Bank guarantee

The Israel district court in a recent court case has indicated that the law that currently applies to contractors about providing a bank guarantee to safeguard the home buyer in case he goes bankrupt, equally applies to an investor who purchases a commercial property such as a shop or an office.

Comparison between Israeli Residential Real Estate Transactions and U.S. Residential Real Estate Transactions

Many people are nervous about entering into Real Estate transactions in Israel for many reasons. In Israel, the real estate transactions are conducted in Hebrew, a language they are not completely familiar with. They are not used to Israeli business mentality. Purchasers who are not native Israelis feel that the process is different in Israel than in their native countries, thereby exposing them to more risk. Below you will find a list of practical differences between U.S. real estate transactions and Israeli real estate transactions.

	ISRAEL	USA
Real Estate Agents’ Fees	The standard amount is 2% of the price from both buyers and sellers, plus V.A.T .	Sellers pay fees. Negotiable, but usually between 2% - 6% of the price.
Lawyers’ Fees	Fees vary between 0.5% - 2% of apartment price, plus V.A.T.	A flat rate of $1000 - $1500 per deal.
Title Search	Completed by the lawyer. Title insurance exists but is not very prevalent.	Completed by the insurance company which issues title insurance.
One Lawyer for Both Parties	Permitted.	Permitted if the parties sign conflict waivers permitting one attorney to represent both sides.
Payment Schedules	The payment schedule varies depending on the needs of the parties. Some money is held in escrow against fulfillment of certain duties by the seller, but it is virtually never 90% of the price.	10% at the signing, in escrow. 90% at the closing (transfer of rights).
Mortgages	Mortgages can be transferred from one apartment to another. The reason for this is that some mortgages have special rights attached (such as the oleh mortgage). The seller can transfer such a mortgage to his new apartment so as not to lose these rights. This whole process also affects the payment schedule.	Mortgages are not transferrable to another apartment. When you sell a property, you pay off the mortgage on the property and then have to get a new one any new property you buy.
Taxes	The purchaser pays a Purchase Tax and the seller pays a Capital Gains Tax and Sales Tax.	Capital Gains Tax is paid by the seller, plus a transfer tax of 1%.
Linking of Price	The prices of second hand apartments are usually linked to the U.S dollar. The prices of new apartments under construction are usually linked to the Building Index, but are sometimes linked to the Consumer Price Index or the U.S. dollar.	Prices are not linked.
When Is The Deal Binding?	Upon signature of both parties.	Upon signature of both parties.
Protection of Monies	In contracts for new apartments still under construction, the money is protected by a bank guarantee or insurance policy.	In contracts for new apartments still under construction, the money is held in escrow.
Who Pays the Construction Company’s Legal Fees?	Usually the buyer.	The construction company.
Freehold Land	Much of the land is freehold. The buyer gets a long term lease for 49 or 99 years from the government.	This is not prevalent.

Dictionary of Real Estate Terms English - Hebrew

Government Authorities	Israel Land Authority	Minhal Mikarkaei Israel
	Israel Land Registry	Lishkat Rishum M’Karkaim (TABU)
	Register of Mortgages	Rasham Hamashkenot
	Municipality	Iriah
Taxes	Purchase Tax	Mas Rechisha
	Capital Gain Tax	Mas Shevach
	Municipal Tax	Arnona
	Betterment Tax	Hetel Hashbacha
	Long Term Lease	Chachirah L’Dorot
	Building Maintenance Fee (paid monthly)	Vaad Bayit
Bank / Mortgage	Mortgage	Mashkantah
	Transfer of Mortgage	Grirat Mashkantah
	Freezing of Mortgage	Hakpa’at Hamashkantah
	Payment of Mortgage	Siluk Mashkantah
	Property Appraiser	Shamai
Realtor / Broker	Real Estate Agent	Metavech
	Real Estate Agency Fees	Dmei Tivuch
Legal issues	Lawyer	Orech Din (m), Orechet Din (f)
	Zoning Law	Tochnit Bniat Arim (TABA)
	Building Permit	Heter Bniah
	Illegal Building	Charigat Bninah
	Notary	Notarion
	Notarization	Ishur Notarioni
	Bank Guarantee	Arevut Bankait
	Transfer of Rights	Havarat Zchuiot
	Memorandum of Understanding	Zichron Dvarim
	Contract	Chozeh
	Cancellation of Contract	Bitul Chozeh
	Enforcement of Contract	Achi’Phat Chozeh
	Ownership	Ba’alut
	Property Registry	Chevra Meshakenet
	Power of Attorney	Yipuy Koach
	Irrevocable Power of Attorney	Yipuy Koach Bilti Chozer
	Guarantor(s)	Arev / Arevim
Technical	Technical Specifications of Property	Mifrat Techni
	Engineer	Mehandes
	Civil Engineer	Mehandes Ezrachi
	Structural Engineer	Mehandes Constructziah
	Architect	Adrichal

Homebuyers prepared to pay more

A real estate survey conducted in July 2009 by a well know financial
newspaper in Israel found that the average top price people are set to pay
for a home has risen to NIS 979,746.This represents an increase of 21% from
the survey conducted in January 2009.
The survey also found that 85% of home seekers were looking for pre-owned
homes as compared to 46% for new ones.

