The price of the apartment you will buy does not start and end with the sale price of the apartment. As in all apartment sales there is a whole process that you will need to go through before you are comfortably sleeping in your new home. And of course each step along the way will cost money.
That being said as a general rule of thumb you should budget an additional 10% of the purchase price for these additional costs. Of course every case is different depending on the specifics of each apartment and each individual’s needs. So let’s try to break this down in an organized way.
Agent Fees
Unlike in the US, in Israel both the buyer and the seller pay an agent fee. The rate can vary from agent to agent as each agent can determine his own fee up front, but the standard fee is 2%. Some agents charge less and a select few charge more!
There is no requirement to have an agent and many sales are done directly through websites or local ads, but generally speaking, especially if you are a foreign buyer, it is worthwhile to work with a reliable and trusted agent. He will often save you more than he will cost you.
Summary: Agent will cost you 2% or slightly less of purchase price.
Inspection Fee
Buying an apartment in Israel is not cheap. Hiring a qualified engineer to inspect the property before purchasing it is an expense you can’t afford to skip. There can be steep pitfalls in an apartment that will come back to haunt you. Things that need to be checked are plumbing and electricity, construction and materials. building codes and more. They stem from a number of factors. 1. Low quality workmanship. 2. Builders who cut corners. 3. previous owners who did unprofessional and sometimes illegal renovations.
Inspection can run anywhere from 1500 NIS to 4500 NIS depending on the apartment. Get a professional inspection and have him write up a professional report. This way you can deal with it together with the seller over coffee before you agree upon a price, and not in court for years after the fact.
Lawyer Fees
Once you agree to purchase the property you will need a lawyer to close the deal. Lawyer fees are generally from 0.5-1% of the purchase price. Sometimes both sides share a lawyer to lower the costs. Be very cautious before entering such an arrangement. See article on Israel Real Estate Lawyers to learn more about their role in a property transaction.
Purchase Tax “Mas Rechisha”
When you purchase an apartment in Israel, the buyer must pay a purchase tax. These fees need to be paid within 50 days of the contract. There are three different rate tables.
- For Israelis purchasing a first apartment
- For Israeli purchasing an additional home or a foreign resident
- Oleh Chadash discount
The tax rate is based on the purchase price with the increased rate applying only to the additional costs. If you are a foreign resident buying an apartment for up to $1.5 million expect to pay from 5-6%. If you are making Aliyah expect the rate to be around 3%. For rate tables see Israel Homebuyers Tax page.
Mortgage Fee
If you are taking out a mortgage the fees charged by banks to open a file is 0.25-0.5% of the total mortgage you want to take. In order to get a mortgage you will need to have your property appraised by the bank. An appraisal costs anywhere from $750-$1500. To learn more about the myriad of mortgage options and what you need to qualify see our Israel Mortgage Guide for a primer on Israel mortgages.
Currency Conversion Fees
Years ago the strong and safe US Dollar was the currency of choice for selling homes in Israel. Those days are long gone! Prices of apartments today are quoted in Shekel and that is the currency in which the seller will insist you pay. Converting your US Dollar to NIS will cost a commission, transfer fee and of course you won’t be getting the listed exchange rate.
Rather than going through the bank there are many reliable transfer companies who can help you not only with your transfer but many little hassles around it, and they can get you a better deal.
Exchange Rate Fluctuations
Since you will be making payments in installments after settling on a price and signing a contract, keep in mind that the exchange rate fluctuates. This means that since you pay in shekel, the US dollar cost of your apartment may be more when you make further payments than when you signed on the deal. You can hedge against that by exchanging the full amount upon signing the contract, but you may not want to.
Home Improvements
Depending on the condition of the home you are buying you will need to invest in fixing it up before you move in. Here the sky’s the limit, especially if you plan on hiring an interior designer. Make sure that you’ve figured out your renovation plan and left some extra change for things that you will only come to understand once the old owner has moved out and you’ve taken possession of the apartment, and see it empty with the furnishings. Keep in mind that many things American take for granted are luxuries that Israeli’s may not even have dreamed of!
Moving Costs
This of course will depend on if you are moving, buying a vaction apartment and how you are furnishing it. To give you a sense of the costs of a typical Israel move the price can fluctuate from $1500 – $5000