How To: Prepare For a Home-Buying Trip
This is the next installment in the series of “how to” articles that focus on various aspects of purchasing a home in Israel.
Here’s a common – and always heartwarming – scenario, which has played itself out many times over the past decade: I receive a phone call or email from a couple who share their lifelong dream of purchasing an apartment in Israel with the hope to someday make Aliyah or spend significant time in Israel upon retirement. They are now at the point in life where they feel mentally and financially prepared to take the plunge, and they would like to meet me and look at properties during their upcoming trip.
I respond with tremendous enthusiasm, as I get a vicarious thrill every time I receive this call, and begin focusing them on what should be done to prepare for the trip.
The first step is to create a wish list, which we call the “buyer’s profile,” that addresses issues such as location, bedroom count, amenities, whether they are willing to do renovations and/or to buy “on paper” in a new project, and finally we discuss budget. I explain the associated expenses (acquisition tax, lawyer, agent, etc.) that can add up to 15% above the purchase price. Once that conversation is finished, often the client asks what they can do to prepare for the trip.
I first recommend that they meet with a lawyer during their trip, to discuss legal aspects of purchasing a home in Israel and to fill out a power of attorney (POA) document, which permits the attorney to sign documents and transact on their behalf. I send names and contact information of several excellent real estate lawyers and suggest that they interview them and choose which person they feel most comfortable working with. Lawyers usually charge 1%+VAT of the purchase price.
I then recommend that, if they are considering taking a mortgage, they call mortgage brokers – I will send them a few recommendations – and choose one to work with. The mortgage broker will request financial documents to determine how much they will be able to borrow. Realistically, a credit-worthy overseas buyer can borrow up to 60% of the purchase price – 50% towards the purchase price and 10% towards closing costs (Israelis buying a first home can borrow more). Understanding your mortgage options prior to arriving in Israel helps you determine your budget; this is key information, as it will guide us in determining which apartments to include in our property search. Once in Israel, you will meet the mortgage broker to sign a POA, allowing her/him to transact on your behalf. Mortgage brokers usually charge about 1% to 1.25% + VAT of the mortgage amount. You should inquire about all associated charges, as many banks charge a .25% registration fee plus there can be additional miscellaneous items that can cost a few more shekels. Also, find out whether they have a minimum charge.
Finally, I recommend that they talk to a foreign exchange professional who can help them transfer funds and convert them to shekels. In addition, the forex company can make all payments on the client’s behalf, as most banks in Israel can be challenging to work with. Forex companies usually charge .5% for their services. And yes, you will also need to meet with the forex professional to sign documents allowing them to transact on your behalf.
Don’t worry if you don’t address all these matters prior to your flight, as we can help you set up appointments after you have arrived. However, the more leg work you do before your trip, the better prepared you will be upon your arrival.
Disclaimer: The article above is for informational purposes only and should not be construed to come in place of using legal counsel and hiring professionals to carry out all due diligence, including reviewing all legal and planning issues, prior to purchasing an apartment.
Gedaliah Borvick is the founder of My Israel Home (www.myisraelhome.com), a real estate agency focused on helping people from abroad buy and sell homes in Israel. To sign up for his monthly market updates, contact him at email@example.com.