48% of Israelis: Environmentally friendly homes important

However, only 16% know what this means.

Environmental awareness is rising in Israel, even as many Israelis have no idea what it means, according to a survey made recently.

Civil engineering has in recent years harnessed environmentalism in the development, planning, and construction of projects, such as building on prefabricated recycled construction material, use of water saving and recycling systems, soil preservation, the removal of contaminants, use of solar, wind, and hydro energy, and the use of quiet transportation

Experts in the field predict that green construction will become the popular standard within five years

Other purchasing costs

Lawyer's Fee

Your lawyer will ask for 0.5% - 1% plus VAT on the amount for the property to draw-up the contract and register your home.
He/she may add other expenses if you live overseas. It is important that the lawyer be knowledgeable about the city in which you are buying your home (it is not recommended to use a friend or family member.)
Never sign a contract with a builder without your lawyer first reviewing it. You will often be told that the contract is standard, but it is usually completely in favor of the contractor and against your best interests.
It is not uncommon in second hand transactions for the parties to use the same lawyer to save costs. Make sure that the lawyer is completely unbiased toward either party.

Agent's Commision

The agent charges 2% plus VAT. This is the standard charge in Israel. A good agent will save you more money than the commision you pay. He knows which buyer is keen to sell and what is more suitable to your needs. Thus he /she will save you a lot of time and energy by taking you to the right properties.

Mortgage Broker

There are many mortgage options available in the real estate market today,for example:fixed interest loans, variable interest plus indexation, dollar linked, etc. Clarifying and determining the best mortgage option is not an easy task (it depends on the borrower's age and in what currency his income is paid in,etc). A mortgage broker works independently of the banks to determine the most suitable mortgage for a particular client and to negotiate the most competitive rates and terms available. A mortgage broker also helps clients build their application, tailor made to each mortgage lender's criteria, to ensure the best chance of approval.
The fee charged is 1% + VAT of the amount of the mortgage taken.

Engineer / Surveyor

should you wish, you can have the property checked by a qualified engineer or surveyor before you sign the contract. He can provide a written or oral report. A written report is usually made when buying in a new project (as this report has a legal standing in court). The cost of a written report is around US$ 500 (depending on the size of the property).
A verbal report usually costs half (US$250 - US$300). A verbal report is usually made for pre-owned properties since "you see what you get".
Make sure to have a licensed and reputable engineer inspect the property.

Closing Costs on Purchasing

Closing costs range between 5% and 7% of the cost of the apartment. This should not be overlooked when applying for a loan.

Contractors Lawyer Fees

when buying from a builder, one normally pays between 1 and 1.5% plus VAT to the contractor's lawer. This is only in the case of first hand apartments. The lawyer not only prepares the contract but also keeps a register of all the new owners and then formally registers the owner in TABU (The Official Goverment Titles Office). This transfer may take place up to 5 years from the date of purchase.

Purchase Tax

This tax is payable within 50 days of signing the contract. You can arrange with the lawyer to pay it all at once or in installments.
At the signing of the contract, give the attorney a post-dated check for 50 days from the date the contract was signed. You can also pay it yourself at the post office. ( The lawyer will provide you the relevant form). This tax must be paid in cash or with a bank check. The amount of the purchase tax is based on the shekel price of the property that appears in the contract.

The rates are as follows: (Between 16/1/2009 and 15/1/2010)

New Inmigrants
Until 1,318,400NIS	0.5%
Above 1,318,400NIS	5%
Single Residential Home
Until 1,026,660NIS	0%
From 1,026,660NIS Until 1,442,870NIS	3.5%
For The Remainder Above 1,442,870NIS	5%
Second Residential Home
Until 873,500NIS	3.5%
For The Remainder Above 873,500NIS	5%
Land Plot	5%
Shop	5%

The professional Licensed Realtor

A broker's commitment is to serve his clients in the process of buying, selling, renting and/or managing their property.
This requires a thorough knowledge of the market, strong negotiating skills, ability to settle last minute disagreements, promptness and reliability.
A good agent can provide to potential home purchasers accurate and fair pricing based on current market trends.
He analyses statistics on past and current sales in order to provide a fair estimate of the actual market value of a particular property for sale and prepares an optimum marketing plan including best advertising channels for the particular home in question, in addition to useful tips on how to best display the home for sale.
He is able to provide critical information regarding neighborhood demographics and other relevant information. This will save the buyers invaluable time, and ensure that they don't buy in an area not suitable for them. (This is crucial especially for Olim!)
Sometimes the "chemistry" between the parties is just simply not there (cultural differences usually add to this) a professional broker uses his diplomacy and tact to avoid unnecessary friction between the parties, which in his absence could lead to one party refusing to deal with the other, resulting in the cancellation of a deal.
A good agent will work with the lawyers on both sides so that the contract can be signed promptly, avoiding unnecessary delays.
Finally, a professional broker will attend the contract signing just in case there is a dispute at the last minute; and if the argument is not of a legal nature (like closing date or payment terms, etc.) lawyers do not like to get involved.