Real Estate Agent Contracts in Israel: Dos and Don’ts and Brokerage Fees

Representation:

In Israel, (as in many states in the United States), a real estate agent can represent both the buyer / tenant and the seller / tenant. Note that this does not release either party from the payment. If both sides are represented by the agent, then each side, independently of the other, must pay the agent the agreed fee (unless, of course, otherwise stipulated and agreed).

When you decide to sell, buy, rent or lease a property, we will generally ask you to sign a form (which is a binding legal document), regarding the specific property.

It is advisable that you read this document, which is basically used, in one configuration or another, by all agents licensed in Israel. The form clearly states the agent’s fee (in case of a deal) and stipulates that if one tries to bypass the agent by asking a father, mother, sister, or brother to buy the property, they are still obligated to pay the agent’s fee. It is also important to note that the basic contract stipulates that once you have signed to buy, sell, rent or lease the property, from that moment on you are obliged to pay the agent fee.

It should be noted that real estate brokers and agents MUST be licensed. If you ask to see a broker’s license that is up-to-date (either a sheet of paper or a card issued by the real estate office that is under the auspices of the Ministry of Justice) and the broker cannot present it, there is no legal obligation between you and the broker, no matter how many documents you sign.

Rate:

All fees listed here are the basic fees charged by agents in Israel with respect to properties. Certainly there are some cases where we will take more than 2% or less. However, these are rare and very specific cases and usually, unless otherwise stipulated, a regulatory fee scale is sought, practiced by most authorized brokers and agents in Israel.

1. Buy or sell – 2% of the amount Plus VAT (VAT = Value Added Tax and is currently 16.5%. This is a tax that the government adds to any sale of goods or services. This is NOT at the agent’s discretion. Charge or not charge. No Regardless of the final price paid, the agent must pay VAT to the VAT authorities.) However, VAT is not added to the sale price of the property, unless it is a commercial property.

2. Rent or lease – It is usually a month’s rent. Therefore, if you decide to rent an apartment for $ 1500 per month, you will have to pay 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 to the agent’s fee, as this is considered a “service industry”.

3. Short-term rentals – The fees for this can vary drastically, depending on the length of the rental and the actual rental rate. The normal policy is to take between 10% and 15% of the total offer.

Can you negotiate?

Most of the big name real estate agents have strict no-deal policies in terms of fees. Of course, for returning clients or for those using our agency for more than one property, they will discuss a reduction in rates. However, don’t expect them to negotiate a rate before you have an idea of ​​what you want them to do. Also, just because you have decided to keep the first property shown to you does not mean that the agent should reduce your fees. Actually, in such a case, you must be more than willing to pay the agents fee as due to your ability and knowledge, they were able to get you exactly to the place that met your description! He hired an agent to save him time and frustration, and that’s exactly what he did.

Exclusiveness:

If you are familiar with agents in Israel, they love the term “exclusivity”. In essence, what it means is that you hire a specific agent for a period of 3-6 months to be the sole representative to sell or lease your property. The advantages of this type of relationship are manifold. The agent will not hesitate to advertise the property or work together with other agents who may have clients for your property. The agency will also fully advertise the property both in print and on the Internet. In Jerusalem, the apartment will also be listed on Shiran, Jerusalem’s multiple property list.

So yes, exclusivity will pay off in many cases. However, and this is essential, agents cannot demand exclusivity or try to convince you. It is up to the owner to go that route. You should want to do this if the agency has a good reputation in the real estate and land investment market and therefore you want to sign exclusivity with more than the agency wants you to sign! However, not signing the exclusivity also works well and most agencies maintain working relationships with many reputable agents in the market and deal with them on a constant basis.