Real Estate Agent Contracts in Israel: Dos and Don’ts and Brokerage Fees
Representation:
In Israel (as in many US states), a real estate agent can represent both the buyer/tenant and the seller/landlord. Please note that this does not release one or the other party from payment. If both parties are represented by the agent, then each party, 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 usually 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 licensed agents in Israel. The form clearly states the agent’s fee (in the event of a deal) and stipulates that if you try to circumvent the agent by asking a parent, sister, or brother to buy the property, you are still obligated to pay the agent’s fee. It is also important to note that the basic contract stipulates that once he has signed to buy, sell, rent or lease the property, he is then obligated to pay the agent’s fees.
It should be noted that real estate brokers and agents MUST be licensed. If you demand to see a current broker’s license (either a piece of paper or a card issued by the Real Estate office which is under the auspices of the Ministry of Justice) and the Broker cannot produce it, there is no legal link 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 in respect of 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, if not otherwise stipulated, it is a normative fee scale, 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 added by the government to any sale of goods or services. This is NOT granted at the discretion of the agent. However , VAT is not added to the sale price of the property, unless it is a commercial property.
2. Rent or Leasing – It is usually one month’s rent. So, if you decide to rent an apartment for $1,500 per month, then you will owe twelve months rent to the landlord for one year and $1,500 + VAT to the agent. Again, VAT is not added to the actual rent (except on commercial properties), but only to the agents fee, as it is considered a “service industry”.
3. Short term rentals – The rates for this can vary drastically, depending on the length of the rental and the actual rental rate. The normal policy is to take between 10-15% of the total deal.
Can you negotiate?
Most reputable real estate agents have strict no-negotiation policies when it comes to fees. Of course, for returning clients, or those who use our agency for more than one property, they will discuss a reduction in fees. However, don’t expect them to negotiate a rate before you have an idea of what you want them to do. Also, the fact that you decided to take the first property shown to you does not mean that the agent should reduce their fees. Actually, in such a case, you should be more than willing to pay the agents fees, because due to his ability and knowledge, they were able to take you exactly to the place that fit your description! You hired an agent to save yourself time and frustration, and that’s exactly what they did.
Exclusive:
If you’re 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 or 6 months to be the sole representative to sell or lease your property. The advantages of this type of relationship are multiple. 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 online. In Jerusalem, the apartment will also appear on Shiran, the multiple property listing in Jerusalem.
So yes, the exclusivity will pay off in many cases. However, and this is essential, agents cannot demand exclusivity or try to convince you. It is the owner’s decision 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 will want to sign exclusivity with more than the agency wants you to sign! However, not signing exclusivity also works well and most agencies have working relationships with many reputable agents in the market and deal with them constantly.