Apartment purchase agreement archive

About a month ago, I published an article about Purchasing an apartment for investment in Kiryat Gat. This article has become one of the most read articles on the site. Many commented on the article. There was also a comment stating, if you read Gindi's purchase agreement, you will understand that you made a mistake.

I don't usually respond to baseless comments. But, if I'm offered something as interesting and challenging as reviewing a nearly 60-page apartment purchase contract, who am I to refuse all this fun?

First of all, thank you very much to D. (name kept private) who consulted with me about a mortgage for Carmei Gat and agreed that I would photograph the purchase agreement.

Perhaps because I am not a lawyer, I was not very surprised that there was nothing in the contract that could turn an unviable investment into a viable one. To tell you the truth, my opinion against purchasing, at least for investment, in Karmey Gat has strengthened after reading the contract.

I'm happy to share with you some points from the purchase agreement. As mentioned, I'm not a lawyer, and I highly, highly recommend hiring one if you intend to buy an apartment from a contractor. The contractor's lawyer represents Only You are the contractor.

There are so many "whereas" clauses, and no mention of construction according to a building permit. An additional "whereas" clause must be demanded, stating that the construction will be in accordance with the valid building permit. Think it's self-evident? Think again. For example A tower in Petah Tikva whose occupancy is delayed due to a deviation from the building permit (too few parking spaces).

Here we are reaching the most creative stage. In an article about Buying an apartment from a contractor I mentioned that an apartment from a developer is an unknown product with an unknown price. Let’s start with the unknown product. Note that the apartment’s square footage may be reduced by 5% without compensation. The Sale Law allows for 2%, but we won’t get bogged down in minutiae like Israeli law. Another issue is the inclusion of common areas (stairwell, lobby, elevator) as part of the apartment’s area based on their proportional share. In other words, if someone buys a 100-square-meter apartment and thinks they’ll be mopping 100 square meters, I have good news for them. It is very likely that they will only have to mop 80 square meters. Of course, this means they will also only be able to use 80 square meters. To illustrate, a standard room measuring 3 by 4 meters is 12 square meters. In other words, 20 square meters is a significant area deducted from the apartment for those unwilling to sleep in the stairwell or lobby. The buyer undertakes to agree that things requiring repair in the apartment will be fixed after handover. This is important. What is missing? A large portion of readers rent apartments, I assume. Every lease agreement includes a clause for repair timelines. Heaven forbid, I have had more than one conversation regarding the obligation to fix an air conditioner within 3 business days and not five as I requested. Nevertheless. Gindi, on the other hand, does not commit to a repair timeline.

Apartment renovations I’ve spared you the trouble of looking up the relevant section of the contract. In great detail, the contractor states that any changes will delay the apartment’s delivery by up to one month, and that this delay will incur costs for the contractor amounting to 0.51% of the apartment’s price (5,000 shekels for a one-million-shekel apartment).

It is very important to add to this section the determination that at the time of the change request, the contractor will specify in writing the delay in delivery so that the client can decide whether to request the change or not.

Of course, Gindi is just an example. In this case, I actually received their contract. Personally, I've never bought an apartment from a contractor, but I've already read several contractor contracts. The points above are not unique to Gindi.

When purchasing a second-hand apartment, you are making a very expensive deal with someone who is often also inexperienced, and both of you are under great anxiety and stress. Many times the seller is selling the apartment due to some financial pressure or because they have already purchased another apartment and must pay by a certain date.

This is in contrast to purchasing an apartment from a contractor, where the seller is experienced.

The situation where two parties make a very large deal, and in a complex system of pressures, can cause unnecessary friction which will worsen the situation for both parties to the deal.

