| 12.06.2022 |

The Complete Guide to Buying an Apartment from a Contractor

Purchasing a new apartment is perhaps the most significant event in our lives, primarily because it is usually the largest financial expenditure most of us will make in a single transaction. Additionally, it’s important because our choice of residence has a profound impact on all aspects of our lives and our family’s life, from our proximity to our immediate family and parents, lifestyle and quality of life, our place of employment, children’s education, extracurricular activities, sports, culture, social life, health, leisure, and more.

Buying an apartment from a contractor is more than one short meeting, but rather a complex and long process with a substantial impact on our and our family’s lives. Starting from the day of signing the purchase agreement and throughout the construction period, usually between two to four years (depending on the project’s nature, size, etc.), through occupancy and delivery of the apartment, and then during the inspection and warranty periods according to legal provisions, lasting from one to several years (and even up to twenty years for the building’s construction).

At Tidhar, as those who accompany clients from the initial stages of the project to years after the apartment is handed over, are consistently amazed to see how often this crucial decision – which influences our clients and their families for many years ahead – is made emotionally rather than based on rational considerations and preliminary tests. It’s a psychological phenomenon. When purchasing a car (which costs a fifth of the average apartment), or a mobile phone, buyers conduct thorough research regarding the manufacturer, the seller, and the product. However, when buying an apartment, buyers often skip many steps. They see an advertisement, a good price, and buy without looking into who’s leading the project.

The issue is that at the beginning of the process, most clients we meet at sales centers, in focus groups, etc., are usually young couples buying an apartment for the first time, possibly the only one in their lives. They simply don’t understand the significance of planning and constructing a building from scratch and the risks involved. They don’t know what important questions to ask before signing the agreement.

Moreover, people don’t realize that a new apartment is not an off-the-shelf product; it’s a product that’s tailored to the customer’s needs to a large extent. Personal taste, preferences, and family needs play a crucial role here. It requires the buyers’ involvement throughout the process, joint decision-making by both spouses, as well as time and resources.

When buying an apartment on paper, there is inherently a lot of uncertainty. Clients who have never seen a construction plan before suddenly need, in a relatively short time, to understand what a “suspended ceiling” and “flush mounting” are and why two rooms cannot be combined when there is a structural wall between them. Adding the economic aspect – the financial preparations that usually go into taking a mortgage – often leaves clients confused, as, in many cases, they don’t understand that the seller of the apartment may not necessarily be the one constructing it.

Buyers are often blinded by advertisements, assuming that the seller is reliable and trustworthy, and they don’t always bother to check who the developers are. Do the developers have financial capacity? Are they building the project themselves or relying on an external contractor? Who is their contractor? What have they built to date? How many apartments have they completed? Did they meet the deadline? Was the apartment properly finished? How satisfied are their former clients?  

When purchasing an apartment, buyers must understand they’re getting into a long-lasting relationship. It’s a process that takes several years; during this time, someone builds a whole new product especially for you, followed by a period of inspections and approvals. Very much like any other relationship, it’s important to know with who you’re getting involved. 

So, among many other things, what should you ask before buying a new apartment from a contractor? 

10 Questions You Have to Ask before Buying a New Apartment

  1. Who is the developer? 

Firstly, when buying a new apartment in a project, especially when it’s a project in the planning stages, it’s important to understand that the contractor and developer may be two separate entities. It’s crucial to know exactly who is behind the project.

The developer is the “parent” of the real estate project. They are responsible for planning, bureaucracy, permits, banking supervision, marketing, sales, and ensuring that the construction takes place, among other things. The developer closes the deal with the customer and is legally obligated. Therefore, it’s important to check that the developer has experience, financial stability, adheres to timelines, works with leading planners, and knows who’s the architect responsible for the building’s design. It’s also important to know the bank supporting the project.

There are no shortcuts when it comes to these sorts of preliminary examinations. It’s important to ask many questions, request a list of satisfied customers, and speak with them. Visit projects that the developer and the contractor built together and consider the finishing level. Talk to the residents and hear about their experience, both during the construction process and their customer service satisfaction before and after the delivery of the apartment. Check whether the projects were delivered on time. Search for information online and gather every piece of helpful data.

  1. Who’s the developer? Who’s actually constructing the project? 

Tidhar for example, offers its customers a one-stop-shop and peace of mind over the years; from the purchasing stage, through planning coordination (resident changes), actual construction, service, inspection, and warranty. Since the group deals with both development and contracting, it can integrate high-level development planning with precise execution and meet commitments to customers in terms of quality, service, price, and schedule. The truth is; however, many companies don’t engage in both development and contracting; in most cases, the developer hires a construction company to build the project, Therefore, check both the background and the developer’s reputation and credentials. 

It’s extremely important to check who the developer/construction company is? What is the construction company’s experience? How many projects does it build simultaneously? Is it still active today? Where has the company built projects in the past? Does it specialize in residential construction? Does it meet its deadline? Does it build according to standard? It’s essential to ensure that the developer’s assurances align with the contractor’s delivered product. 

