Buying an apartment in Israel is an incredibly special opportunity and can be a unique and rewarding experience. For many though, it can also seem scary or overwhelming, especially if buying property from abroad. At Asden, we have had the opportunity of speaking to many Jewish families and individuals from abroad who are in the process of buying a home in Jerusalem and learn about their experiences and some of their preconceived notions. Too often we see fear and hesitation, rooted in a lack of knowledge, become a roadblock for families looking to turn their Zionist dream into a reality. As a service to our clients, we often help them engage a team of professionals who will guide them through the various aspects of the process. When you have a trusted team of advisors by your side, the experience becomes much less scary. In order to help out our future clients and anyone looking to buy a home in Israel, we’ve gone ahead and reached out to a few of our trusted service provides in the fields of mortgage consultation, legal, money transfer experts and interior designers to ask what advice they can give for foreigners looking to buy property in Israel. We’ve summarized their most important points in the ten do’s and don’ts below.
Top 10 Do’s
1. Surround Yourself With A Professional Team Of Experts Who Will Advocate On Your Behalf. “You are buying a home, and may be doing so from thousands of miles away. You want to make sure to surround yourself with a team of experts (lawyer, agent, mortgage broker, insurance agent, interior designer, etc.) who will be there for you and can guide you through the process so it will be all done smoothly and with as little headaches and problems as possible. Make sure you find people who are available and can answer questions for you as they arise.” – Yair Givati, Real Estate Attorney.
2. Speak To A Lawyer Well In Advance. “Consulting with a lawyer in advance and structuring your purchase properly can potentially save you hundreds of thousands of shekels. A lawyer can also handle the title search, reporting requirements to the tax authorities and they understand how to navigate contractual issues to protect your best interests. In addition to reviewing your contract and filing tax forms, having a good lawyer from the beginning will help you coordinate the efforts of all professionals involved in the project and help you deal and decipher new information as it arises.” – Gad Dishi, Real Estate Attorney.
3. Do Your Research. “If you are planning on making Aliyah, you may be eligible for a number of rights if you plan ahead of time.” – Ari Dobner, Exchange Expert.
4. “Only Sign Documents That Have Been Reviewed By A Lawyer.” – Ari Dobner, Exchange Expert. This one may be self-explanatory. Trust the experts and the experts only. Once you sign a legally binding document you cannot go back.
5. Know The Different Mortgage Options Available To You. “There are a number of different ways to construct your mortgage, and each of them has their advantages and disadvantages. If you’re coming from the US, you may be more familiar with the ‘fixed rate’, but in Israel that isn’t necessarily the best option. A mortgage broker can guide you and help you find the best option for your finances and situation.” – Aryeh Strickoff, Mortgage Broker.
6. Find Out The Appraised Value Of The Property Before Signing. “The amount the bank lends to you is based on the appraisal value of the property, not the purchase price. If the appraisal value is lower than you expected, you’ll need a larger then expected down payment.” – Aryeh Strickoff, Mortgage Broker. “The appraisal value will also tell you if you are getting a good deal or not based on other homes in the area. And lastly, appraising the property will also let you know if there are any building violations. For example, if your kitchen is built in an area that was not included in the permit, you can find yourself needing to rip out your kitchen and then needing to redesign the entire unit. But all this can be avoided if you get an appraisal first!” – Gad Dishi, Real Estate Attorney.
7. Use A Reliable Financial Service Provider For Transactions. “It may go without saying, but the first step we recommend is opening up a bank account in Israel if you don’t already have one. You will need to pay contractors stubs and cover various costs that cannot be paid via wire transfer. For the bulk of your charges, it’s important to have a reliable and licenced financial advisor who can make sure you don’t lose more money than you need to on transactions or exchange rates. Usually, promises of “no fees” or “great rates” from banks or lending companies are code words for hidden markups.” – Ari Dobner, Exchange Expert.
8. Consult With Your Interior Designer Beforehand. “If you’re building or developing your apartment, it’s important to consult with an interior designer to walk you through all the stages of the construction process, and ensure that you are receiving everything the builder or developer promised. Builders here also have different standards and may have secret building costs or charges that foreigners don’t understand. Working with a good interior designer can save you lots of money and aggravation. Designers can help you figure out what you may want or need, and enable you to build a realistic budget plan before you begin. ” – Annette Frommer, Luxury Interior Designer.
“They can advise you on what items to bring or not bring over from overseas and advise you on what will fit in your new home. With a good interior designer you can plan out what you want your home to look like beforehand, have a clear understanding of how to get there, and will help you overcome any obstacles along the way.” –Shana Sunshine, Interior Designer.
9. Do Get Clear On All Your Rights For Designing our Apartment. “Understanding what is involved in designing your home and what exactly you are getting will help you figure out what you may want or need to upgrade. This also helps to come up with a budget plan.” – Shana Sunshine, Interior Designer
10. Do Buy A Home In Israel. “Besides for being a great financial investment, buying a Jewish home connects you to thousands of years of Jewish heritage culture, and traditions.” – Annette Frommer, Luxury Interior Designer.
Top 10 DON’Ts
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 to 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 8-85, 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 repairs building defects. However, these warranties and guaranties 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 US, 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 US, 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 most special and 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 then 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.