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Successfully Purchasing Real Estate in Israel: The Purchasing Process (Part 5)

Navigate Israel's unique property buying process: Learn about the binding Promise to Purchase. Dive deeper into our guide for smart purchasing in Israel.

The Promise to Purchase

The steps of the purchase process in Israel are different from those in the US, so it is very important not to sign any document before discussing the transaction with your lawyer.

When you buy a property in the US, the first step is usually to sign and send the owner an offer to purchase. This document contains conditions precedent that allow you to cancel the contract depending on your financing plan, if, for example, the bank refuses to grant you a loan.

In Israel, the process is totally different! Once you have decided to buy a property, you do not have to sign an offer to purchase. However, you should be very careful, because the seller (or his real estate agent) may ask you to sign a Promise to Purchase (Zichron Dvarim).

The problem? In Israel, there are no conditions precedent, which means that once a Promise to Purchase is signed you are committed to buying the property at the price detailed in the document, even if flaws are discovered in the property after signing. Therefore, it is crucial to pay close attention to anything you sign - the Promise to Purchase is a legally binding document, even if it is just a piece of paper with a few handwritten sentences, signed by the seller and the buyer. Furthermore, once this document is signed it must be declared and will be subject to taxes.

Another important thing you should know is that there is no need to sign a Promise to Purchase or any other offer when buying a property, because the contract already contains all the information necessary for the transaction. In fact, the final deeds of sale are already signed by the parties when the purchase contract is signed, which also does not include a suspensive clause related to the loan. These deeds will need to be registered once the payment and handover of the keys have taken place.

When you buy property through a real estate project under construction from a developer (Kablan), the procedures may be different than with a classic purchase. In these cases it is very common to be asked to sign an offer to purchase or a promise to purchase, along with a deposit, while waiting for the purchase contract to be finalized. In these situations it is crucial to consult a real estate lawyer to ensure that you are protected from potential risks. Your lawyer will be able to ensure that the document you sign is voidable, that your deposit is placed in escrow and refundable under any circumstances, and that you are not subject to any unexpected tax liabilities.

Don't forget! Since there is no suspensive clause in Israel regarding financing, you must make sure that your mortgage has been authorized before signing a contract!

The steps of the purchase process in Israel are different from those in the US, so it is very important not to sign any document before discussing the transaction with your lawyer

The Deed of Sale

Once the negotiations are over, it is up to your lawyer to prepare the compromise sale based on the agreements made between you and the seller.

The Deed of Sale in Israel includes the details of the property as they appear in the Israeli land register (Tabu). The real estate contract in Israel also details how payments will be made and staggered according to an agreed upon schedule. It may also include consequences for failure to comply with any of the seller's commitments regarding the property, which may affect the payment schedule and the compensation required as a result. Other aspects of the agreement to sell in Israel may include issues that the seller must resolve, such as unpaid fees related to the municipality or utility companies.

The signing of the sales agreement will usually take place between 1-2 weeks following the negotiations, at the owner's lawyer's office, and usually in the presence of the realtor (who eagerly awaits his stamp once the contract is signed). Both parties then sign the contract as well as numerous documents related to the taxation of the property, such as the purchase tax (mas rechisha) and the capital gains tax (Mas Shevah). The seller also signs documents to ensure that there are no hidden debts or problems with the property, while the buyer declares that he has seen the apartment and is buying it "as is". The parties also sign a warning notice (Hearat Azhara) and an irrevocable power of attorney (Yipui Koach Bilti Chozer). In addition, your lawyer will register a note in the land registry indicating that you are in the process of purchasing the property, so that the seller cannot sell the property to anyone else. Finally, the buyer pays the down payment for the property by giving a bank check to the seller who attests the receipt of this payment by signing a confirmation of receipt.

In Israel, a property sale is typically recorded by one document, as is the case in the United States, i.e. you officially become the owner as soon as the deed of sale is signed at the lawyer's office.

Taxes, Charges: Who Pays What?

The various costs associated with the real estate transaction are typically divided equally between the buyer and seller, according to the terms specified in the sales documents.

Before your planned date of entry to the property, you must, together with the seller, sort out the transfer of the various taxes on the property, including water, gas, electricity, and the property tax (Arnona). Some of these services can be done online, while others require an appointment and the presence of both you and the seller. This may also differ depending on the city, as in different locations these services are offered by different companies.

In order to transfer electricity, water and gas services, you need to report the reading on the relevant meters on the date of entry to the property. This can also be done a few days in advance if the property is empty and you have agreed with the seller. In any case, you must specify the date of entry to the property and enclose a copy of your contract.

The property tax is split between you and the seller based on the date of entry. Since the property tax is paid every two months, the seller may have already paid the first month after your arrival. The seller will receive a refund from City Hall and it will be your responsibility to pay this month.

Concerning the condominium charges, the seller is obliged to pay all fees until your date of entry to the property. 

Have you moved into your new property? Mazal Tov! Don't forget to go to the government website to update your address. It's important to do this because you will need to receive an updated slip (appendix, "Sefach") for your ID card with your new address.

Update Your Address

You are now ready to purchase property in Israel. For more information on each step of the buying process, visit our blog! There you can read many articles about selling, buying and the Israeli real estate market in general.

The Immo Israel team is at your service for any questions or queries, just fill in our contact form and we'll be sure to help.

See you soon in your new home in Israel!

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