Buying Property in Israel?

Have you been sitting on the fence, looking at real estate in Israel but not yet taken the plunge? It could be that your hesitancy is working to your advantage. No guarantees of course. In this business, the real estate landscape can change quickly. But, in a very interesting Globes article interviewing Avi Tiomkin, a consultant on international hedge funds, real estate prices in Israel are declining, and in time, the prices you see on the market will more accurately reflect reality. According to Tiomkin, the prices we see now are a result of the combined efforts of Israeli banks and developers to keep prices higher, but Tiomkin believes this scheme is coming to the end of its life.

Tiomkin points to a number of indicators, such as a significant drop in housing sales, especially in the luxury market, a tremendous slow-down in demand by overseas investors and speculators, and a soon-to-be influx of new housing stock on the market. He paints a potentially gloomy picture too, depending upon the actions or inactions of the Ministry of Finance and the Bank of Israel. I am sure both will do everything they can to keep the real estate market in Israel strong.

Bottom line: we are entering a true buyers’ market. Should you sit it out longer? Maybe, but it could also be that the scenarios Tiomkin paints do not materialize, or are short-lived. It can also be that while you sit it out waiting for prices to fall further, someone else comes along and grabs your dream home. We suggest a little of both. Be careful about checking the market, doing research on comps, getting a second opinion on the true worth of the property and then jump in.

private home in safed, israel

private home in safed, israel

 

Nine Things You Should Know Before You Buy Property in Israel

IMG-20160731-WA0009Great you are ready to buy a home in Israel. You have found the dream house or apartment, negotiated a good price and are ready to sign on the bottom line. The real estate lawyers over at Epstein & Company suggest that before you take this last step, you beware of these nine very important facts. It will save you a lot of headaches and heartache down the road. For their in-depth discussion please go to their website:

  1. Zichron Devarim, or Memorandum of Understanding. If you are in America, a Memorandum of Understanding or Intent to Purchase is a commonly used document that signifies you are serious about purchasing the real estate. In Israel, this is a legally binding document, even though it expresses an intent to prepare a sales contract at a future date. Avoid this. Instead, visit with a competent real estate attorney who will prepare all of the legal documents necessary to conclude the sale, while protecting your interests.
  2. Taxes. In a previous article we discussed some of the common tax consequences involved when purchasing real estate in Israel. Before you sign the sales contract, be sure to consult with a competent authority so that you have a thorough and up-to-date understanding of what your tax obligations will be, and what loopholes, if any, might be available to you.
  3. Heytel Hashbacha or Improvement Tax. This is a tax burden borne by the seller, who must pay for an increase in value between his purchase price and his selling price due to improvements made to the property or assessments by the municipality. Oftentimes this issue will come into play when discussing the price. If you find out in advance what will be his improvement tax, it could be that this can be used in your offer. There are creative ways to work out the sale so that the seller’s tax can be lessened.
  4. Debts at the Municipality. Once the sale is completed, your name will be written in the legal records—Tabu. In order to do this, all outstanding bills must be paid by the seller. Your lawyer is responsible for completing all the necessary documents and checking to ensure that the property is clean of debt. Typically, a portion of the sales proceeds is held by your attorney until he or she receives verification of the property’s debt-free status.
  5. Mortgage. If you are applying for a mashkanta, or mortgage, be sure to do this before you sign a contract of sale. In Israel, the contract is the last step in the process of purchasing a property. Once you sign, you are committed to the sale and to making the payment. If for some reason you should not receive the mortgage or receive less than you thought and you cannot follow through with the purchase, you will find yourself facing penalties for breach of contract.
  6. Nesach Tabu. This is an important document that your attorney should obtain before you even begin discussing prices. The Nesach Tabu will indicate if there are any liens, foreclosures or additional mortgages. It will also confirm that the property was correctly registered to the seller. It is not unusual to find yourself already into the purchase process only to find out that the property was never transferred from a previous owner, sometimes generations ago. This means that the seller does not have the legal right to sell the property to you. It is not difficult to make the changes, but depending upon the circumstances, it can be time-consuming.
  7. Future Plans. If you are buying a home in Israel, especially in a new community, or one where there are lots of empty lots, it is wise to go to the municipal planning office and ask about the future development plans of the neighborhood. Do not take the seller’s or real estate agent’s word for it. They may not actually know what is on the books in the planning office. If you are buying a second hand apartment, that has been renovated and includes additional space, you will want to confirm with the municipality that all construction was done with the necessary permits. This is especially critical if you are using a mortgage to purchase the property.
  8. Visually examine the property. If you are purchasing real estate in Israel from abroad, then in addition to asking for expert photos and a video, do your best to find someone on the ground who can inspect the property for you. In Israel, property is sold as is. Better to know in advance what needs fixing than after you have paid for the home. Further, if you have a list of repairs, it can help you with negotiating a lower price.
  9. Real estate lawyer. All sales of property in Israel require a lawyer. Unlike in other countries, real estate agents cannot conclude a sales contract. We recommend that both parties to the contract utilize their own lawyers, who are competent in real estate law. Your real estate lawyer can sign all the necessary documents for you should you not be here to sign the final purchase contract and other documents.

