SELLING AN APARTMENT
Occasionally I meet a seller who does not understand why he needs a lawyer. In his mind it is a very simple process, he gets money and only then will he give over his apartment. Nothing could be further from the truth. Contracts are very complicated and balance the rights of the parties involved. Sometimes seemingly innocuous legal language can cause damage to those who don`t understand the real meaning. Sellers have various obligations by contract and if they do not live up to their obligations, and do not do so on time, they could be sued for breach of contract. Obviously if the seller does not understand his contractual obligation then he will not be able to fulfill them. The seller also makes various declarations in the contract and one of the lawyer`s jobs is to make sure that the seller understands the declarations. In addition, the lawyer will be able to advise what taxes might apply to the sale.
There are various expenses connected to selling an apartment:
1. Real estate agents – They usually ask for 2%+ vat but the price is generally negotiable.
2. Betterment tax (Heital Hashbacha) – Betterment tax is levied because of a building plan which gives new building rights or added value to the property. The Betterment tax is 50% of the added value of the property. The added value of the property is generally determined by a professional land appraiser. Usually the seller is responsible for the tax if it is levied before the contract is signed and the buyer is responsible if it is levied after the contract is signed
3. Capital gains tax (Mas Shevach) – Capital gains tax is paid on the difference between the purchase price of the property and the sale price. There are many exemptions to this tax and a lawyer should be consulted.
4. Legal fees – Most lawyers take between 0.5%-1% of the price of the apartment plus value added tax though occasionally additional work is required and a higher fee is requested.
5. Money transfer and/or conversion costs – If the seller is sending money overseas then not only will he pay transfer costs but he will also pay a commission for converting the money into a foreign currency.
6. Registration fees – The fees usually come out to a few hundred shekels, depending on where the apartment is registered.