The last important term is "rooms" (haydarot in Hebrew). A home is measured in Israel by the
square meter and by the "number of rooms". The number of rooms includes a
count of bedrooms plus the living room (usually it's living room / dining area together).
So, a 5 room deera means 4 bedrooms. A 2 room deera is a 1 bedroom apartment
by U.S terms.
An interesting difference in Israeli costs is renting. Relative to the purchase
price of a property, the rental price is downright cheap. Even by U.S. standards,
long term rental rates (1 year or more) are reasonable (depending on where in the U.S. you
are).
Example, a 3 bedroom apartment in a decent area may run $500 per month. Note,
this price does not include any utilities (you are expected to
pay for water, gas, electric, and telephone).
Here's a breakdown of normal rental costs:
- Rent via a Real-Estate agent (the norm), pay him 1 months rent.
- Sign the contract, pay the Owner's lawyer 1/2 months rent.
- Install phone line, pay ~$175 (but only ~$20 to transfer it).
- Pay water and electric (no start-up / transfer fee).
- Pay gas (if by gas bottle, the norm, rent 2 bottles every ~4-8 months, pay in a lump
sum.)
- Pay property tax (more info, see Taxes page.)
While
the utilities will be in your name, the guarantee that the utility companies use for
payment is to refuse service to a new resident until any/all old
bills are paid. This means if the previous resident left any bills behind you won't
be able to get (water / electric / gas / phone) until someone pays the old bills off.
After you sign a contract it's not the landlord's problem (it's yours). There
are 2 ways to avoid this problem, one is to actually check with the utility companies to
make sure the bills are zero before signing the contract (this is the normal procedure) or
two to have it written into the rental contract that the landlord is responsible for
paying any old bills (or alternatively that you are released from the contract if any
outstanding bills are found and not paid immediately by someone else).
There's a reverse side of this as well, when you move out you must make sure that the
landlord signs a paper verifying each of the current utility meter readings (a check-out
level) to make sure you don't get stuck with utilities used until the bills are
transferred to a new tenants name.
Buying in Israel is significantly different from the U.S. Land title can often be
in dispute. This is additionally complicated by the fact that there is no escrow
process in Israel. Further, banks only finance up to 70% of a property (and they
really don't like going over 50%).
It's very important to employ a very experienced well skilled real-estate lawyer in
any purchase transaction. Money is usually exchanged in a 5 step process (to protect
both sides, 5 different stages of paperwork, signings, and movement of money between the
parties). Full detailed research of property ownership is critical (there is no
"title" companies, this involves the lawyer and the government land-title
office).
An example of this process is below...
by Ralph Anzarouth,
Oct. 31, 1999, posted with permission.
This section will explain how I got a fast mortgage in Israel (definitely not
the norm).
A) YMMV. It worked for me, it might not work for you. Israeli bureaucrats
(Israeli bankers ARE bureaucrats) can be very inconsistent over time, so
whatever happened to me proves nothing, besides the fact that it's worth trying.
B) I was in a hurry to get a mortgage in a week. Actually I did not
need it that fast; I could have asked my current landlord to let me move out a
couple of weeks later. It's just that I wanted to do it fast ("A"
type, ah?). If you are a "B" type you can take it easier than I did,
unless you have time constraints, or are afraid that the dollar goes up, or
interest rates, or both.
C) Israelis do not like this method, and you might want to avoid it.
Why? Because instead of visiting the bank every day (which is what bankers
want you to do), I kept sending faxes with all the documents they need. Bankers
hate it, actually. They want you to loose half a day's work to go and hear from
them which document you should have brought and didn't. Hey, they are
bureaucrats, and have to justify their existence and their jobs. It's not by
chance that in the end I gave the business to a Russian immigrant at Bank
Yirushalaim who couldn't care less about whatever negotiating strategy I chose,
she just badly wanted my business. She deserved it and I am glad that she got
it.
D) In reality, the search for a house is the main thing. Mortgage is only a
tool to get there, but you need to keep energies to work it out. People who
focus too much on the excitement of buying a new place tend to invest less than
they should on the process of how to buy it cheaper. Banks can exploit this and
give deals at outrageous rates. One proof of this is that many people I know got
cheaper interest rates (even 1% off) negotiating with their bank.
E) This section does not detail important items, like: the buying process,
the choice of a lawyer, checking the contract and many others. I focus here on
the mortgage, and mention the other items only in relation to the mortgage.
