Building Risks of Auction Properties: How to Assess Deterioration, Repair Costs, and Demolition Requirements

In principle, interior inspections are not possible for auction properties. With ordinary used properties, you can check equipment and damage on-site, but since this is not possible at auctions, problems often arise after winning the bid, such as "the property was more damaged than expected" or "repair costs exceeded the budget."

Furthermore, auction properties are often cases where the owner was in financial difficulty, and it is not uncommon for maintenance to be neglected. In long-abandoned vacant houses, leaks, termites, and deterioration of equipment may have progressed. Building risk is one of the typical causes of failure in auctions.

Even without an interior inspection, you can obtain considerable information from the three-document set.

• Current Condition Survey Report: Contains photos of the interior and exterior taken on-site by the court executor. This is a valuable document for checking damage, leftover items, and equipment condition through photos.
• Property Specification Sheet: Basic information such as building structure, age, and type.
• Appraisal Report: Depreciation based on the building's age and wear is reflected in the appraised value. If the appraised value is extremely low, it may be due to building damage.

Additionally, checking the exterior on-site (visible from outside), inquiring with neighbors, and confirming registry information are also effective. Even just cross-referencing the photos in the three-document set with the exterior on-site can give you a general idea of the risks.

Below are estimated repair costs to anticipate based on the building's condition (these are general estimates; actual costs vary significantly depending on scale, region, and condition).

Buildings that are severely deteriorated and difficult to use as-is may be deemed "demolition required." In such cases, there are two major risks.

• Demolition Costs: Approximately ¥1,000,000 – ¥2,000,000 for wooden structures (varies depending on structure, location, and presence of asbestos)
• Possibility of Rebuilding: Whether new construction is possible after demolition. If the land is non-rebuildable, even after demolition, you cannot rebuild, severely limiting its use.

When considering land with a building requiring demolition, be sure to also check Risks of Non-Rebuildable Properties. If the building is unusable and rebuilding is impossible, the options for using the land are limited.

Interpreting the building's condition from the photos and descriptions in the Current Condition Survey Report requires some experience. KeibaiX uses AI to analyze the three-document set and classifies the building condition into categories such as "Good, Average, Deteriorated, Demolition Required," which is also reflected in the KeibaiX Risk Score assessment.

By filtering the list to show properties with low risk scores, you can efficiently search while avoiding properties with high building risks.