Buying an apartment at the preconstruction stage differs from buying a secondhand apartment. With a secondhand deal, the apartment is built and you see what you are getting. With a new apartment under construction all you see are plans and a verbal description of the apartment and the technical specifications under which it is built. So, what do you need to get started in a transaction of a new build?
Show the plans and specifications to an expert
To decide whether this is the right apartment for you and one that will fulfill your needs you need to show the plans of the apartment you are considering to an architect or interior designer in Israel. They can advise you as to the following:
- The size and measurements of the apartment and the rooms.
- Explain the plans to you. Where are the windows, doors, and electrical sockets?
- Whether or not the apartment fits your needs and if not, what needs to be done to adapt it to your needs, and what would be the cost of this?
- The specifications (the written description of the apartment and all its elements, i.e. what the cabinets are made of, how many electric sockets there are, etc.) are good quality.
- Whether or not you should do any upgrades of materials like tiles, kitchen cabinets, and other items in the apartment and what would this cost.
- The quality of the materials in the specifications or whether new materials should be used.
- Changes that should be made in the internal layout of the apartment, and their cost.
Depending on the advice from this professional you will be able to make the crucial decision of buying the apartment – or not.
Check your financials
When you have an idea of how much the apartment you are buying will cost (after consulting with your Israeli real estate attorney as to the taxes and other costs) you need to check the following:
- How will you finance the transaction – the price of the apartment, changes, fees of professionals, and taxes?
- The possibility of taking a mortgage in Israel? You will need to consult with a mortgage consultant in Israel to see what the mortgage will cost you and what the monthly payments will be.
- The possibility of financing the transaction from savings?
- The possibility of financing the transaction with a loan from abroad?
- The path you choose depends on your goals from the transaction. Is the purchase for investment purposes only? Is this an effort to have a foothold in Israel by buying an apartment? Is this your dream apartment in Israel that you intend to live in? The answers to those questions will determine whether you decide to go through with the transaction and which path you choose in the financials.
- Where is your money? Do you have a bank account in Israel where the money sits? Is your money in a foreign account abroad? How will the money be converted into Israeli currency and how does this affect your decisions?
- If your money is abroad, how are you going to transfer it to Israel? Will you send it to a bank account you have in Israel? Will you set up an arrangement with an exchange company? Will your lawyer set up an escrow account?
Once you have an answer to those questions you need to start working towards setting up the Israeli bank account, the escrow account or the account with the exchange company. These things can take time to set up and may require documents that you may need to ask your accountant for or sign before the Israeli consul or local notary with an apostille.
The Registration Form
When you have picked the apartment you intend to purchase, you will be asked to sign a registration form. Here is what you need to know about this form:
- The registration form includes the identification of the apartment (number of the building, number of the apartment, floor, north-south etc.), The size of the apartment and what is attached (i.e. parking space, storage unit, garden, roof, etc.).
- The form sets out the price, and payment schedule, additional costs like purchase tax, legal fees of the company, the amount of a small downpayment, and how much time they give you to come and sign the sales agreement.
- This form should also list any special terms agreed upon with the construction company such as added perks to the basic specification (air conditioner for example) and anything that was agreed upon and which formed the basis of your decision to go forward with the transaction.
- Show this form to your Israeli real estate attorney who will go over it and make necessary changes in the form for your protection.
Once this form is signed you have a certain number of days to sign the contract. During this time your Israeli real estate attorney will be reviewing the sales agreement (a long document which is an average of 50 pages long) and negotiating any legal changes in the contract. You should use this time to set up your bank accounts in the way you have decided, for transferring funds, for getting approval for a mortgage, and for signing power of attorneys and any other documents you need for the transaction.
Picking Your Team
At this stage. you should have your team picked out or at least you are working on this. This team includes at least the following people:
- The Israeli real estate attorney will review the contract, negotiate legal changes, help you set up your accounts, sign the contract for you if you are not in the country, make sure payments are made, report to the tax authorities for you, and advise you as to issues that arise during the construction period.
- The Israeli mortgage consultant should you choose to take a mortgage from an Israeli bank.
- The person who will manage the project of the purchase for you. This should be either an architect or an interior designer. They will negotiate with the construction company the changes you want; they will assist you in picking out the tiles, ceramics, kitchen cabinets, and anything else you choose to purchase for the apartment. They will also supervise the work to make sure it is done properly and that you received the upgrades you ordered.
This is the start of the process. You should check in with the professionals you hired periodically during the construction to see the progress of the project. With the right professionals that you trust who will look after your interest, your transaction should be smooth sailing.