Real estate agent contracts in Israel – do’s and don’ts and broker fees

Representation:

In Israel, (as in many states in the United States), a real estate agent can represent both a buyer/tenant and a seller/landlord. Please note that this does not exempt one or the other party from payment. If both parties are represented by an agent, each party must pay the agent an agreed fee separately from the other (unless otherwise expressly stipulated and agreed upon).

When you decide to sell, buy, rent or lease a property, we usually ask you to sign a form (a legally binding document) about the particular property.

It would be wise for you to read this document in one form or another, which is basically used by all licensed agents in Israel. The form clearly sets out the agent’s fee (at the time of the contract) and states that if a father, mother, sister or brother tries to bypass the agent by asking them to buy the property, you are still obliged to pay the agent’s fee. It should also be noted that once you sign up to buy, sell, rent or lease the property, you are obligated to pay the agent’s fees.

It should be noted that real estate brokers and agents must be licensed. If you want to see if the broker has an up-to-date license (a paper or card issued by the Real Estate Office under the Ministry of Justice) and the license that the broker failed to issue. There is no legal binding between you and the broker – no matter how many documents you sign.

Fees:

All fees listed here are the basic fees that agents in Israel charge on properties. There are certainly some cases where we take more or less than 2%. However, these are very rare and very specific cases, and if it is not usually stipulated, you are looking at the standard fee scale of most brokers and licensees operating in Israel.

1. Purchase or sale – Plus VAT (Value Added Tax) 2% (Value Added Tax is now 16.5%) This is a tax added by the government on any sale of goods or services. This is not decided by the representative. Regardless of the final price to charge or not to charge, the agent must pay to the VAT authorities.

2. Rent or rent – It’s usually a month’s rent. So if you decide to rent an apartment for $1500 a month, you owe twelve months’ rent to the owner for one year and $1500 + VAT to the agent. Again VAT is not added to the actual rent (except for commercial properties), but only the agents’ fees as this is considered a “service industry”.

3. Short-term rentals – This fee can vary greatly depending on the rental period and the actual rental fee. Standard policy is to take 10-15% of the total deal.

Can you negotiate?

Most reputable real estate agents have strict no-negotiation policies in terms of fees. Of course, they will discuss fee reductions for returning clients or those who use our agency for more than one property. However, please don’t wait to negotiate a fee before they have any idea what you want them to do. Also, just because you decide to take the first property he shows you, doesn’t mean the agent has to drop in fees. In fact, in such a situation, you should be more than willing to pay the agent’s fees, because with their skills and knowledge, they are able to take you to the place that matches your description! You hired an agent to save you time and frustration, and that’s exactly what they did.

Loneliness:

If you are familiar with agents in Israel, you will love the word “specialty”. Basically, it involves entering into a 3 or 6 month contract with a specific agent to be the sole agent for selling or renting the property. The benefits of this type of relationship are manifold. The agent will not hesitate to promote the property or work with other agents who have clients for your property. The agency will fully advertise the property in print and on the Internet. In Jerusalem, the apartment is also listed in Shiran, a large listing of Jerusalem properties.

So yes, isolation pays off in many cases. However, and this is critical, agents cannot claim exclusivity or attempt to contact you. It is the owner’s decision to go that route. If the agency is well-known in the real estate and land investment market, and the agency wants you to sign an exclusivity, you’ll want to sign it! However, not signing an exclusivity works just as well and most agencies maintain working relationships with many of the most reputable agents in the market and deal with them on an ongoing basis.

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