good time You decided to buy a new apartment, you made an appointment with the sales consultant on behalf of the contractor and you took the first step on the way to your dream. You entered the air-conditioned sales hall, you were greeted with a smile, and now two espressos – and we begin.
The sales consultant sitting in front of you is a nice guy, but he also has goals. He will tell you that the apartment you want is at a discount, that it is not certain that you will be able to get that price tomorrow and will suggest that you leave the office with an apartment in a simple way: write him a check for ten thousand shekels, maybe a little more, without obligation – so that he can tell the contractor that he is going to make another deal And you can be calm about the price.
If the building is under construction, it will likely find another way to entice you. He will pull out a yellow hat from under the table and tell you “Come on, let’s go to the apartment” using the temporary elevator. If he looks under the table, and if you are wearing closed shoes, he will tell you that you are lucky “because otherwise you wouldn’t be able to go up to the apartment”. If you are wearing flip-flops, he won’t say anything. Immediately after, when you went up to the apartment and he told you about the view from the balcony (without mentioning that tomorrow they will build another tower across from you), it is likely that you will then pull out the checkbook. He served you another espresso, on the way you remembered another important fact, but then the deal is almost closed.
This process, which thousands of individuals and couples in Israel go through every week, may leave you many times with a broken pelvis. What you don’t know is that if you come to this meeting prepared, you can save tens of thousands of shekels and more.
So just before you fill out an application form for the purchase of an apartment and wave your check, which is not even worth a percent of the apartment’s value, there are a few things that are important for you to know – small things that you can demand from the contractor and will give you a little peace of mind. At least until the first mortgage payment.
How much is another floor worth? A tower under construction (Shlomi Yosef)
Before we start, it’s important to note: many times you’ll see a sign with a phone number directing you to a sales office, and then you’ll find out that it’s actually a purchasing group. Before entering such an office, you should think twice. A buying group has one major advantage: the price on paper. But, and there is a big but here, this price is not always the final price.
An apartment from a contractor has a high value in several aspects: the transaction is less risky and the price is known in advance (with the exception of indexation). In a purchasing group, not only is the price sometimes not final, but the construction is often delayed beyond the estimate. Simple math: an apartment from a contractor that will be ready in two years is worth hundreds of thousands of shekels more than an apartment from a purchase group, which will cost you 200-300 thousand shekels less on paper, and will be delayed for another two years (if you get it at all), accompanied by many other expenses. There are many and varied reasons to refuse a buying group, such as objections along the way, flow problems of the head of the buying group, and more. Inbal Or’s case is very unusual and there are enough other reasons to stay away from them. But about that another time. Now, let’s enter the contractor’s office with Some tips that can save you a lot of money.
1. Exemption from the construction input index
When you reach the negotiation stage, it is important that you talk about the price, but no less important – about the part adjacent to it. The construction input index is an index that calculates the total cost of raw materials: iron, cement, wood, etc. – materials that the contractor buys to build your house. When the index rises, the price of the apartment rises. True, even when the building is almost ready and the contractor does not need to buy iron or wood, you will continue to pay until you receive Form 4 and as long as you have a balance left. Did you pay everything in advance? You are exempt anyway, but our sons – most people find it difficult to obtain 30% equity.
The first thing you should do when you are debating between two projects, is to find out the surrounding costs. One of the things the contractor will offer you is an 80/20 payment method. That is, pay 20% now and 80% at the end. Why is it tempting? Because until you get the key, you don’t need to pay a mortgage. Let’s say the price of the apartment is 3 million NIS, you will pay 600 thousand NIS now and the balance when you receive the key. That’s right, you’ll end up paying a 30-year mortgage. This does not make your payments unnecessary and the contractor does not pay for you, but it allows you a breathing space and above all – to avoid paying the suffocating interest for a certain period.
What he won’t tell you, perhaps because it goes without saying, is that some of this 80% is linked to the construction input index. Therefore, try to bargain and obtain an exemption from the index. At least part of it. You wouldn’t want to find out that it went up by more than 5% this year as well, so the price you’ll pay for 80% is NIS 60,000. Why only 60 and not 120 thousand shekels? Because amendment number 9 to the law, which came into effect a few months ago, states that only half of the balance, in this case, can be attached to the input index (that is, a total attachment of up to 60%, with 20% paid at the signing). This, of course, is assuming that the apartment is ready in a year. If the apartment will be ready in 3 years and the index will increase by 3% on average in the next three years – you will pay almost double – tens of thousands of shekels more.
In the event that you signed such a clause with the contractor, it is likely that you will receive in the mail a demand voucher for the payment of tens of thousands of shekels and you will look surprised. Please note – if you purchased an apartment from a contractor that will be ready in a few years and you signed such a clause, put NIS 100,000 aside. You don’t know what will happen tomorrow and it is likely that after signing the mortgage you will not be able to increase it because the equity you gave the contractor was your maximum. In the end, the bank leverages your loan in relation to the equity.
Therefore, at the very beginning of the negotiations – ask the contractor for an exemption as a condition for signing the contract. We have already encountered contractors who did not agree and offered a compromise: exemption from index for six months, exemption for a whole year or for the entire period. Any such agreement on the part of the contractor will save you a lot of money.
“There is desirable and there is common, it is always better to be rich, healthy and young than the other way around,” says attorney Hagi Adorm, who represents construction companies. “If it is possible and the contractor agrees, that is excellent. But it is highly likely that this will not happen because the contractor will not agree to a full exemption. But apart from that, there are also government tenders by the Ministry of Construction and Housing, price for the resident, discount apartment and the like – in all of which the price of the apartment is linked to the index, up to 60%. In addition, beyond Rami’s government contracts, the construction companies cannot live in a world where they exempt you from the linkage completely. By the way, some of them raised prices to justify the next reduction. The construction input index was affected during the war in Ukraine and the corona virus. This increased the price of inputs.” .
