Stepping Stones to Purchasing Your Dream Home in Israel
Israeli real estate transactions are complicated. Buying your home in Israel may be your dream come true, but if you don’t take it step by step, you could find yourself tangled in red tape and ready to pull your hair out before you know it.
Here are some initial steps to take to help your Israeli real estate transaction go smoothly.
Find a good real estate agent
Of course you don’t necessarily need a real estate agent to help you find your dream home but you may find that using one helps you save time and money. Real estate agents generally charge 2% plus VAT from both the buyer and the seller. According to Israeli law, real estate agents must be licensed, so make sure yours has all the formalities in place. Generally, real estate agents will ask you to sign some paperwork with them before they show you any properties. Since this may be a legally binding contract, it is wise to show it to your attorney before signing.
Hire a structural engineer to check the apartment
Unless you enjoy risk taking, you’ll probably want to call the deal off if your engineer finds structural or other serious flaws with the apartment. Depending on the type of problems found, you may be able to negotiate a lower price with the seller which takes into account the costs you will incur to fix the problems. It’s also possible that the price you were quoted is a firm price, irrespective of any defects found in the apartment.
A written report may cost around $500 plus VAT. A verbal report is usually about half that amount but a written report is more useful if you discover unreported problems later on.
Authorize an attorney to represent you
- complete the title search to confirm ownership of the property and discover any outstanding mortgages or other debts
- negotiate the contract, including the payment schedule
- discuss your tax liabilities
- process the registration of the property rights
Optionally, your lawyer can also help you set up a bank account in Israel, facilitate the payments that need to be made, and even help you with the mortgage paperwork.
Your lawyer should be able to give you a good indication about how much the transaction will actually cost you, including all the fixed and variable costs involved. For instance, one optional extra is title insurance, which covers you in case there is a mistake in the title search or registration.
Legal fees usually run between 0.5% – 2% of the property price plus VAT.
Consult with a land assessor
The assessor can tell you if the asking price is reasonable or not, and can check the neighborhood and property zoning regulations. You’ll be forewarned about any plans for your street or neighborhood which could affect the value of the property or your comfort level. You’ll also find out whether the property you’re considering has any illegal additions built on to it and whether you can get a permit to build an extension in the future. If these issues are important to you, consult a land assessor before you sign any contract.
Check your finances
Even if you don’t absolutely need a mortgage, you might decide you would rather finance the purchase with money from a loan rather than use your own funds. If you’re using your own funds, is the money available immediately or not? If you are relying on a mortgage to finance the purchase, make sure the bank approves the loan before you sign the contract. Once you sign, there is no going back without paying compensation to the seller unless otherwise stipulated in the contract.
If you’re planning to take out a mortgage from an Israeli mortgage bank you may find it helpful to consult a mortgage broker. A mortgage broker can investigate the deals available at a variety of mortgage banks on your behalf and negotiate the best mortgage rate for you. They will also help you calculate what your monthly mortgage repayments will be in shekels. Note that if you are a foreign resident, some banks will allow you to take out a mortgage in dollars and pay it back in dollars abroad. Mortgage brokers usually charge 1.5% of the mortgage plus VAT for their services.
Whichever professionals you use, don’t be afraid to ask as many questions as you need, and make sure that you understand all your rights and obligations. Take one step at a time and you’ll find that before you know it the deal is signed, and you’re on your way to a smooth Israeli real estate transaction.