Monday, August 23, 2010

Chapter 15 – Show me the Numbers

I know people like to see the photos and designs but just as exciting (at least for me) is the number crunching. Since we closed on the land I thought I would share the percentages I would pay on closing on the land. Then I’ll go into the details of the builder contract negotiations.

Land = 100%
Tear-down = 2.83%
Municipal taxes for 2010 Pro-rata = 0.07%
Land Measurement Inspection = 0.06%
Transfer of Land rights = 0.73%
Mortgage Setup Fee = 0.50%
Judicial Scrivener Fee = 0.15%

Total is about 5.17%.

One cost I did not disclose is the real estate agent fee which is typically 3.15%+ 60,000yen. Let’s just say I’ve managed to get a GOOD discount but can’t say exactly how much.
On this commission, every agent will tell you that this is the basic fee. Some will even tell you it’s the law. All I will say here is that this is a negotiable price especially if you have not gone very far in the overall acquisition process. What you want to do here is to get the lowest commission and structure the deal in a way that real estate agent’s compensation is aligned to your goals which is to save money. One thing I would like to point out though is make sure you DON’T string along a company or agent then go with a lower bid after they’ve shown you numerous houses including “The One” you would like to purchase. Be upfront and agree on the commission first, especially you’ve already honed in on a property you found on the internet. And if you think it’s not worth bothering haggling over, just remember that 0.5% discount on a 500K$ home is 2500$ in savings, or a very nice dishwasher..)

In our case, we did not do an RFP “Request for Proposal” for the building contract but instead went with an open book approach. Our candidate builder is the same company that built the home of our architect. They also made major renovations to our friend’s home. Both were happy with quality of the work and quality of service and found the company to be very trust worthy. Below is rough breakdown of our negotiations thus far.

(1man= 10,000yen = 100$)

June 15 : Base Estimation with Sakamoto: 52man/Tsubo, This is just a guideline so we know understand how much our design incrementally increases.

June 24 : Independent estimate created by Sakamoto using known market prices.

July 8 : First Official Estimate: It is 4.47% over our safe budget. Their estimate includes a 1.2% discount.
Based on this we review the design. We simplify the bathroom and study(minus). But we had options in the kitchen(plus). Then we make all the windows double-paned with Low-Emission coating(plus). We double the insulation(plus). We decide to use paint everywhere (plus). We change loft staircase to include a platform(plus).

August 4: Second Estimate : It is now 6.5% over our safe budget. They grew our discount to 1.9%.
I’m not too happy with the increase even though I’ve added details, I feel I made some concessions to balance things out. They mention I’ll be getting back about 30man in Eco Points. But still not happy. I sit with Sakamoto-san we go through the 42 pages line by line for 2 hours. We ask the builder to go back and get more concessions from INAX since we are building both the kitchen and the bath room with them.

August 12 : Third Estimate : It is now 3.4% over budget. Our discount grew to 3.1% thanks to concession made by INAX and Miele. But still not satisfied when I realize that the bicycle parking area is not part of contract. I tell them to include it in the contract and to bring down the contract price by 15man and we’ll be 98% of the way there. I turn to Sakamoto-san and ask him if he can send me the 42 page estimate to his house. I spend a full saturday reviewing 2 sets of 1000 line items.

August 23 : Fourth Estimate: It is now 3% over budget. Our discount is now 4.2%. I’ve gotten the concrete bicycle area for free and reduced the total price by 15man. But after close inspection with Sakamoto-san’s contract, I see 50man of costs worth discussing. We agree that the wood shipping fees and the mortar paint should be reviewed. I ask them to knock off an extra 10man and we’ll call it a deal. Next meeting is August 25th when we sign the contract.

No comments:

Post a Comment