For most people, buying a home is by far the biggest purchase they will ever make. But when it comes to deciding whether they are getting their money’s worth, Israelis are far more likely to turn to the Internet than seek a professional valuation – and that could spell trouble.
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In a survey of homebuyers conducted by the Teleseker Institute for the yad2 classified ads website, 53.5% of respondents said they used “online listings for house prices, which they compared to asking prices for similar apartments.” Some 53% marked “websites” as their source of information, while 45.2% said they tapped “information from friends and family” and 25.1% said they asked “neighbors living close by.” The online survey included 505 people, 435 of whom reported that they had purchased a home in the preceding six months.
The two options least chosen were “a property appraiser,” which was selected by only 18.7% of the respondents, and “the Tax Authority,” with just 8.1%.
Not surprisingly, real estate appraisers warn this is a dangerous way to evaluate a property.
“The survey shows that the public still believes it knows everything, but many people have been hurt this way,” says Ohad Danus, the chairman of the Real Estate Appraisers Association in Israel. “We’re talking about the biggest and most costly investment ordinary people ever make in their lives. It’s astonishing that people will spend 500 shekels [$132] testing a car they want to buy for 30,000 shekels but in purchasing a home for more than a million shekels they don’t feel there’s any need to do the same.”
How do you explain that?
“The reason is that when people buy an apartment they feel they’re buying something solid and tangible – a floor, a ceiling, four walls – and what can be wrong with walls? However, ultimately people get hurt by information they didn’t have about the property, things that can significantly reduce its value and that could only have been detected by a professional.”
The cost of retaining an appraiser for an ordinary home ranges from 1,500 to 5,000 shekels, depending on how complicated the job is. Danus says that the Appraisers Association has tried to introduce legislation that would enforce some minimal appraisal as part of any purchase, just as a lawyer is required for signing a bill of sale of a property.
“Politicians understood the need, but have been reluctant to promote legislation that would increase even further the price of purchasing a house,” he says. “The problem is that saving the appraisal fees can end up costing much more down the line. The survey results showing that only 19% of buyers were assisted by an appraiser shows there’s a problem that needs to be addressed.”
“I’m surprised people don’t use appraisers more often,” says Lior Roth, head of Misgav Real Estate. “I would have expected that someone investing 1.5 or 2 million shekels, a typical price in the most desirable locations, would invest a few more shekels in understanding what kind of property he’s buying and what its price should actually be.”
Roth says the cavalier attitude toward home appraisals extends to other areas of home buying. “At big construction sites, where a large number of developers are selling apartments, most customers won’t go to all the sales offices. In a big area with seven or eight such offices, most of them will go to three at most. In contrast, buyers who are not Israeli-born – from the former Soviet Union or immigrants from France or the United States – are much more thorough when buying a home. They’ll carefully compare all the builders, often showing up with charts and carefully taken notes. As a rule, the average Israeli doesn’t have the patience,” he says.
Checking prices in online listings and real estate websites, the most popular choices in the survey, is easy while the online real estate database operated by the Tax Authority has a comprehensive listing of every home sold in Israel but it is very user-unfriendly. But Roni Cohen, director of Eldar Real Estate Marketing, warns that online lists often contain serious mistakes.
“Customers arrive with a lot of information they’ve gleaned from the Internet. They know the relevant price range, the advantages and disadvantages of each neighborhood in relation to schools and transportation — and that’s wonderful. The problem lies in the quality of the information they get concerning sales in the area,” he says. “The online listings are based on information that’s on the Tax Authority website, which is problematic. There are often typos on it and even when the information is entered correctly there is no information about items such as parking or terms of payment, which can also affect the price of the property.”
Yavin Gal-Mor, CEO of the yad2 website, says the site now provides users with higher quality information than in the past. At first, the website was mainly a platform for advertising apartments for sale or rent but now “you can check the history of transactions made in any apartment building, as well as the typical price level in a given area, to the neighborhood’s characteristics.”
Gil-Mor proposes using a new tool that has been developed at the website, called the yad2 index, but admitted that most visitors to the site don’t take advantage of the more sophisticated tools. Only 20.8% of people searching for apartments on yad2 have used the index, he notes. “I’d like to see a higher proportion of people delving deeper into the data, rather than just looking at the asking price.”
Gil-Mor admits that online ads and websites cannot serve as a buyer’s sole source of information. “Even though we try to offer users the highest quality information, the Tax Authority database we use provides only limited information. It focuses on prices, so that only average prices can be deduced from the data. For any given transaction there are missing data or data presented in an unorganized fashion.”
The most salient feature of the yad2 index is that it provides the size of the home.
“In some sales it’s listed by square meters registered at the Land Registry and in others it is based on registration for property tax purposes. In some cases a terrace or part of common areas in the building are included in the figure while in others they aren’t. Each method of measurement gives completely different results and the Tax Authority doesn’t have a consistent policy in this matter. That is why I don’t see our service as providing a price list, but as presenting an index. We help buyers understand what the level of prices in that area should be,” says Gal-Mor.