Buying a Home in Israel

Where to Find Homes/Apartments for Sale:

• Real Estate Websites: Popular sites include Yad2, Madlan, Homeless. These and other platforms list properties across Israel, with filters for location, price, size, and more.
• Facebook Groups: There are many Facebook groups dedicated to real estate in Israel, often in specific areas or cities.
• Newspaper Listings: Local newspapers and classified ads can also be a source, particularly for older owners who may not list online.
• Word of Mouth: Networking can be effective, especially within specific communities, such as those catering to Olim.
• Developers: For new construction, check directly with real estate developers, particularly in new residential areas.
  

Using a Realtor or Agent:

• Advantages: Realtors can provide access to exclusive listings, negotiate on your behalf, and guide you through the buying process.
• Fees: Typically, the fee is 2% of the purchase price plus VAT (17%), sometimes this can be negotiated.

Not Using a Realtor:

• Advantages: You save on agent fees.
• Challenges: You must manage all research, negotiations, and legal processes independently, which can be overwhelming if you’re not familiar with Israeli real estate laws.

• Initial Research and Budget Planning: Determine your budget and financing options. Israeli banks usually finance up to 50% for overseas buyers and up to 75% for Israelis and new Olim.
• Pre-Approval for a Mashkanta – משכנתא – Mortgage: Obtain an Ishur Ekroni – אישור עקרוני – mortgage pre-approval from a bank of your choice to understand how much you can borrow. Different banks offer varying rates and terms.
• Viewing Properties: Visit properties to check their condition, location, and amenities. Consider factors like accessibility, public transportation, schools, and future developments.
• Hire a Real Estate Lawyer – עורך דין מקרקעין: A lawyer is essential in the buying process. They conduct property checks, ensure clear ownership, draft contracts, and manage registration. Legal fees are typically up to 1% of the purchase price plus VAT.
• Property Inspection: It is advisable to have a professional property inspection done, particularly for older homes. Check for structural issues, plumbing, and electrical systems.
• Making an Offer: Once you find a property, you can make an offer. Negotiations may involve price, payment terms, and other conditions.
• Signing a Chozeh Mecher – חוזה מכר – Purchase Agreement. This contract outlines the purchase terms, so have your lawyer review it.
• Payment and Financing: Payments are made in stages, often starting with a 10% deposit. Ensure your mortgage is approved and aligns with payment schedules.

A Yoetz Mashkantaot acts as an intermediary between you and the banks, helping you secure the best mortgage terms. Here’s a detailed look at the pros and cons of using a mortgage broker when buying a home in Israel:

Advantages of Using a Yoetz Mashkantaot

• Access to Multiple Lenders: Brokers work with various banks and financial institutions, giving you access to a broader range of mortgage products and rates than you might find on your own.
• Expert Guidance: Brokers are well-versed in the Israeli mortgage market, including the nuances of regulations, loan types, and financial products. This expertise can help you choose the right mortgage structure (fixed-rate, variable, linked, unlinked) based on your financial situation and long-term goals.
• Time Savings: A broker handles much of the paperwork, negotiations, and communications with banks, saving you time and effort. This is particularly valuable if you’re unfamiliar with the local language or financial system.
• Better Rates and Terms: Brokers often have established relationships with banks, allowing them to negotiate better interest rates, lower fees, or more favorable terms than you might secure on your own.
• Tailored Advice: Brokers provide personalized advice based on your financial profile, helping you structure the loan in a way that best suits your needs, including considerations for Olim or other special circumstances.
• Assistance with Pre-Approval: They can assist in getting pre-approved for a mortgage, an important step in the buying process that shows sellers you are a serious and qualified buyer.