What I did:
1) I put 6 banks in competition for my 100 K$ mortgage, and sent many
important documents in advance, during my search for a place to buy. Each bank
received (well before I bought my house) everything they needed to give me an
"Ishur Ikroni", meaning that "in principle" they will agree
to fund me (which is by no means a commitment, as they proved later). These
documents were: request form (their own document filled), Teudat zehut (Israeli
id card), Teudat oleh (certificate of immigration), Teudat zakkaut (certificate
of immigrant loan assistance eligibility), 3 last pay stubs, 3 last bank
account reports, 3 pay stubs of each guarantor(s). If you do not feel like
asking the guarantor(s) his/her/their pay stubs, you can ask him/her/them to
fax/send them to all the 6 banks (my friend couldn't care less and gave me the
copies of his stubs). I decided to submit also the bank reports of the banks
(outside Israel accounts and in Israel) where I kept my savings, to have them
salivate a bit.
IMPORTANT NOTE: All these are copies, and never originals. In the whole
process of getting a mortgage, you never give any original of your personal
documents to any bank (beside one exception, which we shall see later). All
these documents are copies, and you can often send the whole thing by fax or
snail-mail.
2) Try to get from each bank an "Ishur Ikroni" and a tentative
interest rate. This has only a negotiating value for later use (like you
can tell "I built my budget on 6%, you cannot ask for more now"), but
this is no commitment.
3) Try to understand at this point which bank really wants the business, and
how bad they want it. This is an important information to gain time and
bargaining power.
4) Get the original of your Teudat Zakkaut if it is at a bank that you will
not consider for a mortgage. If you still consider them, tell them you need to
take it away and that they should prepare it. If you do not do this you might
waste a couple of days later on.
5) Find a place you want to buy, then negotiate and sign the contract with a
good lawyer (this would need a whole FAQ, but I will not go into this
now). Get your original of the contract together with the Nessach (or any
official registration the house has). It's your lawyer's job to give you valid
documents to present to your bank. NOW THE REAL NEGOTIATION WITH THE BANKS
STARTS.
6) As soon as you have signed the purchase, fax or give a copy of the
contract and of the registration to all the prospective banks. No
originals. Tell them that a) You want a firm offer on your mortgage
conditions (interest rate + duration + amount) and ask for the exact list of
documents you will need to bring in. Interest rates are of various type,
be sure you understand what you are offered.
7) Call every day each bank to know where the offer you are waiting
stands. By now you do know who wants your business and who doesn't want to
compete. Get from each bank their checklist and find the items that are
required anyway, whatever bank you will pick up in the end. Get the prospective
banks (not more than two of them) to talk to your lawyer to make sure that they
agree on the documents to submit (there are quite a few and they might be
tricky). You can also exploit this waiting time to bring your lawyer a document
from Misrad Hapnim {Ministry of the Interior} (yes, you HAVE to go there again)
which enables you to pay only 0.5% Mas Rechishah (special house sales tax
reduction as a new immigrant). Your lawyer does not always ask you if you are an
immigrant, so if it does not show (and even if it does), be sure you tell him.
8) Get the offers and decide. I forced myself to wait a whole week (hey, for
an "A" type this is like a century!) to bring them down as much as I
could. B"H, in the end I brought Bank
Yirushalaim down from 7.0% to 5.9%, which is a saving of more than 20,000 NIS
before inflation over the 10 years of my mortgage. It's worth waiting a week.
When I got that offer, I already knew what they wanted, and already had most
documents done. Too bad for the other banks, who weren't able to make a decent
offer. NOW THE RUSH STARTS!
9) Did I say I wanted to finish in 24 hours? Actually I wanted it in a week,
but it took 6 full days until I got an offer! So I had to run now. I went on
Monday morning to the bank to get a few documents they couldn't give me before
(they need to write the final mortgage amount). I also gave them:
a) The original of the Teudat Zakkaut (the only original I ever gave and
which I had recovered from the First International Bank of Israel (FIBI) a few
days before).
b) The registration of the mortgage which I did at some other office in Tel
Aviv (you give them another paper from the bank and 140 NIS in stamps [document
tax]).
All I had to do now was:
a) Ask FIBI to sign a form authorizing the mortgage bank to be paid monthly.
b) Go to the lawyer to get some other documents (power of attorney, etc.)
c) Get the signature of the seller wherever he is. This can be tricky,
because in theory the seller should sign in front of the lawyer. If there are
several sellers, as in my case, you have to find them all.
d) Go back to the lawyer to authenticate all this (my lawyer is also a
notary).
