Preliminary Stages
1. Locating the Property:
The first stage in the process is, of course, identifying the desired property. This is done after analyzing the client’s needs and financial capabilities, and typically with the guidance of real estate brokers.
2. Reaching Commercial Terms Acceptable to Both Parties:
After locating the property, the parties through their representatives or brokers work toward agreement on the commercial terms of the transaction. The key terms that should already be agreed upon at this stage include: purchase price; delivery date; payment schedule; condition of delivery , and the condition of the property upon delivery..
Important to Note:
Even during the preliminary stages, it is possible and advisable to consult with an attorney, as guidance is often required regarding the nature of the desired properties, their registration status, structuring the payment schedule, and similar matters.
The Contractual Stage
3. Drafting the Agreement:
After the parties reach agreement on the principal commercial terms, the matter is transferred to their respective attorneys. The attorneys will draft the agreement, with the goal of reaching a mutually agreed and fair final version. This process should, of course, be conducted in cooperation between the attorney and the client, in order to receive instructions and provide ongoing explanations regarding the process.
4. Examination of the Property’s Registration Status:
The first and most important review conducted by the buyer’s attorney is to determine where the property is registered, the nature of its registration, the status of the rights, and whether any liens or encumbrances exist. The manner of registration has significant implications. For example, in many properties located in desirable Jerusalem neighborhoods , the owners’ rights are leasehold rather than freehold, and in some cases the lease term is due to expire within a relatively short number of years. This has critical financial implications for the property’s value.
5. Due Diligence:
Simultaneously with drafting the agreement and reviewing the legal status, it is recommended to conduct additional examinations in accordance with the client’s needs and circumstances. These may include:
Engineering Inspection, Appraisal Inspection and more.
6. Financing the Purchase:
Parallel to the above steps, this is also the appropriate stage to address financing. If the client intends to obtain a mortgage loan, it is highly advisable at this stage to consult with a professional mortgage advisor to verify eligibility, determine the potential loan amount, and understand the applicable interest rates.
7. Closing:
In Israel, the “closing” date is the date on which the sale agreement is signed (rather than the delivery date, as is customary in other jurisdictions). Under Israeli law, the principle that agreements must be honored applies, and therefore except in rare cases an agreement cannot be canceled without mutual consent .
8. Execution of Agreement and Down Payment:
Upon signing the purchase agreement, it is customary for the buyer to pay a down payment of approximately 10%–15% of the purchase price. This amount is typically held in escrow by the seller’s attorney until a cautionary note in favor of the buyer is registered with the Land Registry.
Payment of the down payment does not grant possession or occupancy rights. Possession is transferred only upon full payment of the purchase price.
9. Tax Reporting and Payments:
After execution, the transaction is reported to the Israeli Tax Authority. Payment vouchers are issued for Purchase Tax. Purchase Tax must generally be paid within 60 days from the execution date.
Note: Tax rates for non-resident buyers may differ from those applicable to Israeli residents.
10. Possession and Final Title Registration:
Upon payment of the final installment, possession of the property is delivered to the buyer. Final registration of title in the buyer’s name does not necessarily occur at the same time and may take several months, subject to receipt of tax clearances and completion of statutory registration procedures.