When buying your first apartment in Israel, you may find that the process is a little different to say the least, than what you would expect in your home town. Our Baruch Haba buyers guide will provide you with general information about the process of buying an Israeli apartment as well as explaining your options and general legal rights along the way.
Please note that since buying a house is a big decision besides being a huge investment, we highly recommend that you consult with a professional before making any major decisions. Be careful who you deal with and make sure, when dealing with brokers, that they are licensed properly and you are aware of the commission charges, unlike in many other countries here in Israel the buyers have to pay an agency fee.
1.Important considerations when choosing your apartment
Budget, School district, Neighbourhood maturity (are the facilities in the neighbourhood up and running, is the population older/younger, etc.) , Proximity to religious and social centres, schools, shopping centres, doctors surgeries.
Physical appearance: When considering a new apartment you may want to consider a building engineer and sometimes an architect, to review the plans and technical specifications. If you are buying a new apartment from a developer, you may want to make changes to the layout, this should be done as soon as possible in the process to save money and of course not being too late in the day).
Legal status: Who has title to the apartment, any outstanding liens; seller issued declaration.
Try do your own research and prepare in advance, there is nothing like firsthand knowledge! Know the market and the neighbourhood you are considering. Do your best to spend a weekend there. Understand the pros and cons of the apartment and remember, if possible speak to friends and people who know you in the area – not every apartment is a good fit for everyone, but at the same time there is something for everyone. If the price is not right, be ready to walk away. You will find other apartments. With that said, don't be too stubborn – don't let the seller feel you are not budging because that will put him on the defensive end, and you may loose the apartment unnecessarily.
3. Zichron Devarim
Today, many lawyers recommend NOT signing a Zichron Devarim – a one page document that summarizes the essential terms of the agreement, because of its general legal obligations. However, this may be a requirement (in today's seller's market), in order to reserve the apartment and take it off the market.
When purchasing a new apartment in a project, one is usually required to pay an application fee to the builder, in order to reserve the apartment until the contract is prepared. There is also the contractors lawyers fee which is also paid by the buyer which can be up to 1.5% plus Tax.
4. Financing the Deal
The first step in applying for a mortgage is determining how much you need. Typically, additional costs such as upgrades, improvements and renovations can add 5%-20% of the property value.
Banks today are generally willing to lend 60% of the balance and in some cases up to 75% depending on your financial status.
Apply for "Ishur Ekroni":
This is general mortgage approval from the bank. You will need to provide all of the documentation at this phase, and the bank will give you a general approval indicating the amount it is willing to lend you.
Generally, it takes 3-10 days to obtain this approval, and it is valid for three months (however due to the fluctuation of the financial markets, the interest rate is only valid for 12 days).
If the three month period expires before you take the mortgage, then you will need to update the application form.
5. Signing a Contract with the Seller
Note: Schedule this in advance, so that the contract is signed with the seller immediately after the Ishur Ekroni is received.
HeArat Azhara: Once the contract is signed, a note should be added to the deed to indicate your rights to the property. This is a note in the land registry (or Minhal) advising any prospective purchaser that there is a sales contract for this apartment and the sale is in progress.
Like any other substantial contract, we recommend you consult with a lawyer to cover the legal aspects of the deal.
6. Finalising the Loan - Mashkanta
Return to the bank and open a file (this cannot be done without a signed contract finalising the sale of the home).
For new apartments, the bank only requires a copy of the contract and approval from the seller. For second hand apartments, the bank will also require proof of registration (either Minhal or Tabu documentation).
A Shammai- Surveryor must then be sent out to make a valuation of the property and does not take into account any extensions that were built without planning permission.
The bank prepares your file and notifies you within a couple of weeks that the loan contract is ready for signature.
If you already have a lawyer, he should handle the registration of the apartment and transfer the property deed (apartment) under your name; Remove HeArat Azhara.
8. Tax Payment
Several types of taxes and fees may be associated with your new apartment that you should keep in mind:
Property acquisition tax (stamp duty in the UK) – Mas Rechisha: a progressive/graduate tax, which means that it increases with the price of the apartment. Generally payable within 60 days of signing the contract for the purchase of the property. There are currently exemptions for new immigrants and first time buyers, this is 0% for approximately the first 900,000 nis, the next bracket is 3.5% followed by 5%.
Arnona – City/counsel taxes: Determined by the size of your apartment and its location. In more exclusive areas of a given city, the Arnona is usually higher. There is a 90% discount for new Olim on the first 100m2.
Maintenance – property maintenance or Vaad Bait: Usually a requirement in apartment buildings. This fee is usually between 100-150 nis per month and may become fairly expensive if your building requires an external management company or if it has many pending repairs. You should consult with the Vaad Bait prior to signing your contract.
Note: Prior to transferring the apartment, make sure the previous tenant paid all his debt, taxes and utility bills.