Buying a property in Israel is an exciting step, but doing so from abroad or in another language isn’t easy. If you’re thinking about buying in Israel, but aren’t sure what the process looks like, we’re here for you. This guide aims to illustrate what you can expect as a foreign buyer of Israeli property. (Relevant also to Israeli citizen with an international mentality)
1. Understand your need.
Ask yourself the following questions -
Why do you want to buy a house in Israel? Is it for living or for investment?
What is your budget and the right payment framework for you?
What is the time frame in which you would like the property to be available?
All of these questions will lead you to understand which of the following options suits you best-
Of course there are more than the two listed options, but these are our specialty...
Second hand apartments - Usually these are apartments purchased from a private person or through a broker. They are characterized by a possession transfer time of about a year from signing an agreement and the seller will want the entire payment as soon as possible. The advantage is that you can see, feel and smell what you are going to buy.
New residential real estate projects - These are usually apartments purchased from a company that develops the land and builds the houses. The advantages here are convenient payment terms. (only about 20% at the time of signing a contract) the ability to influence the construction and adapt the execution to your wishes, the ability to fix up to 60% of the property's price to the current market situation. (A huge advantage in the rising market of the last decades.) And warranty secured and protected by the Israeli Sale Law (Apartments) to secure our investment.
Tip - According to Israeli law, a contractor / builder must provide buyers with a manual for proper maintenance of the property. If he did not do this, he is exposed to increased liability for damages.
In Israel, nobody expects to pay the asking price – at least, not as their first offer. Because the housing market is so competitive and properties are in high demand, sellers deliberately set a high asking price knowing that potential buyers will attempt to haggle them down.
An experienced real estate agent will use their knowledge of the area, size, quality and other elements of the property to help you set an appropriate first asking price.
Tip - In Israel, a real estate appraiser (Licensed profession) is sometimes required to perform a valuation of an apartment and present a report for a financial institution involved. Property owners should know this and you will not meet resistance to an appraiser's visit. When I'm not sure about something I remember my grandmother who would always tell me - it's better to be safe than sorry. I recommend in real estate in general and certainly here to act according to this statement.
It should be noted that in new houses purchased from a contractor / builder, the price is usually determined by an appraiser and according to the market at the given time. Therefore, in advance, the price should be fair and backed by a professional opinion. Of course, each case must be examined individually before making a decision.
Financing an apartment always takes some consideration. First, remember that the price you agree on will not include fees.
Realtor commission - Up to 2% + VAT of the property cost. Unlike the USA and Europe, both the buying party and the selling party pay a broker's commission to the broker who represents them.
Lawyers’ fee - Usually up to 1.5% + VAT of the property cost. (Varies between law firms, this is the norm.)
Property purchase tax – for a foreign resident will pay 8% of property cost, for an Israeli citizen provided that this is his only apartment will pay usually approx. 5% (Depending on the total value of the apartment.)
Tip - If you are going to make aliyah someday, but haven't yet - you can and should do proper tax planning in order to pay the right tax rate for your situation.
We strongly advise you not to make any decisions based on in the above, consult with us individually (free and non-binding) regarding your case. Contact us here.
As a buyer from abroad, there’ll also be some fees associated with transferring the money. You need to think about how you will do this. There are a few options here.
Setting up an Israeli bank account - Foreign citizens.
Sometimes different service providers (lawyers, appraisers, brokers), or the nature of the deal require a bank account in Israel. If you need to, you have 2 main options.
The traditional way - a foreign citizen can walk into a bank in Israel with his identification documents and open a bank account, without any problem.
The long distance way - If you are outside of Israel and want to make a real estate transaction in Israel, you can open a trust account. Setting up a trust account usually will be done by your lawyer in Israel who will be the trustee, you will have to go to the Israeli consulate closest to your home and sign the documents required for the process.
For both options you can make an international bank transfer in a foreign currency and exchange currency by the bank to NIS. From this bank account you can manage all the payments required for the purchase of the apartment in Israel or for any activity that requires a bank account in Israel.
It should be noted that the process may be subject to significant fees in large sums of money, therefore careful planning and negotiation is required here. Understanding your need and knowing the tools (such as digital options and more) can save you a lot of money.
As I said in the previous section, I strongly advise you not to trust us on this and certainly do not to make any decisions based on this. Consult with us individually (free and non-binding) regarding your case. Contact us here.
Mortgages in Israel.
(and can I get a mortgage in Israel as a foreign buyer?)
I will start by saying that we are experiencing times when the financing market is unstable, therefore what is described below is only from our experiences with our clients.
An Israeli citizen in his first and only apartment will receive up to 75% of the apartment's value.
Residential improvement, selling an existing apartment and buying a new apartment in its place you will receive up to 70% of the value of the new apartment.
When purchasing an additional apartment you will receive up to 50% of the value of the apartment.
A foreign buyer applying for a mortgage in Israel (For example from the United States or Europe) can usually get -
when purchasing an apartment in Israel up to 50% of the value of the apartment.
The loan will be given in a maximum spread for a period of up to 30 years or up to the age of 80.
Usually the payments can also be determined in a foreign currency such as dollars or euros.
What if I want to buy an apartment to live in after making aliyah?
If you want to buy a home with the intention of living in it as an oleh chadash (new immigrant), you are entitled to certain benefits.
First of all, you can get a discount on paying property purchase tax. (Usually a difference of 3% of the property's value - see the financing section above - fees)
If you’re a first time buyer, you will also be entitled to a bigger mortgage, which may expand the pool of potential properties you can buy.
After you’ve found the right property and have your payment schedule sorted, you’ll be ready to sign.
In some cases, you will already have been required to sign a short, general contract to reserve the property. This does not actually mean you have paid for the apartment or that it is recognized as yours.
The signing of the contract will be overseen by your lawyer. Don’t be afraid to bring up parts of the contract that you are worried or unsure about – in some cases, the sellers will negotiate, and if not, it is always best to be fully transparent about what you’re signing.
Tip - The way it works is that the seller's lawyer sends the sales agreement to the buyer's lawyer and he makes his comments. There is a situation where you have to compromise on such and such conditions, it is important to understand every change made and to find a lawyer you can trust.
Congratulations! Now that you’ve signed, your lawyer will need to register you as the new property owner. (In the land registry aka Tabu) When the property is filed under your name, you will have 60 days to pay the property tax. From this point on, the property is under your ownership and responsibility.
Bonus - warranty. (yes yes, warranty on Real Estate in Israel.)
This hopefully unnecessary step will be relevant only if you have found out that the seller was hiding an issue in the property. If this is the case, you have three years to appeal the property purchase.
However if you’ve bought a new property, the responsibility of the contractor / builder is greater and you are protected according to the law in Israel.
Don't compromise, let us manage the process for you in the best possible way.
Schedule a free online meeting today !
* The above should not be regarded as an individual recommendation but rather as statements based on our experiences. Before making any decision, please consult with us or other professionals who will examine your case individually.