  1. What responsibility does the developer assume, and what is the level of service?

In Israel, the Contract Law (apartments) was enacted to protect buyers and regulates obligations such as providing technical specifications for the apartment (according to a fixed formula), inspecting, and guaranteeing the sold apartment, registering rights within a certain period, and more. The responsibility is divided into two periods – the inspection period varies depending on the nature (e.g., 5 years for cracks, 4 years for plumbing, etc.), and a 3-year warranty period. A common mistake is to think that the inspection period lasts only one year, but in the first year, there is a duty to inspect for any discrepancies, and then, as mentioned, the periods vary based on the nature of the defect. 

It’s important to understand what responsibility the developer takes on after the project is completed. Some companies are committed to customer satisfaction long after construction, offering an extended warranty period or additional services beyond the legal requirements. Others may disconnect after handing over the keys, contrary to the law or providing only the minimum required.

One of the things we hear from clients who currently live in apartments built by Tidhar, is how much of a difference it made that they had someone to talk to throughout the entire process. The sense of having a dedicated contact and a team that cares, goes beyond the 24/7 active customer service hotline or the professional resident affairs team; it’s a mindset and organizational culture that genuinely places the customer at the center. One of our clients expressed it, saying, “I want to personally thank Tidhar for employing such quality people. Beyond their professionalism, they work with passion, and it’s evident and appreciated.”

  1. What protection do you have for your money? 

In general, most projects are financed by a bank. The advantage of banking assistance is that all project funds are transferred to one account, ensuring that all funds are used for the project. It’s important to check the securities and guarantees provided by the contractor to protect your money, as well as to know which bank is involved, especially if the project is financed through a financial entity. 

Currently, the law stipulates a mechanism protecting the buyer, requiring the contractor to provide security, such as a bank guarantee, for payments exceeding 7% of the apartment’s price. This ensures that in extreme cases (such as situations where there something is preventing the company from handing the apartment to the buyer), you are covered for the full amount of your payment. Additionally, all payments are made through a receipt booklet (meaning the funds are transferred directly to the account of the funding bank and not directly to the contractor). Payment in this methos creates an obligation for the bank to issue a guarantee for each payment within the specified periods outlined by law.

  1. Does the project have a valid construction permit? 

Without a valid and official construction permit, it’s illegal for the contractor to start building. Sometimes, contractors offer apartments for sale with a conditional agreement pending receipt of the construction permit. However, it should be noted that the timing of obtaining the permit depends on planning committees. Selling apartments before obtaining the permit is possible, but mechanisms should be in place in the agreement to safeguard your rights (e.g., the right to cancel if the building permit is not received within a specified period).

  1. When is the apartment handover? 

What is the project’s timeline? Is the contractor known for delivering apartments on time? Knowing the handover date will allow you to prepare your move from the previous apartment, planned purchases, etc. Additionally, it’s crucial to be aware that the law stipulates significant compensation for delays in apartment handover. 

  1. What is the size of the apartment? 

The current law (the Contract Law) provides a detailed formula for calculating the apartment’s size. Make sure that the presented data is based on this formula. It’s essential to have a good understanding of the actual size of the apartment you are interested in, excluding the balcony, parking, and proportional part in the staircase area. Go through all parts of the apartment and ensure that the area does indeed add up in square meters as promised. 

  1. What are the specifications of the apartment and building? 

It’s important to understand precisely the guaranteed finishing products and the technical specifications of your apartment – including products and services. Also, concerning the planning aspect – how well the apartment suits your family’s needs, for example, whether the living room is planned in a suitable size for your requirements. Is the ventilation sufficient? 

You should also note that additions such as a gym, a lobby manned by a guard, fast elevators, a residents’ club, and the like, may indeed elevate the building’s status and make it more prestigious. However, during its maintenance expenses, there might be higher costs expressed in an increased payment for the building committee or the management company.

If the building is constructed in accordance with green standard requirements – beyond contributing to the environment, living in such a building would be healthier, and in most cases, ongoing maintenance costs for the apartment and common areas would be lower.

Moreover, it’s advisable to check if there is a utility room in the building and if so, where is it located? Do the building’s regulations include a prohibition on installing a cellular antenna on the building? Are there other concerns in the area like noise or unpleasant odors? Is there a central waste disposal room? And so on.

  1. What does the price include? 

Double-check what the price includes. Generally, the price does not include changes and additions, so it’s crucial to obtain information about the guaranteed credit amount for promised finishing details and the cost of changes and additions to the apartment, etc. Make sure you’ve received a price list for changes when signing the agreement, check if there is a “window” during construction for making changes without additional costs. For example, at Tidhar, a customer requesting changes to the apartment (such as moving sockets and partitions) before the casting the skeleton frame is not obligated to pay extra for these changes – of course, if they are feasible from a planning and execution perspective.

Like in any sales process, you can negotiate with the sales manager regarding the desired price, the requested payment terms, agreed-upon changes and additions, specifications, etc. It is important to delve into the details and conduct price comparisons, as these checks can be worthwhile.

  1. What are the project’s surroundings? 

Are there schools, kindergartens, shopping centers, synagogues, parks, or green gardens in the project and its surroundings? Is the project built close to employment centers, sports, cultural, or leisure facilities? What about road infrastructure and accessibility to main traffic arteries you use? 

It’s essential to know what the future development projects in the area are. You wouldn’t want to suddenly discover a tower is about to block the magnificent view you built on. Make sure to contact local authorities regarding these issues.

Everything said in this post is strictly a recommendation. Culpability for use of any products purchased as a result of this recommendation lies solely with the purchasing party.