How is it possible that two people with similar profiles, who bought an apartment in the same project, experience such different outcomes?
Moshe and Yosef, two retirees from the security forces, each separately bought an apartment in a project by an Israeli developer abroad through the Israeli marketing company that marketed the project. Although both received a recommendation to use our legal services, Yosef preferred to save a few shekels and thought he could handle it on his own; after all, this was an investment of only about half a million NIS, and he had no desire to pay a few thousand more shekels to a lawyer.
Moshe came to our office after reading about us and asked that we accompany him in the legal negotiation for the purchase of the apartment. After we examined the project, as is customary, and after negotiations with the developer, we reached understandings and the agreement was signed. The developer did delay delivery of the apartments by 3 months, but when the balance of the consideration was due, Moshe offset the agreed compensation we had settled with the developer in the agreement for the delay. This is a clause we insist on in every negotiation, under which after one month of delay in delivery compensation is paid to the buyer, even though there are those who claim that local buyers are not paid compensation for delay in delivery, or others who try to create for themselves a “grace” period for a delay of 3 months and more (since this is a project abroad to which Israeli law does not apply).
Yosef, by contrast, signed the purchase agreement as presented to him, without examining it in depth and, as noted, without consulting a lawyer. According to the marketer, he asked that his contract be like Moshe's, but did not heed the marketer's statement that this was impossible since it was not customary, and that Moshe had been assisted by a lawyer who made changes to the agreement for him. Yosef came to our office after the developer was 3 months late delivering the apartments without paying him any compensation for the delay, and after delivery it turned out to Yosef that the apartment did not include parking as he thought he had bought.
Yosef, who thought he had saved a few thousand shekels, found himself at a loss. Not only did he not receive compensation for the delay in delivery, he also had to deal with additional costs to buy parking, which was unexpected. In the end, his total expenses far exceeded the amount he saved at the start.
By contrast, Moshe enjoys his new apartment without significant delays and without unpleasant surprises. He received compensation for the delay and saved the money that would have been required to act legally on his own, and in fact the professional conduct paved his way in the investment.
A study by the International Real Estate Institute (IREI) states: “Investors who use legal advice in real estate transactions abroad reduce the risk of significant financial losses by 30% on average.”
- Don't compromise on legal advice: Investing in real estate, especially abroad, requires in-depth legal knowledge. Hiring the services of an experienced lawyer can save you a lot of money, time and hassle later on.
- Comprehensive due diligence: Before signing a contract, make sure you have carried out comprehensive due diligence on the property, including a physical, legal and financial check.
- Understand the local market: Real estate markets abroad can differ significantly from Israel. It is important to understand the local regulations, market prices and business culture.
- Beware of verbal promises: Make sure all agreements are documented in writing in the purchase contract. Do not rely on verbal promises, as they may be hard to enforce.
- Be prepared for delays: Real estate transactions, especially abroad, may involve delays. Be prepared for this and include clauses in the contract that protect you from delays.
A Harvard University study states that “real estate investment abroad can be very profitable but it requires careful planning and effective risk management.”
In the end, a prudent real estate investment requires patience, caution and the use of professional advice. The story of Moshe and Yosef illustrates the importance of making informed decisions based on knowledge.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית