Chapter 3:What Are the Typical Steps in Buying an Apartment in Israel?
Word of mouth, social media, publicized government auctions, real estate agents, the internet, and firsthand sightseeing can be good ways to look for an Israeli apartment. If you have a general idea of what you’re looking for, online sales listings can be a very helpful resource. Professional real estate agents can also be a valuable and useful resource to help you find an apartment. If working with a real estate agent, it is recommended to find a credible, professional real estate agent who advertises their track record, presents apartments to you transparently, has a good reputation, and doesn’t have any conflict of interest. Remember that real estate is like any other industry, in the sense that there can be high and less-than-stellar performers. In the context of a mortgage, pre-approval is when you go to a mortgage bank to find out how much of a loan you can get. The lender will examine all aspects of your financial picture and inform you of a maximum loan amount, typically taking 8-15 days. To fund an apartment purchase with a mortgage, the mortgage lender must have a representative branch in Israel. However, with many banks, the pre-approval stage can be completed online. There are many types of mortgages on the market, and the pre-approval stage is generally when you will indicate which kind you prefer, and under what terms (this can usually be changed later). Therefore, it is usually acceptable to complete this step immediately.
How to Initiate Communication With an Apartment Owner?
If necessary, your lawyer or real estate agent could be the one to make first contact with the seller on your behalf. If you are not sure if an apartment owner wants to sell their apartment, or if they want to sell to you, your lawyer can act in trust to find out while representing your interests.
Negotiation is a series of offers and counteroffers. When making an offer based on your research and budget, you may attach any time limit to the offer for the seller’s evaluation. If the seller does not accept your offer, there is a good chance they will come back with a counteroffer. You may then accept it, issue a counteroffer of your own, or walk away from the apartment. We advise to make the first price offer yourself while subtracting a substantial margin for negotiation purposes, because this will allow you to grasp the seller’s negotiating position most effectively.
Note that a seller might demand you sign a memorandum of understanding (MOU) during, or even before beginning the negotiation process. An MOU is a one-page document indicating your intention to enter into a binding legal contract in the future, and laying out certain basic conditions. Since a seller can sign multiple MOUs with multiple buyers, among other reasons, signing an MOU can often be quite risky. Additionally, it is important to remember that MOU’s are considered legally binding contracts in Israel. Since it is a very general contract and does not take specific circumstances into account, memorandums of understanding often fail to include important details about the real estate transaction, which buyers do not often anticipate.
What is a Warning Mark in Israeli Real Estate?
Appearing as a footnote in the LRB registry, warning marks are unique to Israeli land law. A warning mark represents an undertaking by a seller to make a transaction or, to refrain from making a transaction on a specific parcel. When a warning mark includes the name of a buyer, it is said to be “in your favor.” Because only one warning mark may be registered for an apartment at a time, a warning mark is a concrete step in the apartment buying process.
Warning marks serve two purposes. First, to warn and inform anyone interested in an apartment that there exists an obligation on the part of its owner to change the apartment’s ownership status, and second, to prevent a landowner who has promised to conduct a transaction with Buyer A from making a conflicting transaction with Buyer B without Buyer A’s consent or without obtaining an affirmative court directive. Registration of a warning mark in your favour can be timed with, or constitute a condition for, the signing of an agreement such as MOU or contract, or act as an intermediate step to assure a buyer’s cooperation with the terms in a contract.
Signing a contract:
Israeli law still dictates that real estate transactions must be made in writing, so once you have settled on the right apartment, negotiated a price, thought it over, and decided to buy the apartment, you will need to sign a purchasing contract with the buyer. A competent lawyer can write an airtight contract tailored to your specific situation, specifying the individual responsibilities shared by you and the seller, and will check and recheck all variables that could impact the sale before you commit to signing the agreement. Remember that due in part to the unique Israeli legal framework, remember that a property’s value is measured not only by its physical attributes but by the registration status and types of rights being purchased.
Appraisals and Israeli Real Estate:
Though not required to do so, certain buyers (particularly investors) find reason to conduct an independent appraisal before or after signing a purchase contract, while others are obliged to do so in the context of mortgage underwriting (discussed below). If the latter, some banks may include the cost of an appraisal in the mortgage package, while other banks will not.
Mortgage Underwriting:
During this step, after you have been pre-approved for a mortgage, the bank will make sure it is not too risky to issue its final authorization of the mortgage and transfer the requested money. Israeli banks require a signed purchase contract to begin with the underwriting process. During underwriting, your application file at the bank will move from the mortgage sales desk to the underwriting desk, which will thoroughly investigate and verify that the apartment is worth what you’ve agreed to pay for it, and verify your credit and collateral are adequate before then issuing (approving), amending, or denying your mortgage loan
Registry:
The registration of ownership rights in the apartment at the Land Registry Bureau is the last and final step in the sale transaction and is the step-through through which your rights to the apartment are confirmed. The date for registration of rights to the buyer is typically in the post-delivery phase of the possession of the apartment to the buyer, or in parallel with it after payment has been made to the seller. Occasionally, it is impossible to register rights at the LRB, such as in a when before architectural plans have been filed with the land registry. In such a case, the rights of a purchaser can be registered temporarily with an attorney, until it becomes possible to register them in the land registry, at which point the attorney is mandated to do so immediately