Are there foreclosures in Israel?

Yes, but not in the American sense. An Israeli bank can force the sale of a mortgaged home. For a home an individual lives in, though, the law sets a waiting period first, the bank has to go through the Execution Office (Hotza’a LaPoal, הוצאה לפועל), and the borrower gets more than one chance to catch up on the missed payments before any sale. The process is slow and supervised, not a quick auction at a fraction of market value.

When a homeowner falls behind, the bank cannot start enforcement straight away. A request to enforce a mortgage on a home an individual lives in can be filed with the Execution Office only after 6 months of arrears, counted from the first missed instalment. The request is first for the arrears, meaning the missed payments, not the whole loan. The exceptions are set out in the Execution Law, for example when the borrower owns another home or has left the country for a long period without paying.

If the arrears are still unpaid, the Registrar of the Execution Office, not a court, can appoint a receiver (kones nechasim, כונס נכסים) to take control of the home and sell it. Even then the borrower has 90 days from the appointment to pay the arrears plus the interest, fees and costs added to them, or to pay half and give security, to the Registrar’s satisfaction, that the rest will be paid within 6 months of that payment. Paying the arrears and the additions in full in that window halts the enforcement.

The receiver’s job is to get the best price for the home, under the Registrar’s supervision. The home is appraised, the sale is advertised, and buyers submit offers with a deposit of 10% of the offer. The receiver then holds a bidding round between the bidders, and the sale needs the Registrar’s approval. Selling through real estate brokers is allowed only with the Registrar’s prior approval. So a receivership sale is not a fire sale, but it is not an ordinary listing either.

The law also protects the family’s housing. The Registrar may not order the sale of the home and the eviction of the borrower and the family living with them unless they will have a reasonable place to live, can afford one, or are given alternative housing (sidur chalof, סידור חלוף). A mortgage deed can replace this protection with a more limited arrangement, but only if the deed says so explicitly and its meaning was explained to the borrower in plain language.

So while a bank can force the sale of a home in Israel, it comes late, after fixed waiting periods, and under the Registrar’s supervision. The dream of snapping up a foreclosed property for pennies on the dollar is, for the most part, a myth in the Israeli real estate market. If you are the borrower and already behind on payments, our guide to being behind on your mortgage in Israel walks through each deadline and option in order.

Too Long; Didn’t Read

• Israeli banks can force the sale of a mortgaged home, but not American-style.

• For a home an individual lives in, the bank must wait 6 months from the first missed payment, and the claim starts with the arrears only.

• The Execution Office Registrar appoints the receiver, and the borrower then has 90 days to clear the arrears.

• A forced sale is advertised, offers carry a 10% deposit and bidders compete for the home.

• The family’s housing is protected unless the mortgage deed validly limits that protection.

• Buying deeply discounted foreclosed homes is not a realistic strategy in Israel.

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