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Introductory Q&A

Properties in the court auction process

Court auction is a process in which the court converts assets into cash based on the Civil Execution Act. Real estate agents do not "buy" or "broker" properties for you, so you must take the full responsibility from bidding to taking possession. Of course, the courts do not broker deals. And nobody will compensate any damage or take any responsibility regarding the property. Hence, the bidder should have some knowledge and experience.

How much are they?

They vary. Most of buyers now are companies, in real estate business, for reselling, so the prices are generally lower than the regular markets. Yet prices are not as low as used to be, particularly in the Tokyo region. So a buyer must be selective.

Are there some hidden defects?

Properties sold through the court auctions are not any different from those on the ordinary real estate markets in this respect. For example, there are sometimes assets with dark history, such as an occurrence of suicide or murder. But you can find the facts about properties by carefully reading the court documents about the properties before the bid. You ought to take care, however, that documents are usually six months old. Things can change meantime so you should conduct your own research; and when you find something significantly different from what is on the documents, you should notify the court. You should verify facts and conditions thoroughly, particularly before paying for the property.

Are there any risks after winning the bid?

There are risks involved in acquiring any asset. However, while brokers reduce some risks in general transactions, buyers of real estate through court auctions must take full responsibility on their own, particularly for not thoroughly reading and analyzing court documents on the properties. As in other significant trades, it is probably wise to have auction concierges as experts assist in the transactions. By understanding risks, and taking available counter-measures beforehand, bidders may able to reduce the risks.

Can I get a mortgage or real estate investment loan even for a property bought in court auction?

Some general members of 981.jp have actually drawn loans to acquire properties through court auctions. Banks as in ordinary sales usually require involvements of real estate agents, so to obtain loan you practically need to engage an auction concierge who will as an expert also help you obtain the loan. While regional banks and credit unions are more eager to lend, one option may be to use so-called non-banks for bridge finance. It is most important to get the fund or financing ready before bidding. And it is probably wise to engage an expert agent.

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