Crossing borders, closing deals

While both Israel and America have vibrant property markets, their real estate dealings present fascinating contrasts. If you’re contemplating purchasing a residence in the Holy Land, it’s essential to understand the legal, cultural, and market-based distinctions that prospective buyers must navigate.

Mazal tov, you’ve found a property in Israel that you want to purchase! In most cases, you will execute a type of preliminary agreement for the purchase. For a pre-owned property, you will probably be asked to sign a zichron devarim, a memorandum of understanding (MOU).

If you’re purchasing a property where construction has not yet begun (called “on paper”– see more below), you’ll file a tofes harshama, a registration document indicating your intention to buy the property. While these agreements may appear routine, they are binding documents that carry legal and financial ramifications and should be examined by a professional, such as those at The Getter Group, before you place your signature on them.

For instance, if you sign a zichron devarim and subsequently have second thoughts about the acquisition, you may have to pay a penalty or forfeit the amount specified in the document. A tofes harshama can also have legal ramifications, but the details are too complex to elaborate upon in this article.

Simply remember to have these forms examined by an unbiased, professional third party (a lawyer or a buyer’s advocate, not the seller’s attorney!), and you should be fine. A recent case we encountered at The Getter Group illustrates the necessity of having these forms examined beforehand.

Someone was planning to buy an apartment in a completed, brand-new building and was going to sign an agreement on it, but friends urged him to seek a second opinion. When we researched the project, we discovered that although residents were already living in the building, the structure had still not received a certificate of occupancy. We urged him not to sign. He followed our advice, saving him from potentially difficult long-term legal issues and resale troubles.

In English, the expression “on paper” typically suggests that something is theoretical (such as, “They’re a strong team … on paper”). In Israel, “on paper” indicates that a property is genuine and exists, but it’s not constructed (or completed) yet.

Purchasing a residence like this (on paper) is a notion that doesn’t exist in America, at least not in the same way it does in Israel. In America, you can purchase a residence that’s already constructed or you could buy a new residence that’s under construction. You could get one that the builder designs or you could hire an architect and customize everything.

In Israel, there’s a notion called “purchasing on paper.” What this typically refers to is purchasing a residence that’s still in the planning phases by the developer. One can customize certain aspects of a residence that’s on paper, but the external structure is designed and determined by the developer.

Purchasers typically get a better price for apartments on paper because the residence hasn’t been constructed yet and will take several years (typically four or five) to reach completion. You will begin paying for this property as soon as you sign the contract, even though it won’t be ready for immediate occupancy.

There are many benefits to purchasing on paper. They include being able to move into something completely new, often having the opportunity to customize the layout of the apartment; getting to tailor many fixtures and finishings to your preference; being able to monitor the progress of your residence under development; getting a better price in most circumstances; purchasing as a group with other like-minded people in some cases; and having your choice of apartments if you get “in” on the project early enough (such as a penthouse or garden apartment, particular views, and so on).

We have seen these advantages play out on many occasions. One client was interested in purchasing property in a particular development in Beit Shemesh. When we went to visit the site, we saw that another building was about to be built that would have much better views than those that were already for sale.

We negotiated with the developer to secure priority access to apartments in the building that hadn’t yet been built. Our client was happy to wait a bit longer to own an apartment with superior views and better airflow.

In another case, a client wanted to change the layout of the apartment to include another bedroom, which would make the apartment more useful and more valuable. We were able to work with the Residential Changes Committee and get that change made for him, even though the property he purchased was technically supposed to be only two bedrooms.

And just last week, we had a client who desperately wanted a window overlooking a certain view. The building was not designed to have windows in that part of the structure, but because the client had joined the project early enough and because of our connections with the developer, we were able to get her prized window written into the plans.

The primary disadvantage of purchasing on paper is that sometimes there are delays. Additionally, one can’t always predict how a new neighborhood, development, or housing project will develop in terms of neighbors, atmosphere, and “feel.” Nevertheless, the benefits are numerous, and a majority of our clients choose this option.

In Israel, because housing demand is consistently high, purchasing without an inspection is quite standard. Buyers are often discouraged from having inspections done and are assured that everything is “fine” (“hakol beseder, hakol beseder”). When purchasing a pre-owned apartment in Israel, it is usually acceptable to forgo the inspection.

You don’t really need to get an engineer into pre-owned properties. That doesn’t mean there aren’t potential issues or genuine problems. It’s just that an inspection won’t get you anywhere. The seller won’t modify the lease, you won’t get a discount, you won’t get the problems resolved, and so on. In Israel, when you purchase pre-owned, you purchase as is. In short, what you see is what you get.

However, there are circumstances when you should insist on an inspection. If, for instance, you are looking to purchase a newly renovated, beautiful pre-owned apartment, an inspection is wise. First, the cost of that renovation is something you’re essentially paying for when you purchase the apartment, and you want to make sure it’s worth the money. Second, you want to make sure that the “stunning renovation” wasn’t hastily done to conceal much larger issues.

When it comes to new construction (i.e., “on paper”), we strongly encourage insisting on an inspection. Many things require checking, such as the quality and soundness of construction, the safety of the building, and the adherence to code. An inspector will also make sure that the utilities and fixtures were installed properly. So in this case, insist on an inspection and have one done properly and by your own inspector!

We recently had a case in which we insisted that the developer allow an independent inspector into a client’s property when the developer claimed that everything was completed and ready for occupancy. The inspection revealed that many things were, in fact, not ready for occupancy, such as the windows, which had not been properly sealed. We insisted that the developer take care of those things before the client officially acquired the property.

The journey to home ownership in Israel presents unique challenges that potential buyers need to be aware of. Of course, the opportunities are unmatched: living in the homeland of the Jewish people and establishing your family’s legacy in the Land.

Ultimately, wherever you purchase, it’s crucial to conduct thorough research, seek professional guidance, and be aware of the nuances. When you do your due diligence, you can approach your residential purchase with confidence and make informed decisions that align with your values, goals, and preferences. If you want to ensure that your needs are met and your rights are protected in a way that empowers you, enlist The Getter Group to help!

The Getter Group specializes in peace of mind for foreign buyers, ensuring that they maximize opportunities and protections throughout the property purchase journey. Contact The Getter Group to find out how we can bridge your journey home.