Structure of court auctions

Filing for court auction

Types of auctions

There are largely two categories of court auction cases as indicated by Japanese letters on the case number. One is mortgage foreclosures, so the filer of auction can be a lender institution, an individual or corporate creditor. Another category includes those resulting from defaults on tax liabilities, court decisions or notorized certificates.

Case number

Courts handling the auctions allcoate case numbers in order of receipt. Thus, smaller numbers may mean filing earlier in the year.

Previous owner of property

Defaulting just one payment does not result in a foreclosure. It ussually takes two defaults, and unsuccessful negotiations with the lender, for the property to be seized. Even then the creditor often seeks the full payment and additional collateral. A debtor should seek relief based on the moratorium law of 2009 or the civil rehabilitation act.

Financial institution: voluntary sale by creditor

Lender institutions in the Greater Tokyo are not too eager to sell collateral properties out of court in recent years, beause court auctions may possibly result in higher sale prices. Earlier sales, however, have advantages of avoiding the freezed up fund in a form of bad loan reserve which would be required for nonperforming loans. For a voluntary sale, the creditor must also prepare a distribution chart, showing amounts to be allocated to mortgagees of lower priority, tax and others.

Financial institution

If negotiations after two defaults fail, a collection officer takes over and the loan becomes non-performing. The lender seizes the property, files for a judicial foreclosure and auction paying the necessary fee deposit. The lender does not really want a court auction, if possible, so the debtor should try to negotiate the payments.

Association of apartment owners

For the apartment owners, a court auction of another apartment unit in the same building is not welcome news. The debtor often has not paid the service, maintenance fees or the renovation reserve; which of course damages the operation of apartment associationl Moreover, auction results in a number of bidders coming to research on site, lowering the value of the building. The association must truthfully answer any questions from the enforcement officer, for the accurate description of the asset and liabilities.

Judicial scrivener

Banks usually ask their lawyers to handle the auction filing to the court. But judicial scriveners can also represent clients in the filing; and usually at lower fees, so judicial scriveners may be more cost effective for individuals filing for auction.

Properties to be auctioned


To file for a court auction, one must have a title of obligation: a loan contract, a mortgage agreement, the fact of default, the letter requesting the full lump-sum payment within a certain period, usually ten to fourteen days, also notifying in event of non-compliance the mortgaged property will be seized and auctioned. The judge confirms the payment of fee deposit, and the documents, and, if appropriate, announces its decision to initiate the auction process. The debtor who owns the property is notified of two weeks to appeal; without which the decision becomes final.

Enforcement officer

An enforcement officer investigates the property to determine the base bid price; obtaining the registration, public area drawing, building layout drawing, measurements, blue prints at the legal affairs bureau, measuring the distance from the closest post of public transportation. The officer also checks on any standing liabilities for water, sewage, power, gas, and for apartment fees, and talks with the debtor, occupants, and others concerned. Communicating with the debtor or occupant, the officer sets the date for checking and taking photographs of the inside; if unable to communicate, the officer has a locksmith open the door to carry out the work; and prepares a report.

Real estate appraiser

Based on the property description reported by the enforcement officer, a real esate appraiser determins the base bid price. In case more research is required, the appraiser can ask the enforcement officer to carry out further investigation. If you have questions about the property description, you may be able to contact the appraiser through a local association of appraisers; or ask the enforcement officer.

Bidding and winning

On the, one can search properties to be auctioned by courts based on areas, while on the BIT, the Japanese site by the court, one must look through each court. Assets are also categorized into seven types: apartment, house, other shared residence, retail shop, office, land, and others. Thus, one can search for properties more easily and effectively on the The ranking is shown with stars, based on leasing demand, years since built, and yield. The works to provide services that would promote the market.

Auction concierge: real estate agent, regular member of FKR

Auction concierges are licensed agents in real estate transactions who have expansive networks in their local areas. And they are specialists in auction properties having completed specialized seminars. Property descriptions are usually available six months before the auctions. A bidder living in the Tokyo area, for example, needs not actually travel to a city in other region where the asset is located to bid on the property; just engage a registered auction concierge of the area. On site inspection usually is for a fee; but also saves time, effort and probably also cost. And a real estate investment cannot be done well alone. Particularly with auctioned properties, there are various issues such as negotiating evictions.


One may inspect the property to be auctioned for two weeks and bid within a period of one week. In three weeks, a bidder conducts researches on the property, pays the earnest money deposit at 20% of the base bid price to the specific account designated by the court, prepares the bidding paper, and files the bid along with the residency certificate or a certificate of qualification, mailed or hand delivered. About one week after closing the bid, the court opens the box on the opening date and determins the winner. If there is no bid, a special sale starts from a set date, in which the first bidder can buy it at the price above the minimum bid price.

Financial institution: bank lending to the bid winner

Revised Article 82 of the Civil Execution Act enables a lender to set mortgage on the auctioned property after the payment for the sale is made. So there are more individual bidders for their own homes to live in. Until several years ago, only credit unions in Yokohama extended credit for auctioned properties, but now major lenders such as Mizuho Bank handles the loans as well. It is important to secure the fund before bidding, because many buyers are denied the credits after winning the bids.


Auction concierges, real estate companies that are regular members of FKR

Bidding is an exciting process, particularly when it ends in winning the bid. Engaged auction concierge would inform the bidder of the result and subsequent steps to be taken; such as the due date for paying for the property, obtaining an estimate of insurance for the property, and getting the possession of it, which may differ from one case to the next. Buyers should utilize the services of auction concierges in clearifying any doubt buyers may have. Auction concierges explain and carry out the procedures to evict any occupants and to obtain possession of the properties.

Renovation contractor

After obtaining the possession of the property, the new owner then refurbishes the building. For investors looking for cash inflows, the asset must be up to the leasing standard; but far above it does not necessarily lead to higher rent. So the owner needs to reduce costs to the optimal result, in which effort also the auction concierges wo have extensive networks of contractors in the areas may be able to help.

Real estate broker for selling

After renovating the property, the owner may take one of three courses; to sell it to a family who would like to live in it, to lease it and earn the rental income, or to lease it and then sell it to an investor. And of course there can be some combination, such as leasing for a while until selling; here as well, consulting an auction concierge may help.

Real estate broker for leasing

The owner may become a landlord earning a rental income. Even though as a collateral it can be used to raise some fund, just holding it would not be wise since there are fixed costs such as property tax, urban planning tax, and for apartment monthly service fee and renovation reserve. To come out better than breakeven, renting it is the option. The owner should study the lease market of the area, renovate accordingly, and utilize the services of brokers.

Storage, removal services

Personal properties of the previous owner may remain on the premise. Even though a common sense may clearly classify some of them as waste, it is in fact unwise to dispose them without the due process; as one may be held liable for doing so. The owner must take the legal steps from the eviction order to the compulsory executions, for which one must allocate both time and costs. Filing for eviction order usually takes 150,000 yen a case. To dispose matters left behind, it usually takes 10,000 yen per ㎥. In many cases, there are 0.3 ㎥ of things per 1㎡ area; so for a 3 bedroom apartment of 50㎡, there are 15㎥ of matters to remove, so with 0.3㎥×50, it costs about 150,000 yen.

Enforcement officer

When occupants who possess the property are not cooperative, or when there are things left behind and the previous owner could not be reached, the buyer must file for the eviction order, in which process an enforcement officer assigned by the court provides the valuable assistances. Rights of buyers are enhanced, and enforcement officers are supposed to help the buyers. So the buyers with help of auction concierge should move ahead toward gaining the possessions. Enforcement officers perform their duties from eviction orders, delivering notices, to auctions of personal properties. contents