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.

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.

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