Disadvantages of Using a Yoetz Mashkanataot

• Broker Fees: Brokers charge a fee for their services, typically up to 1% plus VAT of the mortgage amount. Ask the broker if they have a minimal transaction fee which could impact the actual percentage. While they often save you money through better rates, the upfront cost can be substantial.
• Potential Bias: Some brokers may be biased toward certain banks that offer them higher commissions, potentially impacting the impartiality of their advice. Always ensure your broker is independent and transparent about their affiliations.
• Lack of Direct Control: Working through a broker means you are somewhat removed from direct negotiations with the bank, which might limit your ability to influence terms.
• Not All Brokers Are Equal: The quality and professionalism of brokers can vary significantly. Choosing an inexperienced or untrustworthy broker can lead to poor advice or missed opportunities.
• Complex Fee Structures: Understanding the fee structures of brokers can be confusing. Some might charge upfront, while others receive their commission from the bank, which can create conflicts of interest.

Practical Tips for Using a Mortgage Broker

• Research and Recommendations: Choose a reputable broker with positive reviews, preferably recommended by friends, family, or online communities of Olim.
• Verify Independence: Ask the broker if they are independent or if they have exclusive arrangements with specific banks.
• Compare Broker Offers: Even if using a broker, compare their recommendations with direct offers from banks to ensure you’re getting the best deal.
• Negotiate the Broker’s Fee: Broker fees are often negotiable, so don’t hesitate to discuss the terms before signing a service agreement.
• Understand the Mortgage Terms: Always make sure you understand the terms and conditions of the mortgage offer, including interest rates, repayment terms, and any hidden fees.

• Land Registration – טאבו: After completing the purchase, the property must be registered in your name at the Land Registry Office – Tabu, the Israel Lands Authority, or the Housing Company, depending on the property’s status. Your lawyer handles this process.
• Registration Fees: Fees for registering the property vary but are generally minimal compared to other costs.

• Purchase Tax – מס רכישה: The tax rate varies based on your status:
  – First-time buyers: 0 – 5% of the purchase price, depending on the price tier of the home.
  – Second homes or investors: 8% and higher.
  – New Olim: Benefit from reduced purchase tax rates (0 – 10% depending on the purchase price) for a single home bought within seven years of receiving Aliyah benefits. See article below in the Practical Tips section.
• Realtor Fees: 2% plus VAT
• Legal Fees: 0.5 – 1% of the property price plus VAT.
• Mortgage Fees: Includes bank fees, valuation fees, and insurance.
• Notary Fees: If purchasing from a non-Israeli seller, documents might need notarization.

• Reduced Mas Rechisha – מס רכישה – Purchase Tax: Special rates apply, significantly lower than standard rates.
• Reduced Mortgage Rates: Special mortgage programs with lower interest rates.
• Exemptions from Various Fees: Some tax and administrative fees reductions may apply.
• Priority Assistance: Some communities offer additional benefits and assistance to Olim.

• Not Hiring a Real Estate Lawyer: Always use a lawyer specializing in Israeli real estate to protect your interests.
• Ignoring Property Checks: Skipping inspections can lead to costly repairs later.
• Misunderstanding the Total Cost: Budget for all fees, taxes, and possible renovations.
• Exchange Rate Fluctuations: If financing from abroad, currency fluctuations can impact your total cost.
• Overestimating Financing: Be advised that Israeli banks are conservative in their lending, and you may not receive the amount you were planning on.

• Negotiate Fees: Many fees are negotiable, including realtor and legal fees.
• Timing of Payments: Ensure your payment schedule aligns with your mortgage disbursement.
• Check Local Regulations: Verify building rights, future development plans, and any potential zoning issues.
• Understand Community Costs: Some properties, especially in new developments, come with Va’ad Bayit – וועד בית – property maintenance fees or communal charges for upkeep of shared public spaces.
• Some articles dealing with Home purchasing in Israel: Real Estate Tax, Protecting your Rights, Designers etc.
• Thank you to Gedaliah Borvick of My Israel Home and Yoni Hyman of Hyman Consulting & Investments LTD, yoni@hymanconsulting.co.il, for their help in creating this Guide