In the meantime, I had asked my guarantor to go to the bank and sign himself
a few tons of papers saying that we owe them everything we have now and/or will
make in the future. On Tuesday morning I was at Bank Yirushalaim with all the
paperwork done 24 hours after I accepted their offer. Well, maybe 26 hours. That
felt good. After this, you can call the other banks and tell them the deal is
over. Do this very nicely. Regardless.
10) Did I mention the ribit kalkalit? They do not tell you about it. They
should. This is very tricky and I am not sure I understand the logic behind it.
But I do understand the mechanism. If the mortgage starts at the beginning of
the month (1-15), you pay nothing now and start with regular payments at the
beginning of the following months. I think that even if you shouldn't owe them a
full month of interest, you do pay your regular monthly payment also on the
first month. If you start your mortgage after the 15th, you are charged a daily
interest rate until the last day of the month. Hey, this is A LOT of money, like
0.04% of the value of the mortgage PER DAY. If you get a 500K NIS mortgage on
the 20th, it's 2000 NIS interest for nothing. When establishing the
contract, explain to the lawyer to set up the payments dates so that you do not
pay a ribit kalkalit. I admit some resistance to grab the logic of this one (I
will have to pay 5 days), but if somebody else has a rational for not trying to
avoid it, he's welcome to explain.
11) Did I say the whole thing is not simple? You can make it simpler. If the
seller has already placed a mortgage on the house, he has to free it in order to
enable you to get a mortgage. In general he plans to free it by using your
money. But you can give no money if his mortgage is still running. To avoid a
catch-22 situation, his bank writes to your bank that they are ready to give up
their mortgage rights over the house in exchange for a check of
<SUM>. This enables you to get your mortgage, though neither you nor
the sellers ever get that money, because it's exchanged between the banks. You
only get the receipt a week later, which can be a long time if you want to get
the house keys fast. Now, here is how you make things simpler: it is MUCH better
if both mortgages are at the same bank. I do not know if I would have given up
better conditions to do this. B"H, my favorite bank was also my sellers'
bank. But that did make things simpler. Also, you can motivate the sellers' bank
by telling them "I really want to help you keep this business, just give me
the same conditions as Bank Ploni". Try. I did. It worked.
12) Now it's time to honor commitments: the bank must give you all the money
they promised at the right conditions, the sellers must bring many documents to
prove he has no debts to arnona, vaad bait, electricity and so on, and you have
to pay whatever you have to. Once you have the bank's checks (or a receipt
stating they are using your money to cancel the sellers' previous mortgage if
they had one), it's better to close the deal in front of the lawyer. Get
receipts from the seller (make sure he went through the whole checklist from the
contract), and make sure a copy of each is kept in the lawyer's file. Pay
attention to the time you do it. The official NIS/USD rate is fixed Mon-Thu (I
think) at 16:30, but the contract has often a special paragraph specifying how
to pick the rate of the day. I just cannot grab the logic of that paragraph, so
ask the lawyer to set the meeting at a time when exchange rate is not ambiguous.
13) Be ready for last minute surprises: I got a call from the bank 3 hours
before getting the money. They made 3 new requests: a) a stupid one: a paper
they had already and found pretty soon. b) a less stupid one: a paper they did
not need, but which the contract calls appendix beit, and therefore must be
added as an appendix. I think I would have done the same if I were the banker.
The lawyer faxed it immediately. c) an outrageous one: "How much did you
pay already?" I told them I had already paid an advance of 8000$. Not good.
They said I should have paid a minimum 10%, therefore they cannot pay the
mortgage until I do. "Why didn't you tell me before?" "Oh, didn't
we?" So we settled for paying some more money to the seller at the bank
when finally getting the mortgage. Which was 1 hour later…
14) Does the bank make mistakes? Yes, they do. Some of them cost you money.
When they tell you they are sorry, transform this into a benefit for you. For
instance ask them a discount on the petichat tik (the file opening). Tough guys
get it for free (hey, they made a mistake!). Or ask to print the checks with
next day's date, so that you get one day off from the ribit kalkalit.
Tough guys get this too. Of course, it's better to do these meetings when
you are free from office obligations. I almost did it. But my last meeting at
the bank (with the seller) went on for a while and I had already scheduled to
host a conference call to explain to people calling from several continents the
content of a speech I am giving next week in Spain. Doing this on my mobile
phone while signing a ton of documents (and making sure there are no mistakes)
is not something I recommend.
None yet, I'll add them as I find them.
