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If you are buying your first apartment in Israel, you may find that the process is slightly different than what you would expect in your home town. This guide provides general information about the process of buying an Israeli apartment and explains your options and legal rights at each step of the way.
Please note that since buying a house is a big expense, we recommend that you consult with a professional before making any critical decisions.
1. Identifying, Choosing and Evaluating the Apartment
There are many sites that provide both new and second hand apartments. As expected, some of them have a higher turnaround of apartment inventory. Be careful who you deal with and make sure, when dealing with brokers, that they are licensed properly.
Considerations when choosing your apartment:
- Budget
- School district
- Neighborhood maturity (are the facilities in the neighborhood up and running, is the population older/younger, etc.)
- Proximity to religious and social centers
- Physical appearance: When considering a new apartment you may want to consider a building engineer and sometimes an architect, to review the plans and technical specifications. If you are buying a new apartment, you may want to make changes to the layout (as soon as possible in the process).
- Zoning: Residential vs. commercial; future expectations; seller issued declaration.
- Legal status: Who has title to the apartment, any outstanding liens; seller issued declaration.
2. Negotiation
One word of advice: Prepare in advance. Know the market and the neighborhood. Understand the pros and cons of the apartment and remember – not every apartment is a good fit for you. If the price is not right, be ready to walk away. You will find other apartments! With that said, don’t be too stubborn – don’t let the seller feel you are not budging because that will put him on the defensive end.
3. Zichron Devarim
Today, many lawyers recommend not signing a Zichron Devarim – a one page document that summarizes the essential terms of the agreement, because of its general legal obligations. However, this may be a requirement (in today’s seller’s market), in order to reserve the apartment and take it off the market.
When purchasing a new apartment, one is usually required to pay an application fee to the builder, in order to reserve the apartment until the contract is prepared.
4. Financing the Deal
The first step in applying for a mortgage is determining how much you need. Typically, additional costs such as upgrades, improvements and renovations can add 5%-15%.
If you are currently residing in the U.S., you will need to show prior year tax returns, e.g. W2 as well as credit history reports.
Typically banks are willing to lend up to 60% of the balance without EMI, and up to 85% with EMI.
Apply for “Ishur Ekroni”:
This is general mortgage approval from the bank. You will need to provide all of the documentation at this phase, and the bank will give you a general approval indicating the amount it is willing to lend.
Generally, it takes 3-10 days to obtain this approval, and it is valid for three months (interest rate for 12 days).
If the three month period expires before you take the mortgage, then you will need to update the application form.
5. Signing a Contract with the Seller:
Note: Schedule this in advance, so that the contract is signed with the seller immediately after the Ishur Ekroni is received.
HeArat Azhara: Once the contract is signed, a note must be added to the deed to indicate your rights to the property. This is a note in the land registry (or Minhal) advising any prospective purchaser that there is a sales contract for this apartment and the sale is in progress.
Like any other substantial contract, we recommend you consult with a lawyer to cover the legal aspects of the deal.
6. Finalizing the Loan – Mashkanta:
Return to the bank and open a file (this cannot be done without a signed contract finalizing the sale of the home).
For new apartments, the bank only requires a copy of the contract and approval from the seller. For second hand apartments, the bank will also require proof of registration (either Minhal or Tabu).
The bank prepares your file and notifies you within a few days that the loan contract is ready for signature.
7. Registration
If you already have a lawyer, he should handle the registration of the apartment and transfer the property deed (apartment) under your name; Remove HeArat Azhara.
8. Tax Payment:
Several types of taxes and fees may be associated with your new apartment that you should keep in mind:
Property acquisition tax – Mas Rechisha: a progressive/graduate tax, which means that it increases with the price of the apartment. Generally payable within 50 days of signing the contract for the purchase of the property.
Arnona – city taxes: Determined by the size of your apartment and its location. In more exclusive areas of a given city, the Arnona is usually higher.
Maintenance – property maintenance or Vaad Bait: Usually a requirement in apartment buildings. This fee may become fairly expensive if your building requires an external management company or if it has many pending repairs. You should consult with the Vaad Bait prior to signing your contract.
Note: Prior to transferring the apartment, make sure the previous tenant paid all his debt, taxes and utility bills.
9. Move In and Enjoy!
Although this may seem to be a simple and fun process, remember your legal rights, especially if this is a new apartment. You have certain time periods determined by law in which to inspect your apartment and ask the developer to fix any problems. Make sure to take advantage of these time periods before your rights expire.
