Be a wise buyer, not a foreign freier: a guide to the world of Israeli real estate


By Melchett Mike
July 24, 2011
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melchett mike is about to join that quirky list of institutions (London Irish, Scottish and Welsh rugby clubs spring to mind) whose names no longer accurately describe them. After 12 memorable years, I have decided to cash in on the Tel Aviv property boom and to partially wipe out a loan which, due to rising Israeli interest rates, had started to disturb my sleep even more than the post-midnight Melchett mopeds.

Having purchased and renovated a few properties here, I had considered myself relatively streetwise – and compared to the oleh chadash, fresh off his Nefesh B’Nefesh flight, I probably still am – but the shenanigans of the last month or so have provided an uncomfortable reminder of just how naive I remain as to the shady goings-on in the world of Israeli real estate.

And to invalidate the accusation often levelled at me by former teachers at Hasmonean High School for Boys (and even Girls), that I am a good-for-nothing coward who can only ridicule their poor, defenceless (now at least!) ex-colleagues, I thought I would do something for the general good: provide a list of things to beware of/look out for when entering the minefield that is the Israeli property market . . .

Agents. However much they may attempt to appear honest and decent– essentially, by insisting on making ingratiating small talk in crap English – don't trust a single one of them: they will sell their own mothers to do a deal (though they are no different from most of their UK counterparts in that respect: it was once proposed to me by an agent from a large office in Golders Green that, in exchange for a George Graham envelope, he would "make sure" that I secured a property ahead of a rival bidder).

In spite of insisting that they will not – even cannot – accept any less than their "standard" 2% commission, most Israeli metavchim (agents) will eventually agree to 1.5% for a purchase (and 1% for a sale). Don't waste your time arguing the 2% when signing their paperwork – most will be inflexible at that stage – but rather wait until you find something that you like, and then tell them that you are not prepared to pay more than 1.5% (for an expensive property – especially if you haven't had them schlepping around with you for three years! – you may even be able to get them down to 1-1.25%): unless there is another buyer in the wings, or they have long-term exclusivity on the property, they are unlikely to want to risk losing the deal. (Most things in Israel – from fruit and veg in the shuk to interest in the bank – are entirely negotiable: most memorably, I once overheard Avi, a Rothschild kiosk regular, express his bewilderment that a Fifth Avenue (New York) shop assistant would not, after he had purchased a pair of shoes, throw in a pair of socks and/or shoe polish!)

And don't be a freier after a transaction, either. Following the sale of Melchett, and the agent being handsomely compensated (for what turned out to be a few days' work), I phoned to thank him. His response? "Don't you think I deserve a bonus?" "Be'tachat shelcha" (in/on your backside), I replied (perhaps foolhardily, in an area as homo-friendly as central Tel Aviv). There is an extremely prevalent "shitat matzliyach" – have a go/it's worth a try/if you don't ask, you don't get – mentality in Israel. And it is one that is very difficult to come to terms with for those of us who emanate from countries where we were used to dealing with people who had both a sense of personal self-respect and professional pride.

Builders. If you are planning a shiputz (renovation) of your new property, do your homework: meet several kablanim (builders) on direct recommendation, request to see jobs they have done, talk to former customers (not in the kablan's presence! One recently gave as a reference a woman who told me not to use him!), and obtain quotes based on a detailed architect's plan of the proposed work. From my experience, discrepancies between quotes (relating to an identical plan) can be huge.

Get the kablan you ultimately select to sign a contract – even a simple one, in English if necessary – setting out your expectations, and payment in stages. Hold back a sizable sum (perhaps as much as a quarter of the total) until he has hung the last picture on your wall (it is remarkable what kablanim will do in order to get their hands on that final cheque!): getting your shiputz completely, and cleanly, finished is the most difficult task of all.

It is quite common for Americans (with more bucks than sense) to hand over the keys to their new holiday homes to kablanim, to disappear back to the US, and to merely – without even employing an architect – require a finished product upon their return to Israel. As a result, there are many kablanim, in Jerusalem especially, who, upon hearing a foreign accent, will pick a global price for your shiputz out of thin air, i.e., without seeing a plan – indeed, they will often tell you that "You don’t need an architect" – or even understanding what it is that you want to achieve. Should you encounter such a kablan, run a mile! Otherwise, you will end up paying a lot more for your shiputz, and not even know what it is that you have received for your money.

But it is not just agents and builders that one has to be wary of here . . .

Architects. When your nice, obliging Israeli architect – or, seeing as this has turned into a Hebrew lesson, adrichal – does what he or she has contracted to do, i.e., takes you shopping for flooring and sanitary ware, etc, don't forget that, almost without doubt, he will be receiving a healthy percentage of your total bill as an incentive for him to bring more clients to the store. If you ask him about this, he will either deny receiving anything or spin you some yarn about how his percentage is paid by the shop owner out of a special account, which means that you, the client, loses nothing. This is a crock of shit. Whatever sum is received by your architect could – indeed, should– be knocked off your bill instead. And, if you are paying your architect a fee, you might well (like me) ask yourself why he should be profiting further – and without any transparency – at your expense.

The solution? After your architect has taken you to his favoured retailer – often the most expensive in town (what does he care? Anyway he is spending your money, and the larger your bill, the larger his kickback!) – and you have obtained a written quote, find a store with better prices (your kablan might help you with this) and insist that your architect accompanies you there. He cannot refuse. Of course there is nothing to stop him (as I recently discovered, fortunately in time) taking the owner to one side and demanding a percentage (10% in my case), and threatening that, if he doesn't get it, he will instruct you not to buy there. Though, if you lay down the ground rules with the store owner from the outset – letting them know that you are wise to what goes on here, and that you are the one who should be receiving any available discount – you minimize the danger of getting ripped off.

Lawyers. From my experience, no more more trustworthy necessarily than agents. A Jerusalem 'lawyer' last week demanded "a few thousand shekels" from me for another lawyer, "with connections" (unspecified), to put straight a significant oversight in services for which I had already paid. The fact that said 'lawyer' unashamedly informed me that he "only takes cash" (and that he was recommended by an ex-Hasmo!) should, perhaps, have been sufficient warning (to quote the great Ivan Marks, "It is always the frum ones"). My Tel Aviv lawyer is now resolving the problem, gratis.

You should not have to pay a lawyer any more than 0.5% on a purchase or sale.

And an important rider to all of the above: even if you think that you have absorbed it all, or knew it already, bear in mind that there could always be some "combina" ("arrangement," usually shady) that you are totally unaware of. Be wary of everyone in the world of Israeli real estate: most of them are "at it." In fact, the more someone attempts to reassure you that he is not looking to profit at your expense – or, at least, any more than you have already contracted for him to – the more suspicious you should be!

Finally, do your homework, and don't be shy to ask questions of several competitors in the same field: from my experience, being a nudnik (nuisance) is the only hope that you have of discovering what is really going on here.

And yes, this is all, of course, terribly disappointing for the oleh who moved here out of a sense of idealism. But the sooner you accept the reality of life in Israel, the sooner you will feel at home here (even if you never wish to become one of them!) Be'hatzlacha.

[For the original post, with links, go to http://melchettmike.wordpress.com/ See also http://melchettmike.wordpress.com/2009/12/17/israelis-agents-of-our-own-demise/]

http://www.justgiving.com/mike-isaacson/

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