Part 5: Submit a Letter of Intent and Negotiate
Part 5: Submit a Letter of Intent and Negotiate
Once you've found the right property, you submit a letter of intent (買付証明書) to the seller. This isn't legally binding, but it's where price negotiation and timing (move-in or handover dates) get worked out.
The first formal step toward securing it is submitting a Letter of Intent (Kaitsuke Shōmeisho or Purchase Application) to the seller via your real estate agent.
What is a Letter of Intent (LOI)?The Kaitsuke Shōmeisho is an official document expressing your concrete interest and conditions to purchase the property.
Legal Status: It is not legally binding. Either party can withdraw from the process without financial penalty (such as losing an earnest money deposit) until the formal Purchase and Sale Agreement is signed.
Securing Priority: Submitting a solid offer helps establish your position as the primary buyer (Ichiban Tei, or "first in line") to negotiate exclusively with the seller.
The document serves as the exact framework for negotiations, detailing:
Offered Price (Sashine): The amount you are offering to pay (whether it is the full asking price or a discounted offer).
Earnest Money Deposit (Tetsukekin): The down payment amount you plan to pay at contract signing (typically 5% to 10% of the purchase price).
Financing Details & Contingency (Rōn Tokuyaku): Whether you require a mortgage and a clause specifying that the contract can be canceled penalty-free if loan approval fails.
Target Closing & Handover Date: Your preferred timeframe for settlement and key exchange (usually 1 to 2 months from submission).
Special Conditions: Any requests such as seller removal of old furniture/fixtures, requesting a boundary survey, or asking for repair credits.
The LOI is essentially your opening move in price and terms negotiation:
Price Discounting (Sashine): You can request a discount below the listing price. However, aggressive lowball offers risk alienating the seller or causing them to reject your application in favor of competing buyers.
Terms & Trade-offs: If a price reduction is rejected, negotiations can focus on non-monetary value—such as asking the seller to leave behind appliances/air conditioners, or offering a flexible closing date that accommodates the seller's moving schedule.
Seller Acceptance: Once the seller accepts your offer (or a mutually agreed counter-offer), the transaction officially proceeds toward the Explanation of Important Matters (Jūsetsu) and formal contract drafting.
Pro Tip: Having a mortgage pre-approval (Jizen Shinsa) ready when submitting your LOI significantly strengthens your position. Sellers are far more willing to accept price negotiations from a financially qualified buyer who can guarantee a smooth transaction.