Every year, I see more and more Americans buying homes in Israel. Many of them have moved here; others simply want their own place to use on visits, or they buy as an investment to diversify their portfolio. Many are planning to take up permanent residence down the road. Buying an apartment in Israel can be a thrilling yet daunting experience, as you find yourself out of your “comfort zone,” confronted with many challenges stemming from language and cultural differences, in addition to a different legal system. What should a potential buyer be aware of when embarking on this path?
Israel Real Estate by the Numbers
Floors: In the U.S., if you look at an apartment on the third floor, you’re standing on the third floor. Obvious, right? Not so simple. Here in Israel, the third floor apartment is on the fourth floor. The first floor is called “zero,” or “karka” (ground), the second floor is called “one,” and so on.
Meters: Our elementary school teachers were right when they told us the world is moving to the metric system. Here’s the quick calculation: One square meter equals 10.76 square feet. Therefore, a 100-sm apartment is 1,076 square feet. (A square meter should not be confused with a linear meter which equals 3.28 feet.)
Dunam: It sounds like a Hebrew word, but dunam is actually a unit of land area used during the Ottoman era. A dunam equals 1,000 square meters, equaling 10,764 sf, or just about a quarter of an acre. Dunam is an important word for people who are buying land or a single family home to redevelop.
Room Count: In New York, where I was an investment sales broker for many years, a three-room apartment had one bedroom, and a four-room apartment had two bedrooms. In Israel, a three-room apartment has two bedrooms, and a four-room apartment has three bedrooms. The kitchen, mirpeset (porch), basement, and attic don’t figure in the room count, although they offer tremendous development upside.
Arnona: Municipal taxes (like real estate taxes in the U.S.) must be paid on every property. Unlike in the U.S., however, the tenant, not the landlord, pays the arnona. This is done for one simple reason: The tenant’s status affects the tax rate. For example, reductions are given to retirees, soldiers, the disabled, single-parent families, and in some cases, for residents with very low salaries. The annual arnona rate ranges from 34 shekels to over 100 shekels per square meter, depending on the municipality. In Jerusalem, the average arnona rate in or near the center of town is about 90 shekels per square meter. So a 100-square meter apartment’s annual arnona bill would be 9,900 NIS ($2,600).
Before Signing on the Dotted Line
Years ago, when I wanted to buy a house in New Jersey, the agent told me to submit my offer in the form of a signed contract. She explained that my attorney retained the right to void the contract and craft a new agreement during a period of days following signing. Well, let me tell you a fact of life in Israel: Do not sign anything – not even an informal letter of intent jotted down on the back of a napkin! – without your attorney’s approval. If a document has your signature, it can cause you serious problems.
Debbie Rosen-Solow, a real estate attorney with offices in Beit Shemesh and Ra’anana, explains that – as opposed to most other countries, where the majority of legal implications occur upon closing – in Israel, the privileges and obligations are shifted from the seller to the buyer upon signing a contract. One implication is that the acquisition tax has to be paid within 40 days of signing, even if the closing has not yet taken place.
Another fact of Israeli law is that there is no post-contract grace period to allow purchasers to perform due diligence and obtain mortgages. It is therefore crucial that all legal and financial research is performed prior to signing any written agreement.
Another important fact is the lack of title insurance in Israel. Consequently, if conflicting title claims or unpaid mortgages or liens against the property crop up, they may become the buyer’s problem. I know of a case where there were two ownership claims; it took many years and large legal bills to resolve the dispute. In another transaction, the attorney missed a title issue, which prohibited the buyer from obtaining a mortgage. I share these stories to impress upon you that, in Israel, a good lawyer is worth her weight in gold.
Many Americans have gone through the real estate process in Israel, complex as it is, and are proud owners of their own homes. If this is something you want to do, the key is educating yourself and finding trusted experts who can help you avoid potential pitfalls and make your home-buying process a positive experience.
Gedaliah Borvick is the founder of My Israel Home, a real estate agency helping people from abroad buy and sell homes in Israel. Gedaliah will be running workshops in Silver Spring on January 16 and in Baltimore on January 17; for more information, contact him at gborvick@myisraelhome.com. To read previous articles, visit his blog at www.myisraelhome.com.
Related Articles: