Voluntary Foreclosure

Voluntary Foreclosures are when the owner cannot make their monthly mortgages payments to the bank, therefore consulting a voluntary sale (任意売却). The voluntary sale is initiated by the borrower to avoid further delinquent payments, involuntary foreclosure, and eviction.

In today’s post we will go over the voluntary sale process in Japan.

What is a Voluntary Sale?

The voluntary sale method is the method of selling real estate by agreement between the financial institution (the lender) and the borrower. For instances when the borrower has delinquent payments due to the the inability to repay the lender their monthly payment, or in cases where the sale of the property can’t repay the lender the loans outstanding balance.

In such instances, there is a method of negotiating with the lender (financial institution), canceling the mortgage at the time of the sale, negotiating the payment of the remaining debt, and then selling.

1. The Sale is more than the Outstanding Debt

Typically when taking out a mortgage, a guarantor company will be involved to guarantee the lender on their investment. Depending how many delinquent payments you may have made, the guarantor company may or may not be involved.

1. In the case where the guarantor company has not been brought into the picture:
   The typical sale of the property is possible. If the sale is more than the outstanding debt, the borrower can keep the surplus funds after repaying the lender.
2. In the case the guarantor is involved:
   Discussion with the guarantee company will be required. This will then be a voluntary sale procedure. If the sale is more than the outstanding debt, the borrower can keep the surplus funds.

2. The Sale is less than the Outstanding Debt

Through discussions with creditors, notify the lender that you are unlikely to repay your outstanding debt even if you sell the property. You will then be asked to accept the voluntary sale by submitting your current income, future repayment plan. This will result in a short sale of your mortgage.

3. If you have already received notification for Real Estate Auction

If you do not speak with the lenders regarding a voluntary sale, then the process for Real Estate Auction will take time causing more delinquent payments.
Timing wise, this will be the last time to sell voluntarily. Please note that some creditors do not allow voluntary sales, and only sell by auction.

Although, everything will need to be discussed and the final decision will be made by the creditor, you may be asked to attend the discussion to confirm your intention.

Voluntary Sale and Real Estate Auction Comparison

	Voluntary Sale	Auction
Sales Method	First come, First Serve	Bidding System
Buyers	Anyone	Bidders (Auction Participants)
Home Loan	Possible to Finance	Difficult to Finance
Contract Non-Conformity Liability	Not Liable	Not Liable
Property Viewing	Possible	Not Possible
Transfer and Delivery	Voluntary	Forced
Moving Costs	Negotiable	Non-Negotiable

As in the Real Estate Auction process, the owner with delinquent payments, will be forced to leave the property immediately, where as in the voluntary sale, the move out and transfer of the property can be negotiated with the buyer.

The voluntary sale process is similar to the general real estate sales process in Japan, therefore the sales price is close to market value..

Advantages of Voluntary Sale versus Disadvantages of Real Estate Auctions.

Advantage of Voluntary Sale	Disadvantage of Auctions
Since you can sell at a price close to the market price, you can reduce the remaining debt.	The winning bid amount cannot be predicted, and unexpected debt may remain.
Possibility to provide moving costs and other funds.	Funds cannot be used to pay any expenses, such as moving costs.
It can be sold before it is published in the newspaper or on the Internet, therefore keeping information private.	Everything in the property will be open to the public on the Internet.
Possibility to buy back the property.	The successful bidder will force a move-out.
In some cases it is possible to continue living at home.
Flexibility for the timing or period to move-out.
You can plan the repayment for the remaining debt after the sale.	Not sure how much the remaining debt will be after auction. Difficult to plan repayment.

Although there are certain conditions which need to be met for a voluntary sale, for course of action is a lot more flexible when comparing voluntary sale to an auction.

With anything, timing is extremely important. Depending on the lender, voluntary sale may not be an option. In any case, seeking out consultation early will increase your options.

For additional information or any questions please contact us here
Email: info@remax-apex.com

In the future, we plan to post the Process and Procedures for Voluntary Sales.