The following is a true story with perhaps a few embellished facts. Due to client confidentiality the names of the parties involved have been changed or withheld.

Mr. Kahana, a successful real estate investor, phoned me excitedly that evening. I had already left the office for the day and decided to ignore my vibrating cell phone while I spent some time helping my children with their homework. Mr. Kahana, though, needed to speak with me immediately. He needed to share some news with me and he couldn’t wait for my schedule to include him in it. He therefore elected to phone me at home and my beloved son, who can’t tell a lie, ran to answer the phone, and of course told Mr. Kahana that Abba was home and sitting right next to him.

“We got in!!” he excitedly told me before I could even say hello. “The seudas hodaah is taking place this Motzaei Shabbos in Petach Tikva and you need to come also. You are my lawyer after all, and we could not have done this without you!”

Mr. Kahana was referring to the auction of land that took place several months earlier in Charish , a new, primarily Chareidi development located about 15- 20 minutes (depending on how fast you drive on Kvish 6) just northeast of Netanya. The results of the auction were in limbo, and delay after delay prevented them from being publicized.

What is a Buyer Group?

The actual auction was only for licensed contractors to join; however, various organizations (both for-profit and non-profit) enlisted contractors to bid on plots of land on their behalf. These organizations enlisted as many like-minded potential buyers as they could, whom they felt could form a successful community, and in essence directed the contractors they hired as to what land they needed and at what price.

These “puppet-contractors” who successfully bid on land on behalf of the organization would have a guaranteed customer base of buyers organized by the organization, as well as the organization’s financial backing of its members. Such an organization is known as a Kvustat Yerusha or Buyer Group.

Choosing the right Buyer Group can be very tricky. First, one needs to know how honest, competent, experienced and organized the Buyer Group is, as well as what the group’s chances of success are in putting it all together.  A Buyer Group has overhead such as advertising costs, legal fees, etc. just to enlist potential buyers, and if the Buyer Group is not successful, its members bear the cost with nothing in the end to show for it.

Mr. Kahana joined a Buyer Group that was organized by an amuta (not-for profit organization) that was backed by various esteemed rabbanim. In addition, it was a group that seemed to be very community oriented and organized in his opinion and whom he thought retained the right professionals.

“Skeptic That I Am”

When the results of the auctions were delayed for various reasons, Mr. Kahana stubbornly and persistently phoned the offices of the Buyer Group every other day to make sure that his name was on the list as one of the successful potential buyers of the handful of underpriced apartments he hoped to purchase. My initial question to him when he told me that he “got in” was whether or not he spoke to a live person at the office to which he replied:  “ No, but the recorded message they left wishes a mazel tov to the group’s success in the auction and invites all to attend the seudas hodaah in Petach Tikva this upcoming Motzaei Shabbos.”

I, the skeptic that I am, was hesitant to wish my client an immediate mazel tov especially since I heard through the grapevine that the auction results were in litigation. Many Buyer Groups had been disqualified from the tender due to allegations of attempted price fixing. At that moment though, I did not want to tell him my true thoughts and ruin his moment of excitement, and I calmly said that I would make some phone calls and get back to him and that this sounded like happy news. At the same time I was thinking: Happy news for someone but not necessarily for my client.

I must admit that I never previously had any real experience with a Buyer Group. My decade of legal experience, though, has taught me certain premises of real estate transactions that I try to live by, and one is that “it ‘ain’t over until the closing.”  I was as cautious as I could be for an insistent client and I could not remove all potential risks, but I tried my best to direct him as to how to minimize the downside as much as possible.

I did a little more research and I discovered to my surprise that Mr. Kahana’s Buyer Group did in fact successfully win a bid on certain plots of land in Charish (and had not been disqualified as I thought, along with the majority of other similar amutot to his who were disqualified). Unfortunately though, the Buyer Group consisted of 800 potential buyers and the group only successfully won the tender on land large enough to build 250 apartments.

This left 550 members of the Buyer Group with no apartment to buy, along with a potentially lost small deposit. Buyer Groups generally work on a first come, first served basis, and unfortunately my client was number 317 on the list. Therefore, he didn’t “get in,” and the initial seudas hodaah was celebrated by 250 buyers but not by number 317.

When I phoned Mr. Kahana to tell him the news, he was certainly not too pleased especially since he originally thought he won a small real estate lottery. However, I was very impressed by his immediate expression of emunah that it is Hashem who is in control of these things and all is bashert.

The Happy Ending

Fortunately though, the story does have a happy ending (although “it ‘aint over until the closing” as I always like to say). About a month later, Mr. Kahana’s Buyer Group did convince another contractor who successfully won a bid on land to sell their group his land at a very small profit. Numbers 251-350 now had something to be thankful for.

