Buying an Israeli apartment as a foreign resident

Many Israeli citizens living abroad are interested in purchasing an apartment in Israel, either to move back to Israel \ visit it periodically, or for the purpose of investing in Israeli real estate, which is constantly on the rise. Purchasing an Israeli apartment as a foreign resident requires the help of a real estate lawyer, as errors in the complex purchase process can cause damages and financial losses.

Our office, with branches in Jerusalem and Tel Aviv, specializes in Israeli immigration and real estate law, helping foreign citizens and residents integrate in Israel, including help with the purchase of real estate. The firm provides its clients with advice and representation on a variety of issues, such as advice and representation in negotiations for real estate transactions, real estate taxation issues, rental contracts, registration of rights in real estate, legal advice on mortgage matters, etc.

What is the difference between a foreign resident and an Israeli resident when buying an apartment?

When the buyer is not a resident of Israel, there are several unique aspects in the way the real estate transaction is managed.

These transactions are more complex due to several reasons, including the fact that the buyer sometimes wants to purchase the apartment “remotely”, without visiting Israel, the need for special tax planning for a foreign resident and various conditions facing the buyer in their application for a mortgage.

Besides this, during the negotiation and writing of the sales contract, the buyer must be allowed extra flexibility in the payment date, since delays may occur in fund transfers between countries or in the approval of a mortgage for a foreign resident.

These are just some of the issues that may occur in a real estate purchase when the buyer is a foreign resident.

Is it possible to buy an apartment “remotely”?

This is often the first question we are asked by foreign residents who are interested in purchasing an apartment in Israel. Some of them are businessmen who cannot currently travel to Israel, and the apartment they found will not wait until they take a travel break from their work.

So the answer is generally yes. A real estate transaction can be carried out remotely, when the buyer is not in Israel, but this requires a different procedure than the purchase of an apartment by an Israeli resident.

The purchase involves irrevocable power of attorney to an agent or the lawyer handling the purchase who will manage the transaction with the sellers. The power of attorney authorizes the agent to act fully on behalf of the buyer, including signing the purchase agreement, registering their rights in the land registry and representing them in all the necessary actions.

The attorney will send the power of attorney to the buyer by email, the buyer will sign it and verify the signature at the Israeli consulate and then send the original document to Israel by mail. It will not be possible to manage the transaction through a power of attorney that does not carry an original signature.

When buying an apartment from a distance, you must take extra steps to check the condition of the property. The fact that the buyer is not in Israel may not allow for an optimal inspection that will rule out planning and physical problems in the purchased property.

Does the buyer need to open a bank account in Israel?

As a general rule, a buyer who is a foreign resident can pay for the transaction through a bank transfer from abroad. Only if they are interested in getting a mortgage to purchase the property, they must open an Israeli bank account from where the mortgage charges will be deducted.

Opening a bank account for a foreign resident or foreign citizen is a complex procedure, due to the restrictions that have come into effect in recent years, with the State of Israel entering international treaties intended to reduce money laundering and encourage mutual reporting on foreign accounts between tax authorities.

If in the past a passport + additional ID was required to open a bank account, today the customer must sign various statements related to tax reports in their country of residence and sometimes also required to produce documents verifying the correctness of the tax reports in their place of residence in order to allow them to transfer to Israel the funds intended for the purchase of the apartment.

One of the existing solutions in the case of the purchase of an apartment by a foreign resident, is the opening of an escrow account by the lawyer handling the transaction, a designated account for the purpose of the transaction only. To this account the buyer will transfer the payments required to effect the transaction.

A mortgage for a foreign resident

When the buyer wishes to take out a mortgage to purchase the property, care must be taken to start the process as early as possible, since the approval of a mortgage for a foreign resident may take longer than usual and result in the loss of the deal if the seller wishes to sell the property quickly.

The banking policy in Israel regarding the granting of mortgages to foreign residents is strict. The reason for this is simple, since the applicant is a foreign resident, it is more difficult to examine their financial resources and income, which are the most important conditions for obtaining a mortgage.

Therefore, most of the time, the banks in Israel will grant a foreign resident a mortgage of up to 50% of the value of the property in order to reduce their risk in giving a large loan to foreign residents. In this framework, as mentioned, a warning note will be registered, similar to the purchase of an apartment by an Israeli resident.

In conclusion, if you are a foreign resident in the process of purchasing an apartment in Israel, and you wish to receive advice on this matter, as well as on other issues in the field of real estate, contact our law firm today, which has branches in Jerusalem and Tel Aviv. If you have any further questions, my colleagues and I will be happy to help.

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03-3724722

055-9781688

office@lawoffice.org.il