The price on the contract is just the beginning of the story. Many first-time buyers in Israel are blindsided by a cascade of taxes and fees that can add a staggering 10% or more to the total cost of their home. Forgetting to budget for these “hidden” costs is a recipe for financial disaster.
The biggest expense is the Purchase Tax (Mas Rechisha). This is a tiered tax calculated on the property’s value. For a first-time homebuyer, the rates are relatively low, but for investors or those who already own a property, the tax starts at 8%. On a multi-million shekel apartment, this is a massive sum that must be paid shortly after signing the contract.
Next are the professional fees. Your real estate lawyer’s fee is typically 0.5% to 1.5% of the purchase price, plus Value Added Tax (VAT, known as Ma’am). The real estate agent’s fee is usually around 2% plus VAT. If you are taking a mortgage, the bank will charge an arrangement fee, and you’ll need to pay for a property appraiser (shamai). All told, these fees can easily add another 3-5% to your bill. Ignoring these costs is not an option; they are a fundamental part of the purchase price.
Too Long; Didn’t Read
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Purchase Tax (Mas Rechisha): The largest extra cost, with rates starting at 8% for investors and lower, tiered rates for first-time buyers.
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Professional Fees: Budget for lawyer’s fees (0.5%-1.5% + VAT) and real estate agent’s fees (2% + VAT).
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Mortgage Costs: If you get a loan, you will also pay bank fees and for a mandatory property appraisal.
