How to Buy Real Estate In Israel as a Foreigner

How high are property purchase costs in Israel? What about real estate agents´ fees?

This article is a short overview of what to expect when purchasing property in Israel as a foreigner. Firstly we´ll take a look at the buying process and then give an overview of the associated costs.

Property purchase process in Israel

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.


Costs of buying property in Israel as a foreigner

Transaction Costs

Who Pays?
Purchase Tax 8%-10% buyer
Registration Fee 0.20% (+ 18% VAT) buyer
Legal Fee 0.50% - 1%
0.50% - 1%
buyer
seller
Real Estate Agent Fee 1%-2% both buyer and seller
Costs paid by buyer 9.7% - 12.7%
Costs paid by seller 1.50% - 3%
ROUNDTRIP TRANSACTION COSTS 11.20% - 15.70%
See Footnotes
Source: Global Property Guide

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
Purchase tax, or acquisition tax, is payable on property purchases at a rate of 8% until NIS 5,872,725 (USD$1,724,000) and 10% for amounts exceeding that. The buyer is liable to pay for the purchase tax.

Registration Fee
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
Legal fee is generally around 1% to 2% the property value. The buyer and seller pay for their own legal fees.