(Courtesy of Asden) Last week, we discussed what you should do when purchasing an apartment in Israel from abroad. This week we will focus on what not to do in that situation.
1. Don’t Assume Anything. “Real estate transactions work differently in every country. When buying or selling, it’s very important to understand the process, as things in Israel might work differently than the way you are used to. For example, many people assume they can apply for a standard 30-year mortgage, but there are a ton of factors that the bank considers when granting a mortgage, including age. Most banks only lend until the age 80-85, so somebody requesting a mortgage at 65 would probably only get a 15-20 year mortgage. Have a professional guide you and explain the differences. Matching the expectations to reality will make the process much more manageable and easy to deal with.”—Yair Givati, attorney
As an added interesting note though, “Israeli lenders limit their loan duration based on the ages of the borrower. They will want to see that the mortgage is paid off by the time the youngest borrower is 75-80 years old (exceptions case by case).”—Dani Schecter, Finance Specialist for Israeli Real Estate. But again, Don’t assume anything!
2. Don’t Rely on Google to Answer Legal or Tax Questions. “Advice not given by professionals could be not accurate and/or might be outdated. Choose a lawyer who can guide you and answer all of your specific questions as they come up.”—Ari Dobner, exchange expert
3. Don’t Buy on Paper Without Researching Your Builder. “Buying in a new construction project provides many advantages to buyers. It allows for greater flexibility for custom designing how your home will look and usually affords a price that takes into account the two or more years to completion the buyer needs to wait to take possession. Another advantage is that these new units are sold under strict compliance to the Sales Law (Homes)–1973, which also mandates guarantees and warranties from the builder to repair building defects. However, these warranties and guarantees are only as good as the builder backing them up. It behooves buyers to research their building company by seeing other projects they already built and by speaking with people who already own such units to hear of their experiences. Your attorney can also pull up information on the company from the company’s registrar to ascertain other information relating to the project or to the company’s solvency status in general.”—Gad Dishi, real estate attorney
4. Don’t Ever Sign a Zichron Devarim (MOU). “According to Israeli law, it could be a binding purchase agreement, which means it has to be reported to the Tax Authority within 30 days and purchase tax has to be paid within 60 days, even if the full purchase agreement has not been signed. In addition, signing such a binding document with a commitment to purchase could jeopardize the ability to negotiate with the other party.”—Yair Givati, Real Estate Attorney.
5. Don’t Wait Until You Are Ready to Sign Before Contacting a Mortgage Broker. “As mentioned, mortgages work a lot differently in Israel then in the U.S., and connecting with a broker from the onset will help you understand the process better and plan your purchase optimally. Getting a mortgage also takes time here, so understanding what you need earlier will help you be ready for the purchase when the time comes.”—Aryeh Strickoff, Mortgage Broker.
6. If Financing, Don’t Sign a Contract Before Getting Pre-Approved for a Mortgage. “There are generally no mortgage contingencies in Israel, which means that once you sign the purchase contract, you are committed to paying the full price whether you are approved for a mortgage or not.”—Aryeh Strickoff, Mortgage Broker.
7. Don’t Go to the Bank Directly for Your Mortgage. “Banks are businesses, and they look out for their own interests first. What they might present as a great deal, may have hidden risks and costs. Mortgages work differently here than in the U.S., so it’s best to speak with a mortgage broker first. They can present you with the options available and will guide you to securing the best option for you.”—Aryeh Strickoff, mortgage broker.
As a note for foreigners: “It is possible to apply and fund a mortgage loan without appearing in person in Israel, and Israeli mortgages are often offered in multiple currencies, including ILS, USD, EUR, GBP and CHF.”—Dani Schecter, finance specialist for Israeli real estate. You don’t need to be in the country, as long as you have the right team to guide you.
8. Don’t Request Your Local Bank to Convert Your Dollars to Shekels for You. “Many banks don’t even allow you to convert shekels, and the ones that do often charge enormous hidden markup fees on exchange rates.” Instead, make sure you use a reliable financial service provider that won’t hit you with hidden markup fees.—Ari Dobner, exchange expert.
9. Don’t Try to “Time the Market.” “Doing so will drive you crazy and most probably leave you full of doubts and regrets. Ideally, convert as much of the purchase price as possible immediately upon closing on the deal, so that adverse fluctuations in the shekel rates don’t cause your purchase to go way over budget.”—Ari Dobner, exchange expert. Additionally, “If you are buying from a builder, the payment schedule could likely take a few years, and the rates may change significantly anyway.”—Yair Givati, Attorney
10. Don’t Be Discouraged. “There are a lot of things to be concerned and cautious about, so buying, planning and designing a home in Israel might seem overwhelming at times. With the proper guidance and preparation though, it can be one of the most rewarding and best investments you will ever make.”—Annette Frommer, luxury interior designer.
There is a lot to know and consider when buying a property in Israel, and if you are coming from abroad, the process is even more challenging. Buying a home in Israel can be one of the greatest investments you will ever make, and we hate to see people’s fear of not knowing what to do prevent them from fulfilling their dream.
With this list, we hope you are at least more knowledgeable about the process than before and can avoid some of the many common mistakes we see at Asden. Moreover, we hope that you are now more confident that buying a home in Israel is really feasible and not so challenging, as long as you prepare, do your research and surround yourself with a team of experts who can guide you along the way.
If there is one thing you can take away from this article, it’s that you do not need to know everything about buying a property in Israel before you do so. What you do need is to work with experts in the field who do know everything about buying a property here. At Asden, our mindset is to use our experience and our network of great professionals to guide clients through the process of buying a home and ultimately achieve their dreams in Israel.
