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

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  • #16
    In 1986 my wife made a purchase of 500 tsubos of land in Kurihashi. The property was farmland that belonged to a relative who had no living children. We made a down payment of 6 million yen and in 1989 when the government changed the law to allow foreigners to own land in japan my name was added to the deed. 1987 saw a house built on the property and when the land was purchased and the house was built loans were made to us by Saitama Shinyo Ginko and our guarantors were my ex's parents. In 1995 the bank took over the property, we declared bankruptcy and the property was auctioned off. At no time did the bank go after my inlaws for the outstanding amount.

    On the other hand the JGF's father stood as a guarantor for loans made by a business associate and the banks didn't hesitate for a moment to go after him when the loans were defaulted on. After the bubble the banks were told in no uncertain terms to not pursue people who defaulted on home loans, they were to just confiscate the property and the insurance would cover the rest.

    And one additional tidbit, a lot of farmers have outstanding loans that haven't been paid back–some of these loans may be decades old. Nokkyo/JA bank has been reluctant to foreclose as this would leave them holding a sizeable chunk of property fit only for farming and no one to farm it. Might be an opportunity there for all you wannabe gaijin ricefarmers.

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    • #17
      Originally posted by edin日本 View Post
      when the government changed the law to allow foreigners to own land in japan my name was added to the deed.
      I would like to add names (my son & daughter who study abroad) to the deeds of a property that I have sole ownership of..... What are the procedures .... do I just get a notary . Cheers if you can help out a little.

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      • #18
        Originally posted by AW1 View Post
        I would like to add names (my son & daughter who study abroad) to the deeds of a property that I have sole ownership of..... What are the procedures .... do I just get a notary . Cheers if you can help out a little.
        I assume you mean a property in Japan. Procedure is pretty straightforward; you draw up a simple contract, one side of A4 is fine, stating that you are giving a part of the property, say 25%, to each of your son and daughter as a gift. You then buy the necessary revenue stamps for paying the real estate transfer tax. Then you take the A4 contract, the revenue stamps, the deed, the juminhyo for your son and daughter, a seal certificate for yourself, and a power of attorney from your son and daughter giving you power to add them to the deed on their behalf (assuming they will stay abroad), and go the the local legal bureau where you'll fill in an application form. If everything is in order, the deed will be amended to include your son and daughter for the appropriate percentage. There may also be a gift tax payable, depending on the value of the property. Most people engage a judicial scrivener to take care of all the documentation, but it is possible to do it yourself to save money. No need for a public notary.

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        • #19
          About a third of Japanese mortgages are negative equity, I read. Since many of the positive equity people would be near-retired or retired folks (which make up a big portion of this graying population), I reckon that's about half of normal working households who are under water. So at least, you wouldn't feel alone.

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          • #20
            Originally posted by WUMbuster View Post
            I assume you mean a property in Japan. Procedure is pretty straightforward; you draw up a simple contract, one side of A4 is fine, stating that you are giving a part of the property, say 25%, to each of your son and daughter as a gift. You then buy the necessary revenue stamps for paying the real estate transfer tax. Then you take the A4 contract, the revenue stamps, the deed, the juminhyo for your son and daughter, a seal certificate for yourself, and a power of attorney from your son and daughter giving you power to add them to the deed on their behalf (assuming they will stay abroad), and go the the local legal bureau where you'll fill in an application form. If everything is in order, the deed will be amended to include your son and daughter for the appropriate percentage. There may also be a gift tax payable, depending on the value of the property. Most people engage a judicial scrivener to take care of all the documentation, but it is possible to do it yourself to save money. No need for a public notary.
            Thank you.
            In th case of a J-wife (stop laughing) would I have to pay transfer tax if I moved her name onto any deed holdings i may have ? and vise versa her property with my name being added. would she be hammered for tax

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            • #21
              Originally posted by AW1 View Post
              Thank you.
              In th case of a J-wife (stop laughing) would I have to pay transfer tax if I moved her name onto any deed holdings i may have ? and vise versa her property with my name being added. would she be hammered for tax
              BTW what is the transfer tax? Is this like a 4000 revenue stamp? It's not shohizei is it? Because we're talking about gifted transfer, not a sale. Regarding shohizei, I'm thinking that applies to the first buyer of newly built house or condo, is that correct? But not to buyer of a pre-owned house or condo because shohizei has already been paid once for all of the materials consumed. Also bare land should not be subject to shohizei as that is value-added tax and nothing has been added to unimproved land.
              If anybody knows, please confirm or deny my understanding.

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              • #22
                Originally posted by kabunushi View Post
                BTW what is the transfer tax? Is this like a 4000 revenue stamp? It's not shohizei is it? Because we're talking about gifted transfer, not a sale. Regarding shohizei, I'm thinking that applies to the first buyer of newly built house or condo, is that correct? But not to buyer of a pre-owned house or condo because shohizei has already been paid once for all of the materials consumed. Also bare land should not be subject to shohizei as that is value-added tax and nothing has been added to unimproved land.
                If anybody knows, please confirm or deny my understanding.
                Well who is playing out of his league now, eh? Just to show that there are no hard feelings, allow me to shine some light on the matter.

                It's not the consumption tax, but the stamp tax due on any legal transfer of the property.. I paid (half) when I bought my property, and half when I sold it. It's not an enormous amount, especially if the property is worth less than 50 million yen.

                I found a table online which looks like it is accurate, or at least it matches my experience.

