You are finally fulfilling your dream of buying a home in Israel. You found the right apartment, negotiated the price, and now have a handshake with the seller. What has to be done before the contract gets signed?
Attorney. Retain a lawyer who will negotiate the terms of the contract and also do a title search to ensure there are no liens against the property. If you are overseas, your lawyer will send you a “Power of Attorney” document for you to sign and get certified by a special international notary called an apostille. This document gives your lawyer the power to sign the contract on your behalf.
Different System. Unlike home purchases overseas, where title is transferred at the “closing” when you receive the keys, in Israel the magic legal moment when buyers gain an ownership interest is at contract signing. Accordingly, all due diligence must be completed prior to contract execution.
Funds. You will need to send money to cover the down payment and closing costs that are due soon after contract signing, such as the acquisition tax (which is usually payable within 60 days of contract execution), and your lawyer’s and agent’s fees. You can wire funds to your lawyer’s escrow account, to your Israeli bank account, or to a forex company that will transfer your dollars into shekels and make all the initial payments on your behalf.
Inspection. When buying an existing property, we highly recommend that you hire an engineer to inspect the premises and ascertain that there are no structural issues with the property.
Financing. If you plan to get a mortgage, get pre-approved. If you are going to have a sizable mortgage, it is advised to do an appraisal before contract signing to confirm that the appraised value is similar to the purchase price.
Designer. If you are going to do any work on the apartment, we recommend that you retain a designer to check the premises and give you a ballpark figure of costs to finish the apartment to your expectations. If you plan to do work that would require a building permit – such as expanding the apartment’s footprint – you should hire a zoning specialist to review plans and the zoning to ascertain that your expectations match reality.
Future Obligations. Make sure that you understand your future financial obligations, such as your monthly condo fees, or “vaad bayit,” and property taxes, known as “arnona.”
Property Manager. If the property will be vacant for long stretches of time between visits, you should hire a property manager to check your apartment on a regular basis. The property manager’s fee should be ascertained prior to contract. Parenthetically, if you are buying the property as an investment, the property manager will guide you regarding appliances and furniture. Short-term rentals must be fully furnished but a long-term rental can be given bare, as the tenant will bring their own appliances and furniture. In addition, long-term renters pay the arnona and vaad bayit fees, so your income will be net.
You Are Not Alone. There is a lot to be done from the time you have a handshake until you sign the contract, but don’t despair. We have a tremendous network of seasoned, honest English-speaking real estate professionals – attorneys, engineers, bankers, mortgage brokers, forex specialists, property managers, designers, and architects – who will help you complete your due diligence. Once all the items on the list are checked off, you are ready to move forward and sign the purchase contract.
Gedaliah Borvick is the founder of My Israel Home (www.myisraelhome.com), a real estate agency focused on helping people from abroad buy and sell homes in Israel. To sign up for his monthly market updates, you may contact him at gborvick@gmail.com.