Article written by Lisa Baron who is an experienced real estate agent working in Modiin with Pisga Nadlan Real Estate Agency Lisabenisty39@hotmail.com – +972 58-6692036
Photograph by Michael Bloom.
Buying a home in Modiin is exciting, but in addition to finding a place for the right price, it is important to ensure that you factor in all the added costs that are part of purchasing a home in Israel. In addition to real estate fees (up to 2% plus VAT), which are paid at signing, here are some other fees to consider:
Engineer Costs – 1.500 – 4,000 shekels (plus VAT)
The engineer is brought in once a price and payment terms have been agreed. The engineer will usually provide an oral report on-t he-spot, outlining any major issues; but will usually take up to 2-3 weeks to provide a written report. Buyers do not usually wait for a written report as the verbal explanation of the engineer’s findings is usually sufficient for assessing if there are any ‘red flags’. Buyers should expect 20-40,000 shekels of repairs. Engineers are usually paid at the time of the inspection (and are the only people usually paid before signing a purchase contract).
Shamai (appraiser) – 600 – 4,000 shekels (plus VAT)
The shamai is usually brought in when the mortgage is taken out. They will come in and assess the value of the property. Often, properties are evaluated at a price lower than the purchase price. This is common-practice but it is important to be aware that the mortgage amount will only cover to the value of the shamai, meaning you should build into your expenses a ‘buffer’ to cover the difference between the appraised value and the purchased cost as the bank will not provide a mortgage on the difference. Sometimes, if there is a question or property lines/dimensions, the lawyer might recommend bringing in a ‘shamai-moded’ to measure the property and ensure it conforms with the property specifications. This can cost around 1,700 shekels (the lawyer will advise if this is needed).
***Please note – if you bring in an appraiser before purchase, it is usually more expensive and can be up to 6,000 shekels. The Shamai is usually paid at the time of the evaluation (usually after you are in contract for the purchase).
Property Tax
The property tax will depend on your status (Israeli purchasing first residence, foreign investor, new oleh (immigrant), etc.). https://www.eretznadlan.com/real-estate-taxes-in-israel/ The lawyer will help you determine the best rate according to your status. New Olim have a discount on purchase tax and can buy a property at a tax rate of 0.5% plus vat. The top tax bracket without a discount is 8-10% depending on the cost of the property. If you’re making Aliyah within two years than you pay 8-10% tax, and when you make Aliyah you put in a request to get back 7.5-9.5% of the taxes paid. So even though you initially have to lay out the full tax, you will be reimbursed by the government once you officially make Aliyah. There are also discounts available for Israeli residents and there is an online calculator to determine your tax bracket at the following website: https://www.misim.gov.il/svsimurechisha/frmFirstPage.aspx?cur=1#nbb Property tax is usually paid about 45 days after signing.
Legal Fees
The legal fees are up to 1% plus VAT. The lawyer is needed as soon as there is an agreed price and agreed terms to ensure that your rights are protected. The lawyer will work with the seller’s lawyer to ensure the deal is sound and will help steer you through all the processes involved with the purchase (property tax, registering the property, etc.) It is worth finding a lawyer and ask advice before beginning your real estate venture.. Legal fees are usually paid at signing.
Mortgage Broker
The mortgage broker should be approached at the early stages of evaluating a home-purchase in order to get a realistic picture of what is within your affordability. The mortgage brokers often charge about 1% plus tax of the mortgage value.
***Please note – some buyers prefer to negotiate directly with the banks, but they will still be charged fees for taking out the mortgage.
Mortgage fees are either paid upon pre-approval and then upon starting the mortgage; and sometimes paid entirely when starting the mortgage. Consult your mortgage broker on their payment structure.
Foreign Exchange
Exchange rates obviously fluctuate so it is important to factor in a margin of change. Banks and foreign exchange brokers will charge commission fees (up to 0.75%). There are a number of foreign currency exchange companies that will give you better rates. Foreign exchange commissions are paid when transferring sums.
General Expenses
It is usually estimated that there are between 20-40,000 shekels of upkeep needed on your new home. The sellers usually leave the property ‘as-is’ so you can expect to need to have the place fully cleaned (cleaning services range from 500-3,000 shekels depending on whether it is a general clean or a deep clean). You will also likely need to have the house painted, holes in walls patched up, grouting redone, and other general upkeep.
It is generally recommended to have 8-10% over the cost of the purchase in reserve to cover the additional home-buying expenses.
For a list of recommended vendors (lawyers, mortgage brokers, engineers, etc.) feel free to reach out to me and I would be happy to provide some names/numbers.
Lisa Baron, Pisga Nadlan Real Estate Agency Lisabenisty39@hotmail.com – +972 58-6692036