Buying a Second-Hand Property in Israel: What You Should Know
Some aspects of the real estate system in Israel are… unique. Educating yourself on the system will help you take control of the process and make an informed decision regarding your purchase. There are two main categories of residential purchases in Israel: new construction and previously owned properties (“second-hand”).
Buying an existing property has the advantage of being able to see the finished property and receive possession sooner. Contracts for second-hand properties have three stages: Offer, Due Diligence & Signing, and Transfer of Rights.
In Israel, offers are generally verbal and non-binding. Offers should include the main business terms such as price, payment schedule and date of possession. Possession dates and payment plans are negotiable. A typical down payment is 20% of the contract price and payments are made over time beginning from the signing date until possession (generally a period of 3-6 months). Your rights are protected by a lien on the property until you receive possession. It is never advisable to sign a memorandum of understanding or “zichron dvarim” as this is considered as binding contract by the courts and can lock you into transaction before you have performed your due diligence.
In Israel, all due diligence is performed before signing and the signed contract is 100% binding. Due diligence includes negotiating the contract draft, title search, financing approval, property appraisal, engineering inspection and planning and zoning checks. There are no title search or escrow companies but rather your lawyer performs those functions so make sure you only work with an experienced lawyer who specializes in real estate. Remember, there are no contingencies for financing and inspection and these checks need to be performed before you sign. Make sure you have mortgage approval not only based on your financial situation, but also for the specific property that you are buying. Once you are satisfied with the terms of the deal, the contract is signed.
In Israel, rights are transferred within a few months after the transfer of possession. Make sure you get a copy of the title deed in your name for your records.
The name of the Israeli property game is to build yourself a good team of professionals to help you gather the information you need to make a solid, informed decision. These can include a real estate broker, attorney, mortgage broker, appraiser, designer, banker, or architect. Once you have all the facts at your fingertips, you will have the confidence to take that next step in making the dream of owning property in Israel come true.
Adv. Jane Olman is a partner at Rachlin-Olman Law Offices, specializing in real estate, and offers full-service legal representation in her boutique Jerusalem law firm for transactions anywhere in the country. She can be reached at firstname.lastname@example.org or +972 2 625 1522