The real estate market is hot, and not just because of the weather. Entering the summer 2007 market demands special preparation.

Buyers and sellers can expect it to behave differently than in the past decade: It seems that a more dynamic, surprising and capricious market will be accompanied by unanticipated options, but also by higher-than-expected prices.

TheMarker's recent survey of realtors, entrepreneurs, brokers, analysts and other market players yielded a list of "do's" and "don'ts" for those who are planning to buy or sell homes this season.

"In summer, there is a 25-percent increase in the number of real estate transactions, in sales and, to a greater extent, in rentals," explains real estate price-list editor and market analyst Levi Yitzhak. "Anyone who can will postpone moving till the summer months, when children are on vacation from school and it is easier to take time off from work. Apartments typically require renovation and work, and during the summer these are unaffected by weather-related hazards that can interfere at other times. So, most transactions take place during the summer months and prices increase."

But this summer, the anticipated increase is larger than in previous years. Says Re/Max Israel CEO Bernard Raskin: "We've been waiting for this summer, which may be very interesting, as far as we are concerned. Typically, seasonality in the real estate field usually means a decreased number of transactions in fall and winter, and a sharp increase in summer. What is unusual is that, in recent months, which are typically quieter, here at Re/Max, we have seen activity and transactions that were typical in summer months during previous years.

"Because of that, we are waiting to see what will happen in the summer to the number of transactions. Based on the current atmosphere in the real estate market, I believe that this summer could be the best season in 10 years."
 

Contractors present additional evidence of this trend: They report increased interest in the projects that they are building. Doron Toren, deputy director of marketing for America-Israel believes that the sizzling market could produce changes in promotional processes: "Most construction companies mount their sales campaigns during the High Holidays," he says, "but I believe that this summer will be different. We are already launching a campaign for our project in Petah Tikva."

Other companies are also hurrying to offer a variety of bargains, despite the fact that the holidays have not yet appeared on the horizon. Thus, buyers would be well-advised to follow developments in the construction industry.

We have recently seen fluidity in what are termed "asking prices," and not only in terms of upscale real estate. Take the price of a repossessed and renovated apartment in Givatayim, a month ago. Despite the $30,000 renovation that the apartment required and its estimated value of $170,000, after renovations, the apartment was sold for $165,000. Some of those involved in price-setting explained that potential buyers were willing to offer relatively high prices because they concluded that there were no similar apartments in the area for sale, and that prices would increase in the near future. Thus, the anticipated price increase raised the actual price.

On the other hand, a seller must know the actual value of his property, and avoid demanding an unrealistic price. "Know the value of your home. If you set a price that is far beyond its real value, it will not sell and no one will take you seriously," Raskin warns.

Some properties remain on the market despite their highly desirable locations. There is a three-room apartment, with a patio and a view of the sea, on Rothschild Boulevard, in Tel Aviv, which remains in such a fix. Owners are demanding $450,000 - in other words, $150,000 per room, or $6,500 per square meter. This is even considered outlandish in the soaring market on that popular boulevard, and the apartment is still waiting for buyers.

How does one set a realistic price? In a neighborhood in which there are new and second-hand homes, one can rely on contractors' prices as a reasonable standard. In locations in which there is no new construction, one can examine real estate ads and consult with experts.

Buyers must also become accustomed to this new reality. Though it was recently possible to press sellers to lower prices, such attempts now may mean losing the apartment. The market is hot, buyers are flocking to it, banks are anxious to offer interest rates as low as 4 percent, and if the property is located in a desirable area, buyers must reconcile themselves to the fact that summer 2007 is a seller's market.

The real estate field continues to make progress on the mortgage front: Banks are offering a variety of packages at reduced interest rates. It is sometimes possible to collaborate with building companies to obtain substantial funding and convenient terms. A couple that is looking for a second-hand apartment in a certain area because they believe that they cannot afford a new apartment, may be surprised by the funding options that are available to them. Ashdar CEO Shraga Weisman recommends examining funding options and asking whether construction companies can grant preferred-term loans, in addition to mortgages.

Another extraordinary feature of the current summer season is the fluctuating dollar rate. Not so long ago, we were accustomed to a steadily rising dollar with minor and fleeting dips in the shekel rate. During the recent period, in which we witnessed a sharp decline from a rate of NIS 4.6-4.7 to a rate less than NIS 4, the dollar's behavior was highly unpredictable.

Anglo-Saxon CEO Hanan Schlesinger comments: "We have seen a return to shekel-based contracts in new transactions. Anglo-Saxon's data indicate that more than 20 percent of apartments were already rented for a shekel fee that is not bound to developments in the dollar during recent months. My tip to renters is to sign a contract based on the shekel price, because it is hard to predict what will happen to the dollar rate. Because most people earn a shekel salary, it is recommended that all parties implement contracts in shekels, even if they bind the contract to a predetermined, minimum dollar rate for the sake of calculation. We recommend that they update the price when the contract is renewed at the end of the year.

"There is a dilemma in the case of purchases of previously owned apartments, regarding whether the price should be tied to the dollar, because these are long-term transactions. But in this case, as well, I believe there is reason to bind the contract to local currency."

The desire to save money (on the part of buyers) and the desire to earn money (on the part of sellers) occasionally cause transactions to go up in smoke for no significant reason. Thus, a buyer may announce to a seller, "Someone made me a better offer," though no such offer exists. The buyer may tell the seller, "We found another apartment at a lower price and we are mulling it over." The pay-off that results from such comments is minimal and may only produce a profit of a few thousand dollars, but the risk is enormous and many deals have gone sour because of such statements.

"Be straight at the finish line," Raskin recommends. "You have reached the end of negotiations, and you stand to make only a few thousand dollars, one way or another, but you may find yourself without a partner."

Levi Yitzhak recommends that you do not believe any promise that is not anchored in a written contract. Construction-firm marketing personnel often exaggerate plans to enhance the surroundings, the existing amenities, the size of apartments and other features. Ads depict lovely models of homes described as "luxurious," surrounded by lush green belts, but reality, on the ground, may be far more humble. It is worth employing the assistance of an expert in the field to scrutinize the technical details of an apartment purchase contract.

The second-hand apartment market is similarly rife with story-telling: An apartment seller in Petah Tikva told buyers that he had access to two parking spaces, although the documents that he presented indicated that he had only one space. He maintained that "the construction company that sold me the apartment promised to register the second space in my name." The buyers did not believe him and refused to pay for the second space. When they examined the status of the second space, they were told that it still belonged to the construction company and had yet to be purchased. The company certainly had no intention of giving an additional space to the original owner.

Dror Ohev Zion, managing director of the Dara real estate marketing firm, recommends that buyers pay special attention to the date on which a property becomes available for residence and the opening date of the next school year. "Construction companies make every effort to take the beginning of the school year into account in planning when to make apartments available to residents. For example, if an apartment is slated to be ready for residents sometime in September or October, the company will make every effort to hand over the keys in July or August. The opening of the school year is already taken into account by builders in preliminary planning stages and when determining the date of availability," he explains.

The most important tip: Exercise patience, despite pressure. In a market as complex as this one, it is easy to make mistakes. Gambling is forbidden. Continue to search for the right product at the right price - without compromise. No one should settle for less when settling into a new home.