How does real estate brokerage work in Israel? Most people know the visible side: a broker shows an apartment, schedules viewings and collects a commission at the end. In practice, apartment brokerage (tivuch dirot) is a field regulated by the Real Estate Brokers Law, 5756 1996, which determines who may broker, what the broker must do, what the broker is prohibited from doing and when the right to a fee arises. Anyone who understands how real estate brokerage works in Israel knows what to ask of the broker, what not to expect, and when to hand the wheel to the lawyer. In this guide we go over the legal framework and the actual stages of the work, from the first meeting to the signing.
How real estate brokerage works in Israel: what a broker does and what the law prohibits
The law defines real estate brokerage as bringing together, for consideration, two or more parties for the purpose of entering into a transaction in a property right. In other words, the broker’s central role is to bring the parties to a deal: to find a property or a buyer, to show it, to make inquiries, to manage the commercial contacts and to bridge the positions.
Equally important is what the broker does not do. Section 12 of the law prohibits a broker from drafting documents of a legal nature relating to the transaction, from assisting in drafting them, or from representing a client in legal negotiations toward drafting them. A broker who breaches this section loses the right to brokerage fees. The practical meaning:
- The broker conducts the negotiation on price, dates and payment terms at the commercial level.
- The sale agreement, and also a memorandum of understanding (zichron dvarim) that may be considered a binding agreement, are drafted by lawyers.
- A broker who suggests you “sign something short to reserve the apartment” without a lawyer is acting against the spirit of the law, and may expose you to a commitment you did not intend.
What the sale agreement includes and why early signing is risky is explained in the guide to the apartment sale agreement.
Who may broker: a personal license, not a brand
Under Section 2, it is prohibited to engage in real estate brokerage or to present yourself as a broker without a valid license. The license is granted to a person after passing the examination of the Registrar of Real Estate Brokers at the Ministry of Justice, and must be renewed by paying an annual fee. Section 13 prohibits employing an unlicensed person in brokerage, except in administrative roles. So it is not enough that the office is well known: the person who shows you the apartment and negotiates with you must hold a license personally. The check takes a minute and is explained in the guide how to check a broker license.
The brokerage services order: why the signature comes before the address
Almost every brokerage process begins with one document: a written order to perform a brokerage action (hazmanat sherutei tivuch). Section 9 of the law provides that without a signed order containing the details set out in the regulations, the broker is not entitled to brokerage fees. That is why a professional broker will ask you to sign before giving an exact address or showing a property.
From the client’s point of view, the order is not just a form. It establishes which properties were shown to you through the broker, at what commission rate and when it is paid. Before signing, it is worth reading it like any contract. The details that must appear in it, customary commission rates and the calculation with VAT are set out in the guide to broker fees.
When a broker is entitled to a fee: the effective cause
Even with a license and a signed order, the right to brokerage fees arises only if the broker was the effective cause (gorem ya’il) that brought the parties to a binding agreement, in the words of Section 14. This is the test on which most disputes turn, and the courts examine it according to the facts of each case. A few situations that illustrate the logic:
- A broker showed an apartment, and the buyer went back to it directly two months later. If the showing is what created the connection, the broker may be considered the effective cause even without taking part in the closing.
- A buyer saw the owner’s listing before the broker showed them the apartment. Here the connection came from another source, so it is worth telling the broker in advance and not including the property in the order.
- Two brokers showed the same apartment to the same buyer. The question is which of them actually brought the deal to fruition, not only who came first.
The practical rule is simple: early transparency prevents later disputes. If you already knew a property, say so before signing.
The broker’s duties to you under the Real Estate Brokers Law
The least known part of the law is the duties it imposes on the broker. They apply to every licensed broker, regardless of the commission rate or exclusivity.
| The duty | Section of the law | What it means in practice |
|---|---|---|
| Loyalty and fairness | Section 8(a) | To act loyally, fairly and in an accepted manner, and to give the client all material information in the broker’s possession about the property |
| Skill and care | Section 8(b) | To take reasonable measures to find out material information about the property, not merely pass on what was said |
| Disclosure of personal interest | Section 10 | If the broker, a relative or an entity they control has an interest in the property or the deal, the broker must disclose it and obtain written consent |
| Confidentiality | Section 11 | It is prohibited to disclose information the client provided without the client’s consent, unless the law requires it |
| Prohibition on legal actions | Section 12 | Not to draft legal documents and not to represent in legal negotiations |
What counts as material information? For example, knowledge of a building violation in the apartment, of an urban renewal process advancing in the building, of a damp problem the broker saw during the visit, or of a plan affecting the surroundings. The law does not turn the broker into an appraiser or an engineer, but it does require the broker not to hide what they know and to find out what is reasonable to find out. Breaching these duties is a disciplinary offense about which you can complain to the Registrar of Real Estate Brokers.
To whom the broker owes duties when working with both sides
In Israel it is common for one broker to work with both the seller and the buyer in the same deal, with a signed order from each side. This is permitted, but it creates a situation worth understanding: the broker owes a duty of loyalty to both clients, and the confidentiality duty of Section 11 applies toward each of them. Two practical points follow:
- An honest broker will not tell the buyer the minimum price the seller is willing to accept, and will not tell the seller the buyer’s maximum budget. If a broker tells you the other side’s secrets, it is likely they are telling yours too.
