The Process of Buying Property in Israel

Updated: Sep 17, 2020

Buying property in Israel – like anywhere else – is a process, but understanding how things work can save a lot of aggravation.

Finding a Property

In Israel, most buyers purchase their homes either through a licensed realtor or, in the case of new construction, a builder. It's rare for people to market their homes on their own. Be sure to stroll through various communities and neighborhoods to get a feel for them both on weekdays and Shabbat.

Stop and speak to residents and ask their opinion on the local school system, noise, shopping options and traffic patterns. Interested in a certain building or development? Israelis are very welcoming – and opinionated - so don't be afraid to knock on doors to see what actual residents have done with their homes, and to learn about the quality of construction. Also, search for "for sale" signs and jot down the phone numbers of realtors representing homes in the area. Know that they will charge up to a 2 percent fee (plus VAT), but the fee tends to be negotiable.

Negotiating a Price

Rena Hollander of Hollander Law Offices often urges her clients to hire a building engineer to examine the property before signing a contract.

"We operate on the principle of Buyer Beware. It's important to have someone check for dampness and other issues."

Once you're aware of the problems, it may be possible to negotiate the price down, and to state in the contract that the seller and not the buyer is responsible for the repairs before handing over the home.

Otherwise, the buyer will be purchasing the property "as-is," with all that it entails.

Another potential negotiating point: the type of land a home is built on. In Jerusalem, for example, the land may be owned by a church that leased the land for 99 years with no guarantee of renewal. The shorter the time left on the lease, the more difficult it is for the owner to sell the property. That can substantially lower the sale price.

Sometimes the churches have already sold the land to developers who will allow the owners to buy the lease for a considerable amount of money.

When it comes to new construction, it's sometimes possible to negotiate the interest rate charged by a builder.

Hollander was recently able to negotiate a lower interest rate and a longer-than-usual grace period in case her client was late in paying. It saved the client thousands of dollars, she said.

Hiring a Real Estate Lawyer

While some buyers hire a lawyer only after their offer has been accepted by the seller, others prefer legal counsel from the very beginning.

Both are acceptable options, but having a lawyer on board from the start can be an advantage, especially if the buyer isn't familiar with the real estate market in Israel or isn't a fluent Hebrew speaker.

"Some people like to have their lawyer engaged when they are making an offer, who can stipulate that the offer be contingent on certain factors," says Simon Seitz of Simon Seitz Law Office.

A lawyer will reach out to the realtor and seller's lawyer, and to the developer if it's new construction. The lawyer will break down the costs to make sure your budget will suffice. This will help you determine whether you will need to take out a mortgage. If so, it's often advantageous to seek the services of a recommended mortgage broker.

Hiring Your Own Appraiser

In the case of a second-hand home, Seitz says, it's often a good idea to hire an appraiser before signing the contract.

"The bank will give you a mortgage based on a percentage of the property's appraised value. The bank will only give a loan based on the appraised value. If the appraisal is less than the sale price, this could make the buyer spend more of his own money," Seitz explained.

Your real estate lawyer will also check the property's title, negotiate a payment schedule, witness the contract signing, and then report to the land tax authority and send a copy to the mortgage bank and transfer the title.

Purchase Tax

Buyers need to know that for non-residents, the flat-rate property tax that starts at 5% percent of the price of the home, and can reach 10% for very expensive apartments (above 17.794 million shekels). The starting property tax for foreigners used to be 8% and was reduced in August 2020 by the Ministry of Finance.

Israeli residents who do not own a home (or those who are looking to buy a new one and sell their current apartment) have potentially lower property tax brackets: The first NIS 1,744,505 the tax bracket is 0%. From NIS 1,744,505- NIS 2,069,205 the rate is 3.5%. From 2,069,205-5,338,290, the rate is 5%. For homes ranging between NIS 5,338,290- NIS 17,794,305, the rate is 8%. The maximum 10% rate which foreigners are charged, also applies to Israelis purchasing properties over NIS 17,794,305.

Those who make aliyah within one year of purchasing a home (and up to 7 years post making aliyah) qualify for an aliyah benefit. "Once you established your residency or aliyah, you can claim the difference from what you paid already," according to Yair Givati, a lawyer at Haim Givati & Co.

Buying a home in Israel presents a unique set of challenges and the process is somewhat different than it would be in the United States, the United Kingdom, or elsewhere. It is therefore always recommended to consult with professionals in the field who can guide you through the process.

Buying a home in Israel presents a unique set of challenges and the process is somewhat different than it would be in the United States, the United Kingdom, or elsewhere. It is therefore always recommended to consult with professionals in the field who can guide you through the process.

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