Navigating Real Estate Differences: Israel vs The United States

Givati Law

Israel vs USA

When it comes to buying real estate, the procedures and systems can vary significantly from one country to another. When it comes to Israel vs United States, this is particularly evident in terms of closing dates, contingencies, financing processes, and the role of a real estate attorney and other various professionals involved in the transaction. In this article we will delve into each of these items and explain the differences so you can be more knowledgeable and better prepared to navigate the buying process in Israel. 

Closing Dates and Possession

In the United States, the closing date is the defining date of the transaction, when you make the final and significant payment as well as taking possession. It typically follows a period of due diligence, inspections, and financing arrangements. Conversely, in Israel, the defining date of the transaction is the day you sign the purchase agreement, even if the payment schedule is spread over a long period of time and possession is transferred a few years down the line (for example when buying in a new construction). 

Contingencies

US buyers benefit from built-in contingencies as part of the process included in the purchase contract itself, providing time for inspections and financing arrangements among others, after the signing of the purchase agreement. In contrast, in Israeli transactions there is no room for contingencies in the contract, and therefore all due diligence and inspections must take place prior to signing of the contract. Otherwise, the apartment is purchased AS-IS. So if for example you will not be eligible for financing, you’ll have to find another source to make the payments. Additionally, if the contract does not specify items that must be fixed by the seller,  the seller is not responsible to fix them.  

Role of a Real Estate Attorney

In the US, the closing process is mostly facilitated by escrow companies, ensuring legal compliance and transactional integrity. The role of your attorney is to transfer title, and In some states an attorney is not even involved in the transaction. However, in Israel, there are no title insurances or escrow companies at all. The real estate attorneys take on a more prominent role in the buying process, handling among others things, tasks typically managed by escrow entities and title insurances. The real estate attorney has the most important and significant role in the transaction as far as the buyer is concerned, protecting your rights and a smooth transaction. The lawyer will also be involved in the due diligence process, managing/negotiating the contract, payments, taxes, possession and title transfer. Title insurance, commonly used in the US, does not exist in Israel.

Financing & Mortgage Brokers

In the US, mortgage rates are publicly available, allowing buyers to compare and choose the best option for their needs. Mortgage brokers are typically compensated by the bank, which may influence their recommendations. In Israel, mortgage rates are not as transparent, to the extent that different branches of the same bank could quote you different rates. In addition, different banks might have different avenues and paths for their mortgages, making it challenging, maybe even impossible, for buyers to compare options effectively. That’s where a good mortgage broker comes into place, helping you navigate the different options, comparing the options, and negotiating a better rate, by knowing the different options available. Additionally, in Israel, the buyers pay the mortgage broker directly, aligning their interests more closely with the buyer’s needs.

Agents and Payment Structures

In the US, an agent will only ever represent one side (either the buyer or seller), and fees will vary – depending on whether they are representing the buyer or seller. Agent fees will typically be paid by the seller only. Whereas in Israel, real estate agents can technically represent both the buyer and the seller, and both parties pay the agent. Agents in Israel usually charge 2% of the property price (negotiable) + tax for either transaction. For rentals, agents charge one month’s rent + tax for leases of one year or more, or 10% of the total amount paid for short-term leases. Full payment of the commission is due upon the signing of a binding agreement, as that’s the defining date of the transaction, as mentioned above.

Understanding these intricacies is essential for navigating the real estate landscape when looking to purchase in Israel. It’s also crucial to seek advice from relevant professionals such as lawyers, agents, mortgage brokers, appraisers, engineers, and architects to ensure comprehensive understanding and informed decision-making throughout the transaction process. 

To learn more about the buying process in Israel, download our 10-step guide here: https://mailchi.mp/2b220a36d8b9/10-step-guide-download

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