Part5: Can't Get a Loan

When taking out a loan for a real estate transaction, in principle, banks will not finance a property without an inspection certificate. There are problems for both the buyer and the seller in buying or selling a property without an inspection certificate.

The first problem for the buyer is that since a loan is not available, the buyer must pay the full amount in cash. Financing is a major hurdle for the buyer. In addition, the buyer cannot use the building without obtaining an inspection certificate, except for small houses, etc. Therefore, the buyer faces the problem of legal compliance in the use of the building after the purchase.

The next problem for sellers is that they are limited to buyers who can purchase with cash, which narrows the market. In addition, because there are few buyers, price negotiations can be difficult, making it difficult to sell at the desired price. Furthermore, because buyers are difficult to find, the time until the sale may be prolonged.

So how can a loan be obtained for a building without an inspection certificate?

This is where the “guideline survey” comes in (for more information on guideline surveys, please read our previous article, “What is a Guideline Survey?”) 

Trivia: In principle, buildings without an inspection certificate cannot be used

Under the Building Standard Law, buildings are classified as No. 1 to No. 4 buildings according to their use, structure, and size (*The classification of buildings will change in April 2025).

Buildings No. 1 through No. 3, excluding No. 4, can only be used after obtaining an inspection certificate, while No. 4 can be small-scale, such as a two-story wooden detached house.

In reality, there are many cases in which buildings are used even though they have not obtained an inspection certificate, taking advantage of the limited ability of the government to detect illegal construction, but in the worst case scenario, they may be subject to a prohibition order, leaving them in a legally precarious situation.