Planning the Closing Costs of an Israeli Home Purchase
Planning the Closing Costs of an Israeli Home Purchase
American buyers are used to a closing statement that lists every charge on a single document at the end of the process. In Israel the costs arrive from different directions and at different moments. Some are paid to the tax authority, some to professionals, some to the bank and some only after you receive the keys. None of them should come as a surprise if you map them before you sign. This guide sets out the main categories of cost in a typical purchase, explains who usually bears them and suggests how to build them into your plan. It deliberately avoids figures, because each depends on your status, the property and the professionals you choose.
Purchase Tax
Israel levies a purchase tax on real estate acquisitions. The amount depends on the price, whether the property will be your only residence in Israel and your status as a foreign resident, returning resident or new immigrant. Foreign residents and owners of more than one home are often treated differently from Israeli residents buying a single apartment.
Purchase tax is usually due within a set period after signing, and your lawyer files the declaration. Ask an Israeli tax advisor to estimate it for your case before you negotiate.
Legal Fees
Your Israeli lawyer handles due diligence, drafting or reviewing the contract, tax filings and registration. Fees are negotiated and are commonly expressed either as a proportion of the price or as a fixed amount, with VAT added. When buying new from a developer, the buyer may also be charged a contribution toward the developer's lawyer, which is subject to regulatory limits.
Brokerage
If a licensed broker introduced you to the property, a brokerage fee is usually payable once a binding agreement is signed, provided you signed a written brokerage order. Buyers and sellers in Israel often each pay their own side. A separate guide on this site explains how these fees work.
Financing Costs
If you take a mortgage, expect costs such as a bank file fee, the appraisal, registration of the bank's lien and possibly a mortgage advisor's fee. The bank will also require life insurance on the borrowers and property insurance on the structure, which become ongoing costs.
Currency conversion and international transfer charges belong in this category too. For larger amounts, the spread on conversion can be one of the more significant items.
Bank file and processing fees
Appraisal by a licensed appraiser
Lien registration and related legal steps
Required insurance policies
Conversion spreads and wire fees
Inspection and Technical Checks
Many buyers commission an engineer's inspection, particularly for resale apartments or when accepting delivery of a new unit from a developer. The report can reveal defects that affect price or require repairs, and for new apartments it supports claims during the warranty period.
Costs After You Get the Keys
Once you take possession, you become responsible for municipal tax, building committee fees and utilities. Renovation, kitchen and air conditioning upgrades, window treatments and furniture can add considerably to the real cost of settling in, especially in new apartments that are delivered with basic finishes.
If you plan to rent the property, include the cost of preparing it for tenants, a property manager and landlord insurance.
Building a Realistic Budget
Create a list of every category with an estimate from the relevant professional, then add a contingency for delays and currency movement. Share the list with your lawyer and mortgage advisor so they can flag anything missing. Tax items in particular should be confirmed by an Israeli tax advisor, and your US CPA should know about costs that may be relevant to future US reporting, such as those that affect your basis in the property. We do not provide tax or legal advice.
Frequently asked questions
Who pays purchase tax, the buyer or the seller?
Purchase tax is generally the buyer's obligation, while the seller deals with capital gains tax and certain other levies. Your lawyer will confirm how responsibilities are divided in your contract.
Is VAT included in the price of a new apartment?
For purchases from a developer, the price quoted to private buyers usually includes VAT, but you should confirm this in the contract. Professional fees generally have VAT added.
Can closing costs be financed by the mortgage?
Banks lend against the property value, and closing costs are usually paid from your own funds. Plan to have them available in addition to the down payment.
Are there costs if the deal falls through?
Legal, appraisal and inspection costs may already have been incurred. Contracts can also include compensation clauses, so read them carefully with your lawyer.
Elkayam Group
Elkayam Group, the brand of Kobi Elkayam Real Estate Ltd, is a Tel Aviv company based on Rival Street 37. Its roots are in a family business established in the forties, and three generations later it is active in development, urban renewal, TAMA 38 and pinui-binui, with partner companies that support combination and complex deals and can issue guarantees. We work in Hebrew, English and French and help American buyers see the whole cost picture before they commit.
Contact us for a clear walk-through of the cost categories in the purchase you are considering.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv