Approaching the deadline: What awaits 'on paper' apartment buyers

Real estate reviews published over the past year by the Chief Economist at the Ministry of Finance have highlighted the phenomenon of contract cancellations for apartments purchased 'on paper'. While this is not a widespread phenomenon, the increase in purchase volumes over the years has naturally led to a higher percentage of cancellations.

Galit Winder Teper, CEO of Phoenix Construction Financing, believes that most buyers will meet the task: "A significant portion of buyers, especially those for whom this is their intended home, will complete the purchase. Exceptions will only be those facing significant financial challenges, such as an inability to sell their old apartment or secure a mortgage. Those who bought two or three years ago still hold a good position relative to today's prices."

Winder Teper also notes that there is a significant cancellation penalty. In projects financed by her company, apartments whose purchase was cancelled have been resold by developers at prices not lower than the original purchase price.

The Developers' Perspective

Ilan Gordo, Treasurer of the Israel Builders Association, addresses the issue: "The economic reality of recent years poses challenges for all parties. Developers want to sell at attractive prices but must ensure their buyers can meet their obligations. Banks that provided the financing have already performed underwriting, so we expect most buyers to fulfill their commitments."

However, buyers are advised to ensure their financial standing remains as strong as it was when the bank initially approved their credit. Risks are higher for couples who have experienced layoffs or unexpected financial burdens.

Udi Levy, VP of Sales at the Knaan Group, adds: "Most developers choose to help buyers exit the situation with minimal damage, whether through flexible payment arrangements or assistance in selling to a third party. This is a matter of reputation and maintaining a buyer base for future projects."

Risks and Strategies

Daniel Rokach, CFO of the Ram Aderet Group, emphasizes the importance of comprehensive checks: "When a buyer postpones taking a mortgage, we involve consultants to examine the full financial picture. The goal is to ensure buyers can handle not only the initial payment but all subsequent obligations until the transaction is complete."

Kobi Ronen, VP of Marketing at Oron Nadlan, calls for responsibility: "Buying an apartment requires long-term planning. Developers also bear responsibility by verifying the repayment ability of clients at the time of contract signing."

Alternative Viewpoint

Adv. Ilan Leibovitz, a former MK, warns: "In recent months, we have seen buyers who prefer to lose the contractual penalty rather than take a mortgage at current high interest rates. For them, this is not a rash decision, but a way to avoid 30 years of debt beyond their means. Developers should check right now which buyers are still able to close the deal."

Nir Shmul, CEO of the Shanir Group, agrees that the deadline has arrived: "We see that all parties are making efforts to preserve transactions. Forfeiture is a rare measure, as developers do not want to be left with vacant units in a difficult market."

Expert Recommendations

CPA and jurist Eran Buchris emphasizes the need for professional planning: "One should not reach the payment day without a defined financial solution. It is necessary to analyze liquidity and capital sources to adapt the credit structure to the client's budget."

Dr. Bella Barda Baraket summarizes: "A smart developer maps buyer profiles in advance and maintains transparent communication. Buyers should treat the payment date as a strategic event: re-checking financing options and preparing for various scenarios."

Israel Atia, CEO of the Financial Planning Center, adds: "The biggest mistake is waiting until the last month. Buyers should re-check their financing ability months in advance to avoid double pressure on both themselves and the developer."