How to avoid friction when buying a used apartment

To avoid unnecessary friction, we can do a number of simple things:

Hire a lawyer who naturally instills calm and confidence.
To know in advance what things you cannot give up and the reasons for your inability to give them up. Try to narrow this list down to a minimum.
Usually, one of the main sources of stress is the mortgage and its associated tasks: the appraiser, the registrar of deeds, Insurance And so on. Plan a schedule in advance that will allow you to get the mortgage without stress. Share your timeline plans with the sellers to ensure it suits them as well. If the apartment being purchased is also mortgaged, the entire process must be carried out in cooperation with the sellers. Complete each of the tasks on time. Several tasks can be performed concurrently.
Separate the main issue from the secondary ones. Often, sellers, for their own reasons, want to change a technical detail or another in the deal after signing the contract. If it is not significant to you, let it go.
Be assertive when necessary. If you feel that the sellers are not taking you seriously and may impact your purchase and mortgage process, be assertive. For example: In an apartment I once bought, there was a scheduled date for the start of renovations, and afterward, a tenant was already waiting for the apartment. The seller delayed the handover of the apartment for two days, and on the third day, when she could have handed over the apartment, she told me she was "tired and we'll talk tomorrow." At this point, I told her that if she was tired, she could go to sleep, but I reminded her that for every day of delay in handing over the apartment, she had to pay 800 NIS. The tiredness vanished, and at nine in the evening, I received the key to the apartment.

I would be happy to hear your opinion on this article. Please leave a comment or question below.

By the way, despite potential friction, I tend to prefer purchasing a second-hand apartment over buying a first-hand apartment from a contractor., Because in such an apartment there are other hidden costs., And the apartment you receive will be much less predictable and known in advance.

You found an apartment. Congratulations. You hired a lawyer and paid them good money for peace of mind regarding the apartment purchase process.

Stop This is too big a deal to trust someone else to take care of it for you. Just as a slight stomach ache is enough for a family doctor, but before a complicated surgery, it's worth getting a second opinion, so too here, because it's about so much money, you should be involved in reviewing the contract. The good news: it won't cost you any money. All you'll need is to dedicate a little time to carefully read the contract.

Why check a real estate purchase agreement?

Here’s an example from one of the deals I closed: The lawyers (for the seller and for me) agreed on three payments. I took out a mortgage for 75% of the apartment’s value (When investing in apartments, it's advisable to take out the maximum possible loan from the bank. (But that is a topic for a separate article.) The bank stipulates that before using the bank’s funds (a mortgage), all personal funds must be paid in full (in this case, as mentioned, 25% of the apartment’s value).

However, the contract specified a payment schedule that contradicted the bank’s guidelines. Specifically, the contract stipulated that 10% of the apartment’s price would be paid upon signing the contract, 10% with Registering a caveat in the Land Registry and 80% upon receiving the keys to the apartment. On the surface, this is a better contract (for the buyer) than is customary, since 80% of the money is paid only upon actually taking possession of the apartment. In reality, under these terms, it was impossible to obtain a mortgage due to the requirement to pay 25% (the down payment) before receiving the mortgage.

In this case, we had to ask the sellers to accept part of the payment in advance to bring the total to 75%. The sellers agreed to accept the money early, and everything worked out.

It's not always that easy. Sellers are sometimes suspicious, unfriendly, and use statements like "It's written in the contract, so that's how we'll do it..." or they might simply be abroad or busy. In this case, you could get stuck in a situation that might cause a delay in payment to the sellers and the fines associated with late payment.

I suggest you read the contract and draw a timeline on paper, along with the key events on the timeline as written in the contract. For example:

Contract signing date 4/1/2022. First payment in the amount of…
According to the contract, up to 14 days after that, we will write a warning note: we will register April 14, 2022, second payment in the amount of...
30 days later, you receive the key to the apartment: Third payment in the amount of...

Of course, the timeline should also include all the actions we need to take to reach the third payment after we have received the mortgage and have the money in hand.

The schedule must be critically reviewed before signing the contract to ensure there is enough time to obtain a mortgage according to the method The efficient mortgage.