I found a home I want to buy, how do I proceed to purchase?

You’ve found a property that checks the boxes and meets your needs, you want to proceed to purchase, but you’re not sure what to do next.  The following are important steps to be taken:

1. Attorney

Hire a real estate attorney as early as possible in the buying process and consult with him/her at every stage of the course.  No agreement should be made, and no monies should be handed over without seeking legal counsel.

2. Inspection

Bring in a licensed engineer to inspect the unit and the building that contains it.  He/she should provide you with a comprehensive report, in writing, that includes all structural or engineering issues and estimates of the costs for repairs or replacement.  The purpose of this is not necessarily to ask the seller for a discount, they’re selling the property “as is”, but rather the inspection is for you, the buyer, to understand what you are purchasing, the condition of the property and the amount of money that will be required to deal with any issues that exist.

3. Appraiser

Request a comprehensive appraisal of the property to ensure that you are not grossly overpaying. To determine a realistic valuation, a Shamai (appraiser) examines several aspects including comparable transactions, the condition of the property, legal status, zoning and permits, the potential of the property and the area in which it is located.

The valuation determined by an appraiser for the mortgage application will be sufficient to determine the fair market value of a property, however, it may not cover all aspects of a comprehensive appraisal.

4. Architect, Designer and Contractor

If the home requires renovation or construction, it is advisable to bring in an architect, designer, and/or contractor to help you understand the potential and the rights associated with the property, and the costs that are likely to be incurred to make the home suitable for you.

5. Bid

Now that you know how much the property is worth and how much you may have to put into it, you can go ahead and place a bid. Make sure to offer a lower amount than your upper threshold as it is likely that the seller will counter-offer your bid.  In most cases, there are a few rounds of “ping-pong” before both seller and buyer reach an agreed price point. 

If you are making an offer before receiving all the information from the above professionals, you should express in writing that your bid is contingent upon the outcome of the engineer’s inspection, the appraiser’s valuation, and, if not yet confirmed, the approval for a mortgage.

6. Mortgage

Ideally, before starting your house search, you should have determined how much you can afford to spend and have a valid mortgage approval “in principle” from a lending bank. If you don’t have that, now is the time to apply for it.

A mortgage application, known as a Bakasha Ekronit, is a request to borrow a specified amount of money and consideration is based on your personal and financial situation. You can apply to any bank for a mortgage, either directly or via a mortgage broker. With the application, you will be required to submit a copy of your ID, and its appendix, pay slips from the last three months (if self-employed, tax reports approved by an accountant), bank statements from the last three months, and if applicable, any other mortgage or loan reports.

An answer should be sent by the bank within a few days, and if approved, you will receive an Ishur Ekroni, a confirmation “in principle”, which is valid for two months. This implies that you have been approved to borrow the amount of money requested, however, it does not mean that you can purchase any property you wish. To take a mortgage on a specific property, you must present the bank with an appraisal that has been conducted by one of the licensed appraisers who works with that bank. The appraisal is to assure you and the bank that the price you’ve agreed to pay for the home is fair.   

Once you are satisfied with the valuation of the property, you’ve agreed on a price with the seller, secured a mortgage, and accepted the condition of the property based on the engineer’s opinion, you are ready to proceed to purchase.  At this stage, your attorney will lead the process.