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 either party from payment. If both parties are represented by the agent, then each party, regardless 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 one attempts to circumvent the agent by asking a parent, sister, or brother to purchase the property, they are still required 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, from that moment on he is 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 broker’s license in good standing (either a piece of paper or a card issued by the Real Estate office that is under the auspices of the Ministry of Justice) and the Broker is unable to produce it, there is no legal bond between you and the broker, no matter how many documents you sign.
Fee:
All fees listed here are the basic fees charged by agents in Israel with respect to properties. Certainly there are some cases where we will take more than 2% or less. However, these are rare and very specific cases, and generally, unless otherwise stipulated, it is a regulatory fee scale, practiced by most licensed 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 that is 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. Rental or Leasing – It is usually a 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, since it is considered a “service industry”.
3. Short-term rentals – The fees 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 in terms of fees. Of course, for returning clients, or for 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, just because you decided to take the first property that was shown to you does not mean that the agent should reduce your fee. Actually, in such a case, you should be more than willing to pay the agents’ fees, as due to his ability and knowledge, they were able to get him exactly to the place that matched his 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 this means is that you hire a specific agent for a period of 3 or 6 months to be the only agent 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 alongside 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 listing of properties in Jerusalem.
So yes, the exclusivity will pay off in many cases. However, and this is critical, agents cannot demand exclusivity or try to convince you. It is the owner’s decision to follow that path. You should want to do this if the agency is reputable in the real estate and land investment market and therefore you want to sign exclusivity with more than the agency wants you to sign! However, not signing exclusivity also works well and most agencies maintain working relationships with many reputable agents in the market and deal with them constantly.