Buying costs are low in Israel
October 24, 2018
How high are realtors´ and lawyers´ fees in Israel? What about other property purchase costs?
|Registration Fee||0.20% (+ 18% VAT)||buyer|
|Legal Fee||0.50% - 1%
0.50% - 1%
|Costs paid by buyer||5.736% - 6.236%|
|Costs paid by seller||0.50% - 1%|
|ROUNDTRIP TRANSACTION COSTS||6.236% - 7.236%|
| See Footnotes
Source: Global Property Guide
THE PROCESS OF BUYING PROPERTY
The buyer must first obtain a land registration extract from the Land Registration Office to ascertain the ownership of the property. The buyer must also check the building rights of the property from Municipal records. After establishing the ownership and settling of any legal encumbrances, the contracting parties must execute a sale agreement.
The written contract must contain the following essential details: description of the property, names of the contracting parties, agreed price, and nature of the transaction. An agreement where one of the essential details is omitted is considered invalid. However, signature of the contracting parties is not needed to render the agreement valid.
The sale agreement must be reported to tax authorities for payment of related taxes. After tax payment and receiving tax clearance, the transaction must be registered at the Regional Land Registry office.
Deposits are not customary in Israel, with both contracting parties proceeding right away to a binding contract, already subject to penalties for non-performance. An initial payment, however, must be paid at contract signing. Initial payments can be as low as 20% to as high as 50%.
It is customary in Israel for the buyer to pay the property over a period of time. For the protection of the buyer, a cautionary notice (He´arat Azhara) must be filed at the Land Registry Office (Tabu) to prevent the seller from re-selling the property. Only after the property is paid in full can the change in title deed be executed.
Footnotes to Transaction Costs Table
The round trip transaction costs include all costs of buying and then re-selling a property - lawyers´ fees, notaries´ fees, registration fees, taxes, agents´ fees, etc.
Purchase tax, or acquisition tax, is payable on property purchases at a flat rate of 5%. The buyer is liable to pay for the purchase tax.
Registration fee is typically around 0.20% of the property value, plus 18% Value Added Tax (VAT). Registration fee include land registration extract, property records, and transaction tax clearance.
Legal fee is generally around 1% to 2% the property value. The buyer and seller pay for their own legal fees.