Ready to Buy Property in Israel? Don’t Forget About the Taxes

2016 - 2Before you buy property in Israel, it is advisable to consult with your lawyer, mortgage broker or accountant on the subject of purchase taxes (mas rechisha). There have been many changes to the purchase tax structure over the past few years, and rather than relying on anecdotal information, avail yourself of expert advice.

Below is a brief overview extracted from an excellent paper on the subject of mas rechisha prepared by Epstein & Co., a Jerusalem law firm. You can obtain the full report by visiting their website (www.epsteinlaw.co.il).

If you are planning to invest in real estate in Israel, Epstein & Co., have two other very good documents on their website: “How can Foreign Residents Invest in Real Estate in Israel Without Paying Taxes?” and “The Ins and Outs of Real Estate in Israel.” We are not making an endorsement of the law firm, merely recommending that you take advantage of the very helpful information they provide through their website.

shutterstock_144600404-e1418557750891Mas Rechisha

The Purchase tax is called mas rechisha. Until 2014, there were various provisions of which a buyer could avail himself and avoid paying a tax or pay a much reduced rate. New regulations have tightened up the exemptions. Whereas previously foreign and Israeli buyers could avoid the tax if purchasing their first property in Israel, the new law requires all foreign buyers (whether Israeli or not) to pay the purchase tax regardless of price and regardless of whether it is the first home in Israel or not. However the new law did make two exceptions: (1) if you live in Israel and hold Israeli citizenship; or (2) you immigrate to Israel within two years of making the purchase.

IMG-20160731-WA0009Israel and you live in Israel

A buyer must demonstrate that Israel is his or her primary residence in order to qualify for the exemption. A typical measure is if you spend more than half the year living here, then Israel is considered your primary domain. But nothing is simple when it comes to governments. Be prepared for the tax authority to ask for lots of proofs.

Foreign buyer

Non-residents must pay a purchase tax and it is based upon the purchase price of the property. Currently, on properties of up to 4,800,605 NIS the tax is 8%, and for properties over 4,800,605 NIS, the tax is 10%.

There are many intricacies and constant updating to the tax laws in Israel. A wise buyer will be sure to first check with a qualified attorney so that you have a full accounting of what it is going to cost you to purchase that dream home. Also a qualified attorney can help you access all the possible exemptions and discounts to make the tax part of your purchase as painless as possible.

 

 

Buying Real Estate In Israel

Here is a very short video to reinforce why it is very important to have a lawyer to handle your real estate purchase. And, I would add another very important point: Do not be persuaded to use the same lawyer as the seller. Many times, especially when the real estate agent is representing both you and the seller, he or she will suggest to utilize the services of one lawyer, in order to make the process go more quickly. It is true, it can make the process move forward more quickly, but just as the real estate agent has challenges in representing both sides (since both sides want the best deal), so the lawyer has challenges, and later on, should there be any problem with the property, you will find yourself in a bind as to what recourses are available to you.

