Real estate auctions for beginners

A real estate auction is a procedure in which, on the petition of a creditor who has not been repaid, the court sells the debtor’s real estate and uses the proceeds to recover the debt. The general public can take part in bidding. Here we explain the basic flow and terms, limited to general information.

This is a general explanation, not legal advice. Details and schedules differ from case to case, so always check the court’s notices and the description of each property on the courts’ real estate auction information site (BIT). The Japanese edition is the authoritative version.

• Bidding flow
• Terms
• Costs
• Points to watch
• FAQ

Flow of period bidding (a guide)

1. Publication and viewing of property informationBefore the bidding period, information on the property (the three-document set) is published on BIT and on court notice boards.
2. On-site check and surveyYou can check the exterior, surroundings and signs of occupancy on site, but as a rule you cannot see the interior of the building.
3. BiddingWithin the set bidding period (usually about a week), you submit a bid form and a document proving the transfer of the deposit. Bids below the minimum bid price are invalid.
4. Opening of bidsOn the opening date, the person who offered the highest price becomes the “highest bidder”.
5. Sale approval decisionThe court checks that there is no problem with the buyer and approves the sale.
6. Payment of the priceOnce the approval is final, you pay the price by the deadline the court designates. You acquire ownership when you pay.
7. Handover and registrationThe court handles the registration of the transfer of ownership. If someone occupies the property, you can, as needed, petition for a delivery order and demand that they vacate.

For properties with no bidders, the procedure may move to a “special sale”, in which purchase offers are accepted on a first-come basis for a set period.

Terms

Reference sale price (売却基準価額)

The price that serves as the standard for the sale, set by the court on the basis of an appraisal report (an appraisal by a real estate appraiser). It is not a “minimum price”.

Minimum bid price (買受可能価額)

The lowest amount you can bid: the reference sale price minus 20% of it (80% of the reference sale price). Bids below it are invalid.

Bid deposit (買受申出保証額)

The amount of the deposit paid when bidding, normally 20% of the reference sale price. It is returned if you do not win and is applied to the price if you do.

Three-document set (3点セット)

A collective name for the three documents that summarize the property: the “property statement”, the “current-condition report” and the “appraisal report”. They describe whether the property is occupied, the rights the buyer takes over, the surroundings and the basis of the appraised value.

Property statement (物件明細書)

Describes the rights the buyer will bear (such as a lease the buyer takes over) and whether a statutory superficies right is established.

Current-condition report (現況調査報告書)

A report by the enforcement officer on the current state and occupancy of the property, investigated on site.

Appraisal report (評価書)

A document in which the appraiser (a real estate appraiser) sets out the appraised value of the property and its basis and conditions.

Special sale (特別売却)

A procedure that sells, on a first-come basis for a set period, properties that did not sell in period bidding.

Delivery order (引渡命令)

A court order, after payment of the price, directing an occupying debtor or owner, for example, to hand over the property.

Costs

Besides the winning bid, costs such as the following may arise. They differ from case to case, so it is important to estimate them in advance.

• Taxes such as registration and license tax and real estate acquisition tax
• Fees to a judicial scrivener or similar (where needed)
• Costs of getting an occupant to vacate, if there is one
• Costs of repair, demolition or renovation (because you cannot see the interior, they may be larger than expected)
• Unpaid management fees and repair reserve contributions (for condominiums, the buyer may take these over)

The auction discount rates on this site tally the winning bids themselves and do not include these costs.

Points to watch

• As a rule, you cannot see the interior of the building. Its condition may become known only after purchase.
• You generally cannot claim warranty against defects. Even if the property has a problem, you cannot hold the seller responsible.
• For properties with occupants, vacating may take time and money. Check what the property statement says about occupancy.
• If there are rights the buyer takes over (described in the property statement), consider that burden as part of the winning bid.
• Home loans: financial institutions differ in how they handle auction properties. Check in advance.
• If you withdraw after winning, the deposit is not returned.

Frequently asked questions

Can individuals bid?

Yes, the general public can bid. However, some properties, such as farmland, require qualifications or permits to purchase. Check the description of each property.

What happens to my deposit if I do not win?

If you do not win, the deposit is returned. If you win, it is applied to part of the purchase price.

Can I buy below the reference sale price?

You can bid from the minimum bid price (80% of the reference sale price) upward, but when there are many bidders, winning bids above the reference sale price are not unusual. In this site’s tally, the median winning bid is above the reference sale price. See the tally on Auction discounts

How much cheaper than the market are auction properties?

Winning bids vary widely by building age, area and property. For condominiums in Greater Tokyo, the median winning bid relative to the (estimated) market price tends to be lower the older the building. However, auction properties come with conditions such as no access to the interior and possible occupants, so a price below the market does not by itself mean a “good deal”. See Auction discounts

Where can I see the latest listings?

On the courts’ real estate auction information site (BIT) you can check the three-document set and schedule for each property. This site does not introduce properties; it presents statistics on winning bids.