrowed all the money. I'm sure if he sold it at an enormous profit he wouldn't be moaning about all that cash crimping his lifestyle.

            Unsympathetically,
            A.

            Comment


            • #7
              Originally posted by TJrandom View Post
              Banks have usually asked for guarantors – and they would be left owing the bank. Plus the bank would auction off the property, and that may not bring the best price – meaning that the guarantor would owe just that much more.

              I do know of a person who walked away from his house by declaring personal bankruptcy, but do not know if guarantors became liable.

              You might contact the folks at capserv.com, as they have a reality subsidiary (CapitalReality), and see if they can help you with your question.
              You'll probably always end up in negative equity in Japan, as prices of property (although not necessarily the land they sit on) depreciate with age - quite rapidly, and over around 25 years. It's an entirely different market from America.

              Comment


              • #8
                Originally posted by Agitator View Post
                He should have considered that before he borrowed all the money. I'm sure if he sold it at an enormous profit he wouldn't be moaning about all that cash crimping his lifestyle.

                Unsympathetically,
                A.
                He's not 'moaning' about it or seeking sympathy as you put it. He's paying the loan.

                Let me guess... You're one of those ppl that posts trash online stuff like the above that you'd never get away with saying in normal face to face interactions.

                Comment


                • #9
                  Originally posted by ksnasi lurker View Post
                  You'll probably always end up in negative equity in Japan, as prices of property (although not necessarily the land they sit on) depreciate with age - quite rapidly, and over around 25 years. It's an entirely different market from America.
                  Sure. Its a fine line here between renting and buying unfortunately...

                  Comment


                  • #10
                    Originally posted by Anamorphic View Post
                    Let me guess... You're one of those ppl that posts trash online stuff like the above that you'd never get away with saying in normal face to face interactions.
                    Sounds kind of like you !

                    Comment


                    • #11
                      Originally posted by Anamorphic View Post
                      He's not 'moaning' about it or seeking sympathy as you put it. He's paying the loan.

                      Let me guess... You're one of those ppl that posts trash online stuff like the above that you'd never get away with saying in normal face to face interactions.
                      Relax, there's a fair bit of 'rudeness' on this site, it goes with the territory. You get a lot of info here and also a lot of sass so take the good and ignore what you don't need, please.

                      This is a good question and the answer has been given that borrowers have to have guarantors and the banks can come after the guarantors so the borrowers usually don't dare try to default and go BK, is my understanding.

                      I see a lot of condo adverts showing very low rates on 100% loans. But if you read the fine print it looks like the borrower has to pay various fees that add up to maybe as much as 5%, stuff they call 'guarantee fee' etc. Plus the buyer has other closing costs and also sales tax, if I'm not mistaken they pay 5% (to go up to 8%) consumption tax on the entire transaction, so actually they have to put at least about 10% down. Then there is an immediate 10-25% depreciation because the condo is no longer new.

                      Interest rates are incredibly low now, but if they get any inflation going, I think all the loans float so they could go up a lot. But the current payments are much lower than rent based on 35 year repayment at very low interest. Just better hope you keep your job for 35 years because you'll be way out of pocket if you have to sell, although money from China *might* be reflating the market here. I hope so because there is a heck of a lot of supply of new condos now, some big ones just starting, over here in Shinkawasaki-MusashiKosugi area.

                      Comment


                      • #12
                        Originally posted by Anamorphic View Post
                        Thanks for the good responses. An Irish cousin of mine got a loan out on a Dublin apt, and now has massive neg equity. Its a real ball and chain for him!
                        That's what happens when you ride a Celtic Tiger.

                        Comment


                        • #13
                          Double post

                          Comment


                          • #14
                            Originally posted by TJrandom View Post
                            Banks have usually asked for guarantors – and they would be left owing the bank.

                            I know a gaijin who is underwater just over 20 million yen and there's nothing he can do.

                            Walk away and the in-laws (guarantors) get stuck with the note.

                            In another example the gaijin claimed to have handed back the keys. Don't know if a guarantor was involved.

                            Comment


                            • #15
                              Traditionally a housing loan would involve at least one, sometimes two guarantors. If you walk away, obviously the guarantors cop the flak, assuming the collateral does not cover the whole debt. This is irrespective of whether the debtor declared bankruptcy - the guarantors still need to pay unless they go and declare their own bankrupty as well.

                              Nowadays, at least for the city areas, most of the housing loan guarantees (and a lot of the housing lease guarantees for that matter) are provided by specialist guarantee companies. They charge an upfront fee (the guarantee fee that kabunushi is referring to) and acts as guarantor, and repays the bank upon default events. The debtor will still need to indemnify the guarantee company, unless he/she declares bankruptcy. Apart from the guarantee fee, there will be a host of other fees and taxes payable, and a 10% non-refundable deposit is pretty standard for the major places such as Mitsui-Fudosan and Nomura-Fudosan. So a 100% loan is not really 100% in that respect.

                              Comment

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