Your lawyer will require a power of attorney from you in order to complete all the transactions related to the sale. If you are not in Israel at the time of signing the purchase contract, then you will need to provide this from abroad, with an Apostille affixed to the document. This can take time, depending upon how far away you are from an Israeli consulate and the waiting time for securing an appointment. Many overseas buyers also provide a power of attorney to a real estate agent, for the purpose of managing the property. This is a legally binding document that cannot be revoked simply by a letter or phone call. In the wrong hands, it can bring you disaster.

Enjoy the video!

 

Tips for Buying Property in Israel

חזית הבית (1)Ready to Buy Real Estate in Israel?

Some Tips to Help You Find Your Perfect Home

Part One: A Brief Overview of Israeli Housing

Nothing can be more exciting than coming home to Israel. B”H, today it is easy, just contact Nefesh b’Nefesh, pack up and get on the plane. Okay, there are some small steps in between, but making Aliyah is nothing like it was in the past, when you had to travel by boat or camel, for months at a time, risking your health and life to arrive in the Holy Land. If you come on an Aliyah flight, you need only settle into your seat, go to sleep and wake up with your teudat zehut in your hand!

Before you make Aliyah you most likely will make a pilot trip to Israel to scope out communities, schools, economic opportunities and get a sense of how it is to live in the Land. The most important decision you will make is where to live. The answer depends upon a number of factors, but this article, the first in a series, iy”H, focuses on the Israeli real estate landscape. In future articles, we hope to give you a brief overview of Israeli cities and communities and important tips for making that very important real estate purchase. So, let’s begin.

Israel is small

All of Israel is only 21,946 square kilometers! This means that no place in Israel is far away. So, if you have friends or family in Yerushalayim, but you want to live in the north, no problem. Commuting is easy!

Geography

The country is divided basically into five areas: North, Center, Jerusalem, South and the Negev.

North: Northern Israel displays gorgeous, rugged terrain and diverse topography climbing up mountain peaks, swooping into valleys, and scaling the rocky coastline. Here you will find the regions of:

  • Upper and Lower Galilee
  • Northern coast
  • Northern valleys (Jezreel, Hula, Beit She’an and Jordan)
  • Zevulan Valley
  • Haifa Bay
  • Golan Heights

The major populations centers are in and around Haifa, Tiberias, Afula, Safed (Tzfat), Acco, Nahariya, Beit She’an, Hadera, Carmiel, Zichron Yaakov and Kiryat Shmona. The northernmost city in Israel is Metulla.

Center: Most Israeli’s live in the Center, which includes Shomron and the Coastal Plain. Here you will find the cities of: Tel Aviv/Yaffo, Petach Tikva, Bnei Brak, Ramat Gan, Netanya, Holon, Herzlia, Hod HaSharon, Ramat HaSharon, Kfar Saba, and Hadera.

The Jerusalem area includes of course our capital city of Jerusalem, plus also its surrounding cities of: Beit Shemesh, Ramat Beit Shemesh, Givat Ze’ev, Ma’aleh Adumim, Modi’in and Kyrat Arba.

South: The south region is home to the southern coastal cities of: Ashkelon, Ashdod, Rishon LeTzion, Gedera, Rohovot, Kiryat Gat, Nes Ziona, and Kiryat Malachi.

Negev: Lots of new residential, commercial and government developments are taking shape in the Negev, a stunning region of deserts, cliffs and seas. The Negev region is home to: Be’er Sheva, the largest city in the Negev, Ofakim, Arad, Yerucham, Netivot, Eilat and Mitzpe Ramon. Within this region is the Dead Sea and Red Sea.

While the majority of Israelis choose the Center or Jerusalem regions, many find the less populated, more affordable and more scenic peripheral areas to be more attractive. If you visit these regions today, you will see a tremendous amount of new growth as more and more communities begin to dot the landscape.

telavivnightAre you city or country?

