In Israel, (as in many states in the United States), a real estate agent, may represent both the buyer/renter and seller/leaser. Please bear in mind that this does not free one or the other party from payment. If both sides are represented by the agent, then each side independently of the other, must pay the agent the agreed upon fee (unless of course it was stipulated and agreed upon otherwise).
When you decide to sell, purchase, rent or lease a property, we will usually ask you to sign a form, (which is a binding legal document), in regard to the specific property.
It is wise for you to 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 case of a deal) and stipulates that if one attempts to circumvent the agent by asking a father, mother, sister or brother to purchase the property, you are still obligated to pay the agents fee. It is also important to note that the basic agreement stipulates that once you have signed to purchase, sale, rent or lease the property, from that moment you are obligated to pay the agents fee.
It should be noted that Real Estate Brokers and Agents MUST be licensed. If you demand to see the license of a broker that is up to date (either a piece of paper or a card issued by the Real Estate office which is under the auspices of the Ministry of Justice) and the Broker cannot produce it, there is no legal binding between you and the broker – no matter how many documents you sign.
All fees listed here are the basic fees that agents in Israel charge in regard to properties. There are certainly some cases where we will take more than 2% or less. However, these are rare and very specific cases, and usually if not stipulated otherwise you are looking at a normative fee scale, practiced by most Brokers and licensed agents in Israel.
1. Purchase or sale – 2% of the amount Plus VAT (VAT=Value Added Tax and currently it is 16.5%. This is a tax that is added by the government on to any sale of goods or services. This is NOT given to the discretion of the agent to charge or not to charge. No matter what the final price paid, the agent must pay VAT to the VAT authorities.) VAT however, is not added on to the price of the property sale, unless it is a commercial property.
2. Rental or Leasing – is usually one month of rent. Thus if you decide to rent an apartment for $1500 per month, then you will owe twelve months worth of rent to the owner for one year, and $1500 + VAT to the agent. Again VAT is not added on to the actual rental (except in commercial properties), but only to the agents fee as this is considered a “service industry”.
3. Short Term Rentals – Fees for this can vary drastically, depending upon the length of the rental and the actual rental fee. Normal policy is to take between 10-15% of the overall deal.
Can you negotiate?
Most reputable real estate agents have strict policies of non-negotiation in terms of fees. They will, of course, for returning clients, or for those who use our agency for more than one property, discuss a reduction in fees. However, please do not expect them to negotiate a fee before they have any idea about what it is you wish them to do. Also, just because you decided to take the first property you were shown, does not mean the agent should go down in his fee. Actually, in such a case, you should be more than willing to pay the agents fee, as due to their ability and knowledge, they were able to take you to exactly the place that met with your description! You took an agent to save you time and frustration, and that is exactly what they did.
If you are familiar with agents in Israel, they love the term “exclusivity”. In essence what it means, is that you contract with a specific agent for a term of 3 or 6 months to be the sole representative to either sell or lease out your property. The advantages of this type of relationship are many-fold. The agent will not hesitate to advertise the property or work together with other agents who may have clients for your property. The agency will also fully advertise the property both in print and on the Internet. In Jerusalem, the apartment will also be listed in Shiran, the multiple listing for Jerusalem properties.
So yes, exclusivity will pay off in many cases. However, and this is critical, agents cannot demand exclusivity nor try to talk you into it. It is the owner’s decision to go that route. You should want to do it if the agency is reputable in the real estate and land investment market and thus you will want to sign exclusivity with more than the agency wants you to sign it! However, not signing exclusivity also works well and most agencies maintain working relationships with many reputable agents on the market, and deal with them on a constant basis.