Don’t Rush to Sign on the Dotted Line When Buying an Apartment in Israel

2

 484980843With real estate prices in Israel booming and rising to new highs, many buyers are under major pressure to sign on apartments quickly, so “not to lose a good deal.”

I’ve been personally involved in too many stories where people come to me with all sorts of issues, where they signed on something too fast and did not take the time to speak with professionals who are independent. (In fact, I personally won a case worth 1.2 million dollars in Jerusalem superior court on behalf of a client, where the court enforced a contract written on the back of a napkin written over a restaurant lunch!)

Recent case in point:

Just this past week, a client from Switzerland came to me who was making a purchase of a penthouse apartment under construction in one of the newer projects in Jerusalem.

The deal with the developer he made was that he would get an additional room in his penthouse, created making the apartment next door one room smaller. This made the deal very attractive, as he was getting a very good price per square meter.

Should he therefore run and sign on the dotted line? Deal of a lifetime? NO!

With few exceptions, most people do not actually put down all the money that the apartment will cost. Calculations are made about mortgages, down payment amounts, and then the decisions are made for how much money the buyer can afford to spend and how they want to create the highest possible capital appreciation with the funds they have on hand.

In this case, some poking around and analysis showed that there was a significant issue with the deal as agreed to between the developer and buyer:

1)    When the banks appraiser would come down to check the property, they would see that the apartment is not built as per plans. This has in the past caused banks to decline to provide financing for the unit, leaving the buyer with a breach of contract and possibly stiff penalties.

2)    With the value of the apartment based on the value of the meters in the official layout, even if the bank would approve the change above and give the loan, chances are the bank would not give that room any value for those meters; giving the bank a much smaller loan approval. This again, would leave the buyer struggling to come up with a large amount of extra money to cover the deficit. Certainly not the outcome the buyer was thinking of when they signed on this “deal of a lifetime!”

After working though the issues, we were able to work with the buyer and developers to agree to several contract changes that ensured the buyer got the deal on his terms, with the extra room—while protecting him from the downside of the bank denying the loan or giving a lower loan amount.

We explained to the developers our concerns. They understood that it wasn’t that we were “just trying to get the price reduced because farvoos nisht…”for no good reason, but that rather, we had good legal points that we brought to the table that were worthy of consideration.

There are good deals out there; sometimes it’s the price, sometimes it’s the location, and sometimes it’s something else entirely. But no matter what you are paying, speak to a professional whose fiduciary responsibility is to do what’s best for you. The attorney and other professionals affiliated with the builder should not be making decisions for you.

Many people think that because they are paying for the attorney, they are represented. In fact, when the deal they bring you shows a layer fee, you are in fact paying for the developers’ lawyer, whose responsibility rests with them and them alone.

When making what might just be the most important purchase in your life, it is not a time for games or letting yourself be swayed under pressure from an eager real estate salesman. You owe it to yourself to think things through and look outside the box for how to make this purchase the smartest one for you.

Yitzchak Steinberg is a respected attorney with many years of experience specializing in foreign buyers purchasing property and doing business transactions in Israel. He is also in charge of the municipal elections taking place in Jerusalem as the appointee of the Degel Hatorah political party. He can be reached via his Jerusalem Office at (02)500-2923 or via email at [email protected]

2 COMMENTS

  1. Thank you , Thank you. I’m in middle of writing up a long list of points and potential article to ” educate people” what it means and takes to buy an apartment in israel. I bought my apartment 2 yrs ago for a lot of money. oh wow! where should I start. Laws take affect in middle and things change; and all kinds of unexpected expenses that you did not prepare yourself for or werent told about. And buying an apartment for this or that amount but the money only going to the owners. And the developers charging an extra fee for everything else cus they too wanna make money. Just today i finalized my air conditioning deal. I was supposed to get central in my apartment but because my apartment is too big and supposedly because I changed my layout which I paid tons for + taxes. They can only give me the junkiest company and the guy dealing with the air conditioning admitted to me that it’s garbage. one of the bad things about it is that it would take an apartment that has an 8 foot ceiling and bring it down in 90 percent of the apartment to 6.9 feet. That’s like living in a machsan. So for all the ” central air conditioning” that I was supposed to get with the purchase of this outrageously expensive apartment I have to upgrade that “garbage” as he calls it and spend 5000 dollars. And so the story goes on and on…. the standard floors are impractical and ugly. No mother with children wants offwhite floors. But the upgrades in the stores they made contracts with are double the price than any other store. They are very excited to call themselves “yukrati” but without a doubt that meaning has only one thing. and that is: spending more money…. BE CAREFUL!!!!!!!!!!!!! Rather buy an apt that is completely ready even if it’s 100,000 dollars more. the price you think you’ll be paying is only the begining of a very long, difficult experience of highway robbery and lack of yashrus.