Israel Real Estate Buyers Guide :
Real Estate Brokers in Israel
Introduction
Historically, the real estate broker service industry in Israel has
been an unregulated and freewheeling area of commerce. The relatively
high housing prices in Israel and the attendantly high commissions
payable to real estate brokers attracted many aggressive sales people
to this field, often without the requisite experience and qualifications.
Accordingly, some of the individuals and firms holding themselves
out as 'professional' real estate brokers lacked the skills, experience
and expertise required to properly advise and serve their clients.
This laissez-faire state of affairs sometimes made it difficult to
distinguish the reputable and trained professionals from the fly-by-night
'boiler room' operatives and contributed to the lack of public confidence
in the real estate broker service industry.
In January 1996, the Israeli Knesset (legislature) passed a new law requiring,
for the first time, the licensing of real estate brokers. Under this new
law, all persons desiring to engage in real estate brokerage in Israel are
required to pass a licensing examination administered by a government-authorized
licensing board. The law includes a "grandfather" clause exempting persons
who provided real estate brokerage services prior to the enactment of the
law from the licensing requirements. This exemption will be effective for
a period of two years from the date of enactment of the law.
The customary brokerage commission payable in Israel is an amount equal
to 2% of the actual purchase price paid for the property, in the case of
sales and purchases of real property, and an amount equal to one month's
rent in the case of one year term rentals. This commission amount is payable
by each of the parties to the transaction (i.e., each of the buyer and seller
or each of the lessor and lessee). All commissions are subject to a 17%
surcharge for Value Added Tax (VAT). The new law requires brokers to obtain
a signed document from their clients setting forth the amount of the agreed
brokerage commission. A copy of the document should be provided to the customer.
