Sorting out real estate promotions: how do you know if it's a good deal?

For some time now, apartment buyers have been encountering a variety of promotions and benefits from real estate developers. At the same time, due to the decline in the volume of transactions in the industry, developers and contractors are offering a wider range of options, from financing terms, reduced index linkages, and specification upgrades to creative promotions from customer clubs, tenders, and more. Alongside the advantage for potential buyers, who can get much more today, this is exactly the time to be careful. It is important not to confuse a "big discount" with a "good deal". A promotion is a way to present a deal, but one must always remember that this does not necessarily mean the final price is attractive. So how do you know? In this article, we will try to answer this question.

Erez Cohen, a real estate appraiser, starts with the basics — the price of the apartment — and explains that in a period of many promotions, buyers should first look at the value of the property, not the size of the discount. According to him:

"The big number that appears in the advertisement ‘a discount of 300 thousand shekels’ is not necessarily the most important figure. Before getting excited about the size of the discount, one must understand what the price of the apartment is after the benefit, and mainly how it compares to similar apartments."

Cohen continues: "In a period when we see more and more promotions and benefits from developers, a discount of 200 or 300 thousand shekels sounds significant, but the real question is what the price of the apartment was in the first place and what its market value is. A buyer should check how much similar apartments are sold for in the project and in the area, and not settle for the price presented to him as the original price before the promotion. In addition, one must look at what is received for the price. The location of the apartment, the floor, the air directions, the parking, the storage room, the specification, and the delivery date are part of the value of the deal. Sometimes the benefit does create a good deal, but sometimes it mainly changes the way the price is presented. Therefore, I would suggest that buyers ask themselves a simple question: if they didn't call it a 'promotion', would I still think this is an apartment worth the price I am paying for it? If the answer is positive, there is a better basis to move forward. On the other hand, this is definitely a period when buyers have more ability to negotiate. One should not settle for the discount the developer offers. One can examine the entire deal and try to improve also the payment terms, the linkage, the specification, or other components. The goal is not to get the biggest promotion, but to reach a price and conditions that reflect the true value of the apartment."

---

Not just the price of the apartment. Also the price of money

Even if the final price of the apartment seems attractive, one must examine how to finance the purchase. Promotions, such as payment installments, payment deferral, or subsidized interest, can significantly ease the buyer's burden in the short term, but it is important to understand what they mean for the deal as a whole and for the repayment over time.

Shalom Amoyal, head of the credit department at Bank Jerusalem, tries to sort things out:

"In a period when we see more promotions and benefits from developers in the market, it is important for buyers to look beyond the headline and examine the full financial picture. From the perspective of the mortgage system, we meet quite a few buyers who focus on the price of the apartment or the benefit offered to them, but do not examine the significance of the deal structure for the total financing that will be required of them along the way, together with the monthly repayments for the total financing. The total subsidized interest, payment installments, payment deferral, or reduced linkage can be significant, but they must be examined in relation to the total price, the required equity, the timing of payments, and the cost of financing over the life of the deal."

According to Amoyal: "We recommend that buyers examine their repayment ability in advance, leave a safety margin for unexpected developments, and understand how possible changes in interest rates, the influence of the index, or income might affect the monthly repayment. Precisely in a period when there are more options and promotions, a wise financial consumer is not necessarily the one who finds the biggest benefit, but the one who knows how to compare deals and choose the one that suits his financial ability even on the day after the purchase."

---

Don't be shy to negotiate

Since we are in a buyer's market, one of the significant changes for apartment buyers is bargaining power. Ron Novotny, CEO and owner of the Anglo-Saxon brokerage chain and founder of Proply, an AI platform for real estate decision-making, says that buyers today have a better opportunity to compare and negotiate:

"The situation in the market creates an important change in terms of buyers. They have more opportunity to stop, compare, and negotiate. In periods when demand was high and apartments were sold quickly, the buyer had less room for maneuver. Today, when there is more inventory and fewer transactions, it is not correct to come to a deal with the feeling that one must accept the conditions offered as they are."

Novotny recommends that buyers come to negotiations knowing their alternatives: "Check how many similar apartments are on the market, how long they have been offered for sale, what the prices of similar properties are, and what other developers are offering. The more information the buyer comes with, the better he can understand if the offer he received is really attractive and negotiate from a stronger position. It is also important not to get fixated on the word 'discount'. If the developer does not want or cannot lower the price, one can try to improve other clauses in the deal, such as payment terms, linkage, upgrades, parking, storage room, etc. Every buyer has different needs, so sometimes better deal terms will be worth more to him than another few tens of thousands of shekels in the price of the apartment."

---

4 questions every buyer should ask before signing:

1. What is the real price of the apartment? Not what the price was before the discount, but how much is actually paid and how this price stands in relation to similar apartments sold in the area.

2. What is the benefit really worth? Is it a real financial saving for me, or a benefit that looks attractive in advertising, but its value for me is low?

3. How much will the entire deal cost me? One must take into account not only the price of the apartment, but also the financing, interest, linkage, required equity, and timing of payments.

4. What else can be improved? Even if a promotion has been offered, one does not have to see it as the end of the negotiations. One can examine payment terms, linkage, upgrades, parking, storage room, and other components.