Urban living

Within the urban centers, you can find new and resale homes to suit every need and budget. Unlike overseas, apartment-living is the norm here and the average apartment size is much smaller than what you are used to. The typical Israeli apartment is around 120 square meters. Apartments are described by the number of rooms, which includes the total number of bedrooms and the salon, or living room. The kitchen and bathrooms are not included in the total number of rooms. So, if you see an advertisement for a 4-room apartment, this means that it has three bedrooms plus the living room. Most apartments have balconies, called a mirpeset. Some are suitable for your succah. All apartments constructed after 1991 must have a safe room, called a mamad. Do not be surprised by the number of older apartment buildings that have no elevator—the famous “walk-up” is alive and well here. Israel receives a tremendous amount of sunlight and we have learned how to harness that energy to save on utility bills. Most apartment buildings have both solar (called dude shemesh) and boiler-heated water. Some older buildings offer only heating by electricity. Air conditioners are standard, called mazgan, and depending upon where you choose to live, you will find that in the summer it is pretty much impossible to live without one.

Residential buildings are governed by a va’ad ha’bayit, or residents’ management committee. There are some older buildings that do not have a va’ad, and the residents themselves accept responsibility for maintenance and cleaning. However, where there is a va’ad, usually the building is better maintained. Your va’ad fee will cover the cost of cleaning, maintenance of elevators, if they exist, and maintenance of the building and grounds. The newer the building, and the more elaborate the amenities, the higher the va’ad ha’bayit monthly fee.

Golan_Heights_-_Gamla_viewOf course, a city may not be to your liking at all. No problem, Israel also offers a number of rural options: yishuv, moshav, and kibbutz. Each community offers a different kind of communal living experience, ample land, and variety of housing in peaceful and quiet settings. The communities are organized into regional councils that have oversight over education, cultural activities and healthcare. Many rural communities are located near to cities, giving you the best of both worlds.

Moshav: Moshavim began as agricultural communities, where residents earned their income through agricultural activities such as farming or ranching. All residents received land for their home and land for farming. Today the moshav has evolved into more of a bedroom community. Residents earn their livelihoods from a variety of sources, most recently, from tourism, successfully operating very popular zimmers. Very few moshavim are engaged in agricultural businesses. On the moshav, your home and the land upon which it sits belongs to you, but the land of the moshav belongs to the state. If you wish to live on a moshav, you must pass a rigorous interview process by the receiving committee, by the regional council and also pass a state-administered psychological test.

Yishuv: A yishuv is basically a bedroom community. The main focus it to maintain the country-like feel of the setting, with only single family homes, on large lots and the same educational and cultural services you would find in the city. You can purchase land and build your own home (there are community standards) or find many second hand homes of various sizes. There are no entrance requirements or interviews.

Kibbutz: Kibbutzim helped formed the foundation of our modern state of Israel. Today, though, not many kibbutzim still operate as they once did. In general, the kibbutz is a collective, meaning that all residents share in the work of the kibbutz and in the income. There is private and communal living. Kibbutz residents own the homes, public areas and the commerce of the kibbutz. Educational, healthcare and cultural services are provided by the kibbutz. Kibbutzim today primarily make their income from tourism related activities, very few are still engaged in agriculture or manufacturing. Also, due to an aging population and lessening of popularity, many kibbutzim have opened up their membership to include new residential areas that exist somewhat separate from the original kibbutz cooperative. Potential residents must pass an interview process and conform to the norms of the kibbutz, each one having their own character. Where the kibbutz has decided to sell land to developers for the purpose of new homes, these residents are not a part of the kibbutz cooperative and do not need to pass the acceptance committee.

5-big

Hopefully, this brief overview will give you some simple tools for deciding where to buy property in Israel. Future articles, iy”H, will discuss:

  • purchasing land in Israel for building and the steps involved in building your own home in Israel
  • types of property registration
  • the process of purchasing real estate in Israel, from within the country and from abroad
  • renting a home in Israel

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Please visit our “hot property” pages, like us on Facebook and look us up when you come to Israel to begin your property search.