Still, there are companies that give you an exemption for part of the input index.
“Giving you 0 will almost never happen, if you got 20/80 you might be disappointed. What would I advise the readers? Try to insert a clause that some construction companies don’t like – to write that in the event that payment is advanced, no matter what the reason, I am attached to the point of payment and not to the board original”.
“This is how you will protect your deal.” Adv. Hagai Adorm
That is, the starting point of the construction companies, unless otherwise noted, is that the linkage is always according to the schedule, and not according to the date you paid?
“Exactly. They say that ‘you can advance, and you will still be ‘measured’, that is, you will pay linkage differences according to a payment schedule, even for the same money you have already paid.’ Go protect the index. It’s not a complicated thing. They tried to introduce it in the Settlements Law, but to this day it hasn’t happened. It could solve some of the coordinators’ problems.”
But you buy insurance. it costs money.
“You buy insurance and pay a premium. It’s still not clear to me why investment houses don’t do it, a structured deposit tied to an index. If it were to come out in the field, it would solve a lot of problems.”
2. A high floor is worth money
Appraiser, a floor increase is worth money. How much money? Depends on the neighborhood. In a normal neighborhood, 20-30 thousand shekels, but if it is a first line to the sea – you may also pay 100 thousand shekels per floor, certainly if it is a second floor from which you can only see the sea.
In general, to avoid doubts, it is always better to purchase an apartment higher than the second floor. But if you still can’t stand it, it’s important that you know what awaits you under the house. Pay attention to an important detail: a first floor above a garden apartment can turn out to be a disaster – no less. Neighbors in a garden apartment can be a nuisance. Barking dogs are not a violation of the law, a gas grill that blows smoke into your balcony is a completely legal matter and even reasonable noise late at night (karaoke at ten thirty at night – completely legal as long as it did not exceed the permitted decibel limit). In short, an apartment on the first floor above a garden apartment – a huge risk for the price. And that’s what you should be careful about.
“It’s worth trying and haggling,” says attorney Adorm. “The value of a floor varies between NIS 20-30 thousand In the expensive apartments in Tel Aviv, this is a gap of NIS 80,000. If you applied for an apartment on the 4th floor and the contractor gave you the 6th floor – you have another NIS 40-50 thousand net in your pocket.”
3. Check the environmental plan
Before you sign the apartment to the contractor, download the environmental plan from the internet. If you need to, go to the engineering department in your area of residence, ask for a building permit or simply – search first on the “Gov Map” website. You wouldn’t want to find out that tomorrow morning a shopping center, nursing home or kindergarten will be built under your balcony.
The contractor will not always tell you this (if you sue in the future for bad faith in negotiations, there is a chance that you will receive compensation for damage to the landscape or the quality of life – but who needs that?). “It’s simple and can be found on the Internet, you can find it anywhere. Check it out, don’t say ‘but I didn’t know,'” says Attorney Adorm.
4. Ask for storage and air conditioning, negotiate the conditions around
“Many times, you will discover that there is a warehouse floor on the bottom floor and you did not know about it. During the negotiations, ask to know if there is one and ask for a warehouse (all this if you do not have a warehouse adjacent to the apartment). Please note – for a warehouse on the first or lower floor, you will not pay property tax For an attached warehouse – yes. If you don’t have an attached warehouse and you get a warehouse on the bottom floor, it’s a net profit.
What more can you ask for? Double or Turkish (contiguous) parking at a reduced price, and improve the level of equipment of the apartment. For example, many times the contractor will offer you “preparation for the air conditioner”. When you get home, you’ll find that you misunderstood and he just made a cast for you. If the contractor is under pressure, try to also request a full air conditioner unit, including dampers (control from each room). Sometimes, even if the price is almost the same – it pays off. No one will mess with you after you enter the house.
5. Protect your deal
Two more important and critical things in negotiations with the contractor. Adv. Adorm explains that “the most important thing for the buyer is to have protection for the transaction. He accepts sales law guarantees and pays in voucher books. If there is a lending bank, this does not exempt it from checking the transaction. With a bank it is much safer – legally, financially and planning – he has already checked everything, so you can sleep more peacefully.
“In addition, pay up to 7% by signing the trust. Under no circumstances should you transfer the money to a bank or company, but to a trust account, and only when there is a deposit to the escort account, the trustee’s attorney pays the first voucher, and hence every buyer pays according to the register, that is, according to the agreement.”
What about the building permit?
“This is another thing that is important to check, that there is an order to start construction. The execution in Israel is without surprises and much smoother. On the other hand, it should be remembered that in the discounted projects and the price for the resident, it is allowed to market with a committee decision on the permit and not only with the permit. In projects on the free market, the apartment is allowed to be marketed even before the permit , but make sure that there is an appendix – insert a clause that if a permit is not granted within six months or a year, you can cancel the agreement and get the money back. All this, in a situation where a permit is not granted, which is fundamentally different from the sales law plans that I signed. That is, you bought an apartment in a green building and left Purple? This is a fundamental change. The square footage is lower or the floor is different from what you received? Of course you can cancel or receive compensation.”
6. The price
We almost forgot, there is also a price at the end. Just before signing the contract, after you have accepted some of the requirements we have offered you here, you can swing the ax for the last time. No matter how stressed you are about signing, ask for an additional discount. The contractor will not be ashamed to send you a payment voucher of tens of thousands of shekels in case the input index rises. You too, try to squeeze the lemon a little more. A small discount is worth another NIS 5,000-15,000 in your bank account. It won’t be easy, but it’s worth the effort.