BUYING FROM A CONTRACTOR
There are many advantages to buying directly from a contractor: the apartment is first-hand, the buyer has more of a say how the apartment will look, there is a warranty period etc. There are also disadvantages: The time frame for receiving the apartment is different and not always clear, money is paid before the apartment is completed and if the contractor goes bankrupt it can cause various problems, dealing with contractors is never easy etc. An experienced lawyer is necessary to deal with all of complexities and to explain to a buyer what is going on and to take steps to protect him.
When buying from a contractor it is important to carefully review the specification and the blueprint of the apartment. By law the contractor must attach the specification to the contract. In addition, it is also important to check the zoning plan of the surrounding area. By doing so, the buyer can confirm that there won`t be any surprises in the future such as tall buildings, schools, kindergartens etc.
The Sale (Apartments) (Assurance of Investments of Persons Acquiring Apartments) Law – 1974, stipulates different types of guarantees, at least one of which a contractor is required by law to provide the buyer of an apartment. These guarantees mostly protect the buyer though they do not give 100% protection.
There are various expenses connected to buying a new apartment:
1. The purchase price – It should be noted that the price is generally linked to the building index so the final purchase price is generally not the same as the contract price.
2. Changes/upgrades – Any changes or upgrades cost an additional fee.
3. Purchase tax – A calculator can be found here. Note that Olim have a partial exemption.
4. Legal fees – Not only does the buyer pay his own legal fees (usually 1%-1.5% of the price of the apartment plus value added tax) but the contractor generally demands an additional 1-1.5% to cover his legal fees.
5. Money transfer and/or conversion costs – If the buyer is sending money from overseas then not only will he pay transfer costs but he will also pay a commission for converting the money into shekels.
6. Mortgage costs – There are various costs connected with receiving a mortgage such as a fee for opening a file, an assessor fee, notary fees, registration fees. All in all these fees come out to a few thousand shekels. If one is living overseas and buying an apartment in Israel it helps to have a mortgage broker in order to cut through the red tape and to receive the best interest rates possible.
7. Gas/electricity – The buyer pays directly to the gas and electric companies to hook the apartment up to utilities.
8. Additional costs – generally there is a clause that the contact does not include any new costs that are not known at the time of signing so if the government levies a new tax the contractor passes it over to the buyer.
9. Engineer – It is recommended to have the apartment checked out by an engineer before taking possession. The usual fee is approximately $500 plus V.A.T for a written report and $250 plus V.A.T. for a verbal report.