Buying Property in Israel From Abroad

5-bigBuying Property in Israel from Abroad

We receive many inquiries from overseas buyers, especially those of you planning your Aliyah. Sometimes the purchase is for investment. Everyone is interested to know “what is the process for buying property in Israel when you live overseas.” While it is certainly preferable to come to Israel personally to view properties and sign the purchase contract yourself, one can conclude a purchase of property from abroad. Below is a brief discussion of the basic elements of buying your home in Israel or making an investment in Israel real estate when you are not in the country. As always, we refer you to proper legal counsel for the most current changes in Israeli real estate law, and of course, to prepare the purchase contract.

  1. Real Estate Agent: Do your research and find a reputable real estate agent who covers the geographical area where you are interested in buying your home in Israel. The agent should be someone well experienced with the market and who has the technical skills to provide you with high resolution photographs and video of the potential properties. Your real estate agent is your advocate for negotiating the best price so that you find the home or investment you want within the parameters of your purchasing budget. Once a potential pool of properties is narrowed down, try to make a quick trip to Israel to take a look in person. You can return home and complete the process from there.
  2. Lawyer: All real estate contracts must be written by an Israeli lawyer, in Hebrew. Your lawyer is your point of contact for the contract, for investigating the legality of the property, for ensuring that all of your needs are met in the sales contract and for hiring an engineer to examine the property to be certain there are no structural problems. You must give to your attorney a Power of Attorney. This Power of Attorney must be sealed with an Apostille by the Israeli consulate. This process can take some time, so you should make an appointment with the consulate as soon as you first begin proceedings with the lawyer, even before you receive the Power of Attorney from him or her. Once the lawyer has the Power of Attorney, he or she can sign the contract for you, as well as become responsible for transferring all legal ownership documents to your name. Your lawyer is your advocate to protect your legal rights throughout the purchasing process.
  3. Cash purchase: If you are paying by cash, all monies for the purchase of the property must be placed into an escrow account until the seller demonstrates that all taxes and bills on the property are clear. Your lawyer will set up an escrow account for this purpose. You wire the money to your lawyer, it is placed in the escrow account, and the lawyer will disburse the funds according to the schedule defined in the contract. Also from this account, the lawyer will pay the various taxes owed on the transaction, land registry fees and the real estate commission.
  4. Mortgage: If you need a mortgage for the purchase, there are several mortgage brokers who can assist you with locating the most favorable loan package possible. The mortgage broker will walk you through the process, tell you what documents are needed, negotiate the best rates and present to your lawyer the mortgage documents for signature.
  5. Transferring associated accounts and receiving keys: Either your real estate agent (if you have provided a management agreement or power of attorney) or your lawyer can take care of transferring your name to all the associated accounts, such as city tax office, utilities, etc and accept on your behalf the keys to your new home or investment, to be held until you finally come home to Israel.

for more information, please contact galilproperties@gmail.com

Bid to make housing affordable sends buyers scrambling, but will it work? | The Times of Israel

New purchase tax law is coming out of the final gate and as you can see, buyers who were sitting on the fence have jumped down and are scrambling to make purchases quickly to avoid being hit with a huge tax bill that could significantly drive up the purchase price.

The law impacts Israeli buyers and foreign buyers differently. For Israeli buyers, the tax change will impact them when they purchase a second property.  For foreign buyers, the changes impact all purchases.

Notice also the enormous increase in property prices experienced since 2008. In fact, here in Tveria one could purchase a nice apartment for around 250,000 shekels in 2008. Today there is nothing on the market for that amount of money, or, if so, you will need to invest more than this amount of money to make it liveable.

One week left—if you have been visiting this site or contacting us over the past several months contemplating a purchase, now is the time to go to contract. The new purchase tax is tied to the date that you sign, not the date that you complete the purchase! Be in touch today and let us help you get into your dream home at the most affordable price possible. weidner.dvorah@gmail.com

Bid to make housing affordable sends buyers scrambling, but will it work? | The Times of Israel.