- The broker’s role is to bring the parties closer and pass on factual information in full, not to represent one side against the other. Anyone who wants representation committed only to them will rely on their own lawyer and their own appraiser.
When each side works with its own broker, each broker owes duties first and foremost to their own client, and each side pays according to the order it signed. The financial aspects of such a situation are detailed in the broker fees guide.
Regular brokerage and exclusivity
In most deals the seller works with several brokers in parallel, and each of them is entitled to a commission only if they were the effective cause. The other option is exclusivity (bil’adiut): the seller lets one office manage the sale for a defined period. The law limits the exclusivity period for a residential apartment, requires signing a separate document, and obliges the broker to carry out marketing actions set out in the regulations. If the broker has not carried them out by the end of one third of the period, the exclusivity ends. All the details, including what happens when the seller sells on their own during the exclusivity period, are explained in our guide to exclusivity in apartment brokerage.
How real estate brokerage works in Israel in practice: from the first meeting to the contract
To understand how real estate brokerage works in Israel day to day, it helps to look at both tracks. The process differs slightly between seller and buyer, but the logic is the same: first you investigate, then you market or search, and only at the end do you enter into a legal commitment.
On the seller’s side
- Introductory meeting and property visit. The broker gets a sense of the apartment, the building and the documents: land registry extract (nesach tabu), permits, existing mortgage.
- Pricing. Analysis of comparable deals actually signed, not listings, and a decision on an opening price and a range of flexibility.
- A written order, and if so decided, a separate exclusivity document.
- Preparation and marketing. Photography, description, choice of exposure channels and the right audience.
- Viewings and screening. Early verification of buyers’ seriousness and their financing capacity.
- Commercial negotiation on price, handover date and payment schedule.
- Handover to the lawyers for due diligence and drafting the contract.
On the buyer’s side
- Defining needs and budget, including a mortgage approval in principle and the expected purchase tax (mas rechisha).
- A written order for every property shown.
- Viewings and comparison, with information about the building, planning in the area and previous deals.
- Preliminary checks before an offer, such as a land registry extract and the municipal building file.
- Offer and negotiation.
- A lawyer who examines the property in depth and drafts the agreement.
On both tracks, the point of transition from the broker to the lawyer is the most important moment. Up to it, the broker leads. From it onward, every written word goes through a lawyer. RS Nadlan does not provide legal or tax advice, and for such questions you should consult a lawyer or a tax advisor. On whether it is worth working with a broker at all, and when you can do without one, we have a separate guide: why it pays to hire a broker.
Brokerage in rentals: the same law, different emphases
The Real Estate Brokers Law also applies to rentals, because a lease is also a transaction in a property right. That means a broker showing an apartment for rent also needs a license and a signed order, and is subject to the same duties of loyalty, disclosure and confidentiality. The differences are mainly practical:
- In rentals the pace is faster, so orders are often signed during the viewing itself. Here too, read the order before signing.
- The customary commission is set differently than in a sale, and sometimes only one side pays it. The practice is explained in the broker fees guide.
- The key check for a tenant concerns the landlord and the property: who the registered owners are, whether there is a mortgage, and the actual condition of the apartment. For owners, the check concerns the tenant and the guarantees.
In both cases, the lease agreement is a legal document, so here too the broker is not supposed to draft it.
Frequently asked questions
Can a broker draft a memorandum of understanding?
No. Section 12 of the Real Estate Brokers Law prohibits a broker from drafting or assisting in drafting documents of a legal nature relating to the transaction, and a broker who breaches this is not entitled to brokerage fees. Such documents are drafted by a lawyer.
Do I have to sign a brokerage services order?
The law does not oblige you to sign, but without a signed order the broker is not entitled to brokerage fees, so brokers ask for it before showing a property. Read it before signing and make sure it reflects what was agreed.
Does a broker have to tell me about problems with the apartment?
Yes. Section 8 requires the broker to provide all material information in their possession about the property, and to act with reasonable skill to find out such information. A broker does not replace a home inspection, an appraiser or a lawyer, but may not hide what they know.
Can a broker work for both the buyer and the seller?
Yes, and this is common in Israel, provided each side has signed an order. In such a situation the broker owes loyalty and confidentiality to both sides, and is not supposed to reveal to either side the bargaining positions of the other.
What can I do if a broker did not act properly?
You can file a complaint with the Registrar of Real Estate Brokers at the Ministry of Justice. The law defines disciplinary offenses, including breach of the duties of loyalty, disclosure and confidentiality, and the disciplinary committee may take various measures, including a reprimand, a fine and suspension of the license. On a question of monetary compensation, consult a lawyer.
Before you begin
Good brokerage starts with an open conversation about expectations, documents and what each side does. We accompany sellers and buyers in north Tel Aviv and the Sharon region, and we will be happy to explain what the process will look like in your case. You can contact us or call 077-500-4600 (+972 77 500 4600).
