Navigating the Field of Real Estate in Israel vs. America

Part II

By Shia Getter

As we discussed in Part I of this three-part series, buying property in a foreign country can be riddled with potential pitfalls. Standards and procedures vary significantly across the globe, and Israel and America are no exception, exhibiting distinct rules and a multitude of legal, bureaucratic, and sociocultural disparities.

For those contemplating a property purchase in the Holy Land, understanding these contrasts is essential to ensuring a seamless and confident transaction. While this post only provides a glimpse into the differences, it’s a starting point for comprehending the nuances. So, read on, and arm yourself with the knowledge necessary to make well-informed real estate decisions.

On the Dotted Line

So, you’ve found a property you’re interested in and you decide you want to buy it. If you’re in Israel, you generally sign a kind of pre-contract. For a secondhand property, you might be asked to sign what’s called a zichron devarim, a memorandum of understanding (an MOU). And if you’re buying on paper (an as-of-yet unbuilt property, read more on this below), you sign a tofes harshama, a registration form signifying your intent to purchase.

Although these contracts may seem standard, they are binding documents that have legal consequences and should be reviewed by a professional before you put your signature on them. For example, if you sign a zichron devarim and then change your mind about the purchase, you will have to pay a fine or forfeit the sum outlined in the document.

A tofes harshama can have legal implications as well, though the specifics are too complicated to explain in the scope of the article. Just remember to get these forms reviewed by an impartial and professional third party (an attorney — just not the seller’s lawyer!) and you should be okay.

In Paper and Ink

In English, the phrase “on paper” generally implies something that’s theoretical or hypothetical (like, “they’re a good team … on paper” or “we won X War … but only on paper”). In Israel, “on paper” implies that a property is real and exists, but it’s just not built (or completed) yet.

Buying a home like this (on paper) is a concept that doesn’t really exist in America — at least not in the same way as it does in Eretz Yisrael. In America, you can buy a home that’s already built, or you could buy a new home that’s under construction. You could get one that’s designed by the builder or you could hire an architect and customize everything.

In Israel, there’s a concept called “buying on paper.” What this generally refers to is buying a home (usually an apartment) that’s still in the planning stages by the developer. You can customize some aspects of a home that’s on paper, but the outer structure is designed by the developer. When you buy on paper, you usually get a better deal because the home hasn’t been built yet and will take several years (generally anywhere from 2-5) to reach completion. You will also begin paying for this property as soon as you sign for it, even though it won’t be ready for occupancy for however long. And when you do move in, so will most of your neighbors, because they also bought “on paper,” and their apartments will be ready for occupancy around the same time.

The advantages of buying on paper include being able to move into something completely new; having the opportunity to customize the layout of the apartment in many cases; getting to tailor many fixtures and finishings to your taste; being able to check on the progress of your home under development; getting a better price in most circumstances; buying as a block with other like-minded people in some circumstances; and getting your choice of apartments if you get “in” on the project early enough (such as a penthouse or garden apartment, particular views, and so on).

The main disadvantage is that sometimes there are delays. And you can’t always know how a new neighborhood, development, or housing project will shape up in terms of neighbors, atmosphere, and “feel.” Nevertheless, the benefits are manifold and a majority of our clients choose this excellent option.

Beneath the Lens

Someone I know bought a home in Denver in an extremely hot market. He had to sign an agreement saying he would not get the home inspected and that he was buying it as is, no matter what any later inspections would turn up. In America, this is a pretty unusual circumstance, something that happens in only the hottest housing markets where demand is soaring.

In Israel, because demand is always high, buying without an inspection is actually quite common. Buyers are often discouraged from getting inspections and are assured that everything is “fine” (“emm, hakol beseder, hakol beseder.”) But actually, when buying a secondhand apartment, it usually is okay. You don’t really need to get an inspection on secondhand properties here.

That doesn’t mean there aren’t potential issues or real problems. It’s just that an inspection won’t get you anywhere. The seller won’t change the contract, you won’t get a discount, you won’t get the problems solved, and so on. In Israel, when you buy secondhand, you buy as-is. In short, you get what you get.

However, there are circumstances when you should push for an inspection. If, for instance, you are looking to buy a fully renovated, beautiful secondhand apartment, an inspection is prudent. Firstly, the cost of that renovation is something you’re essentially paying for when you buy the apartment, and you want to make sure it’s worth the money. And secondly, you want to make sure that “stunning renovation” wasn’t quickly slapped up to hide much larger issues.

When it comes to new construction (i.e., “on paper”), we strongly encourage pushing for an inspection. Many things require checking and verifying, including the quality and soundness of construction, the safety of the building, the adherence to code, and so on. An inspector will also make sure your windows and fixtures were installed properly. So in this case, push for an inspection and have one done properly — and by your own inspector!

In Conclusion (For Now)

Buying a home in Israel clearly involves many differences from what a buyer may be used to in America, and the journey to homeownership here certainly presents its unique challenges. Of course, those who’ve done it will tell you it’s 100 percent worth it, as the opportunities of Eretz Yisrael are unparalleled. You’ll have a portion in the homeland of the Jewish people and you’ll be on the way to establishing your family’s legacy in the Land.

Ultimately, wherever you buy, it’s imperative to conduct thorough research, seek professional advice, and be aware of the nuances, cultural practices, legal aspects, and other unique considerations. That way, you can approach your home purchase with confidence and make informed, educated decisions that align with your goals. Stay tuned for part III of this series to learn more.

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The Getter Group is consistently working to educate foreigners who want to buy property in Israel, to empower them to go into their purchases armed with confidence and knowledge. If you’d like to learn more about the property purchase process in Israel, contact us to find out about our upcoming Israel Real Estate Conference, to be held in the Tri-State Area at the end of August.

The information provided in this article is for informational purposes only, based on the most accurate data available at the time of writing. However, we cannot guarantee that all the information presented herein remains complete, current, or error-free. Therefore, readers are advised to independently verify any information for the most recent updates. 

For more information, contact The Getter Group in Israel at 718.473.3950 or in our new Tri-State office at 732.490.1624 or by email at baila@thegettergroup.com.