                Property Value, JPY (US$) Rate, JPY (US$)
                Up to 10,000 (US$108) 0
                10,000 - 100,000 (US$1,083) 200 (US$2.17)
                100,000 - 500,000 (US$5,414) 400 (US$4.33)
                500,000 - 1 million (US$10,828) 1,000 (US$10.83)
                1 million – 5 million (US$54,140) 2,000 (US$21.66)
                5 million – 10 million (US$108,281) 10,000 (US$108)
                10 million – 50 million (US$541,404) 15,000 (US$162)
                50 million – 100 million (US$1,082,808) 45,000 (US$487)
                100 million – 500 million (US$5,414,039) 80,000 (US$866)
                500 million – 1 billion (US$10,828,077) 180,000 (US$1,949)
                1 billion – 5 billion (US$54,140,386) 360,000 (US$3,898)
                Over 5 billion (US$54,140,386) 540,000 (US$5,847)

                Source: http://www.globalpropertyguide.com/A...n/Buying-Guide

                Dutifully,
                A.

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                • #23
                  Originally posted by AW1 View Post
                  I would like to add names (my son & daughter who study abroad) to the deeds of a property that I have sole ownership of..... What are the procedures .... do I just get a notary . Cheers if you can help out a little.
                  Cost us about \1 million to do it at the time. remember this was back in the bubble when fees like this were high. had to get the official stamps from a notary and have the fudosan do the deed. Check with a good, dishonest lawyer on how best to cheat the current system.

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                  • #24
                    Thanks, A. Great link, (tho the 'transaction fees' chart there is obviously wrong as the numbers don't add up). I didn't know, that's why I was asking. But your post leaves a little bit of confusion because you referenced only the nominal stamp duty and consumption tax but not the 4% Acquisition Tax and 2% Registration tax. You seem to be saying that those are not paid either on a gift transfer, but you sold you property so are you sure the stamp duty is the only 'stamp tax' and no 'registration tax'? It does make a lot more sense that in a no-money exchanged registration change only that only the nominal stamp duty should be charged -- more than 4,000 but probably 10-15 thousand for average properties. But this being Japan you can never be sure how much they will be able gouge the consumers for .

                    The shohizei, as I suggested applies only to the building, not the land, but according to the article it sounds like that gets paid even on resale. I was wondering about that having never purchased a used car or RE here, whether capital items are 'consumed' more than once.

                    Acquisition Tax 4% buyer
                    Registration Tax 2% buyer
                    Stamp Duty 0.01% - 0.20% buyer



                    Sales of buildings are subject to consumption tax, which is levied at a flat rate of 5%. Sales of land are exempted from consumption tax.

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                    • #25
                      Originally posted by TJrandom View Post
                      but do not know if guarantors became liable.
                      I can assure you they are. The word explains it all. What do you think it may mean?

                      My understanding is that if the primary fails to complete the obligation, the guarantor becomes the unfortunate beneficiary.

                      Personally just took a 15 million licking on a post divorce sale late last year. No guarantor unfortunately....

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                      • #26
                        Originally posted by ozzijp View Post
                        I can assure you they are. The word explains it all. What do you think it may mean?

                        My understanding is that if the primary fails to complete the obligation, the guarantor becomes the unfortunate beneficiary.

                        Personally just took a 15 million licking on a post divorce sale late last year. No guarantor unfortunately....
                        That uncertainty on my part was because of personal bankruptcy - as I hadn't heard that the father-in-law became liable in this case. Also post 16 from EdinJ suggests that bankruptcy may prevent the lender from going further. This I am unsure of.

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                        • #27
                          Originally posted by TJrandom View Post
                          That uncertainty on my part was because of personal bankruptcy - as I hadn't heard that the father-in-law became liable in this case. Also post 16 from EdinJ suggests that bankruptcy may prevent the lender from going further. This I am unsure of.
                          This is from personal experience. At the time I declared bankruptcy there were a lot of guys in the tattered remnants of designer suits living rough around Shinjuku Nishiguchi and the Chuo and Sobu lines were being held up on average twice a day due to suicides. Miyazawa's successor was taking a big hit because of Kiichi's hamhanded idea to regulate the housing and commercial property markets and he had to do something when it became apparent that the banks were putting not only the actual defaulters of loans but their parents, grandparents and anyone else connected to these bad loans on the street and out of work (back then defaulting on a loan could/would see you being fired by your company).

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                          • #28
                            To AW1, yes, nationality has nothing to do with it unfortunately. Needs to be paid, by the acquirer. So if you gift your property to your childeren, they will be legally responsible for paying, within 60 days of closing. Tax-wise, basically you should check whether the inheritance taxes work out cheaper than gifting the properties in advance - I assume you are doing this for inheritance purposes.

                            To kabunushi and Agitator, the real estate transfer tax is what kabunushi referred to as "Acquisition Tax." It's a percentage of the value of the property as assessed by the authorities and recorded in the fixed assets tax band register available at the town hall, which may be different to the actual acquisition price. 3% for land and residential buildings, and 4% for buildings for other uses. Payable regardless of consideration for the sale and acquisition and completely different to the consumption tax shohizei. The table that Agitator listed is for stamp duty on each copy of an acquisition contract under stamp duty laws. Not a lot of money compared to the transfer tax and, legally, non-payment does not affect the validity of contract, but real estate companies will obviously insist on this.

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                            • #29
                              Thank you edin日本 & WUMbuster

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