And there was more good news to tell. Since Mr. Kahana’s Buyer Group was a not-for profit organization, per the agreement, he and all the members signed, all 350 members equally shared the burden of the cost of the new piece of land. Since the original plots of land to build the first 250 units were bought at prices much less than anticipated, the ultimate costs of apartments were right on target.

At that moment we all were reminded once again that Hashem truly runs the world! Since then, my client successfully enlisted with another Buyer Group in a new over-subscribed tender on property in Jerusalem and is always looking for the next deal. Although it ‘aint over until the closing,” I truly wish him lots of success along with everyone else in Klal Yisrael braving the tough business world.

Is a Buyer Group the Right Way to Go?

Is joining a Buyer Group to buy real estate in Israel the right decision to make? This is a loaded question with a complicated answer, but based on my past experiences, I would like to give a couple of pointers to the confused potential buyer.

Firstly, we all know that Israeli real estate is very expensive and that the current prices of apartments is out of reach to the average Israeli who is just looking to buy a humble place to live in. Prices in central Jerusalem and Tel Aviv are at a whopping 30,000 shekels a meter in some places and even the periphery neighborhoods can cost a good 15,000 shekels a meter to buy with below standard finishings.

If you buy on paper, it seems that at best you can gain an extra bedroom for the same money provided that you are willing to wait the two to four years it will take for the project to be finished. Not-for-profit Buyer Groups even cause you to wait longer for your apartment because their stage in the real estate transaction is even before permits and pituach/earthwork have been initiated. A Buyer Group transaction is a “pre-on paper” transaction.

Upsides and Downsides

The benefit of course is price. In Mr. Kahana’s tender, the land cost associated with each apartment was almost nothing in comparison to everywhere else, and his total cost for each apartment ended up being a little more than the cost of standard construction itself. It’s anticipated to cost him about 5800 shekels a meter (half the price of every other place that is commutable from the merkaz).

In the case of Charish , the development of the land is being subsidized and for first time qualified buyers, the government is giving a nice-sized grant (on condition that the buyer actually lives in the apartment for several years and is prohibited from renting it out during said period). This is not a plug specifically for Charish, although apartments there will probably cost below average even at the on-paper stage. However, joining a Buyer Group can assist you obtaining an apartment below cost.

The downside of course is that the whole process is very if-y. You are joining a group that may or may not be successful in enlisting enough potential buyers and may or may not successfully win a tender. There is an inherent risk involved that does not exist when buying an already built apartment or even an apartment on paper where the tender is over.

I suggest that a potential buyer joining a Buyer Group focus on the downside more than the upside. Yes, you know that the upside is great if all the “ifs” turn into what you hope for. Since however there are many variables in play, the best thing to do is focus on what the maximum investment you are putting at risk if the tender and development don’t materialize as planned.

Important Guidelines

a. Find out what is the most you can lose and what recourse and escape clauses you will have if things don’t transpire as hoped for. In Mr. Kahana’s case the initial deposit was 50,000 shekels per apartment with 15,000 shekels at risk if the Buyer Group loses the tender, which was actually more money than could be lost with other Buyer Groups. Also there was a mortgage contingency clause to help Mr. Kahana get out of the contract if he needed to. By Mr. Kahana knowing that the most he would lose would be 15,000 shekels, with the upside being much more, he deemed it a good investment. He chose the Buyer Group because of other reasons as well, even though he knew he could lose less with the others. Some Buyer Groups guaranty that you won’t lose more than even a lesser amount, but they don’t guaranty you an apartment at the same low price that Mr. Kahana’s Buyer Group guarantied an apartment to him.

b. Is there a bank guarantee/arvut involved that will guaranty the completion of the project at a certain price? In Mr. Kahana’s case, there was. I recommend to only buy in a project with an arvut in place, as in the past people have lost their money due to absence of an arvut.

c. Is the Buyer Group truly not-for-profit, altruistic, and looking out for the interests of its members? Many non-profits have other things in mind unfortunately. In Mr. Kahana’s case the group was backed by various Gedolim, and fortunately the officers seemed to be following the directives of the generals. Buyer beware. Do your research and talk to the leaders of the Buyer Group. You can figure out by interviewing a Buyer Group what their true agenda is. Mr. Kahana’s amuta seemed to genuinely and ultimately want to assist avreichim from Bnei Brak and other areas to buy apartments to live in at a manageable price and in a suitable environment for them. Other shomer Shabbos householders of all denominations were not excluded, though, from the tender, and the amuta welcomed others to join their community. If the Buyer Group is looking for profit that is also okay, but the buyer should know with which unit they are enlisting. Do your homework.

d. Is the Buyer Group organized and experienced? Usually non-profits are not themselves comprised of businessmen, but they do enlist professionals to assist them in obtaining their goals. Find out what kablanim, engineers, lawyers, architects, and marketing professionals the Buyer Group is working with and find out about their track histories. If any of the required professionals are not in place, the whole project may not take off the ground.

e. Find out what number you are in the group and how many people are enlisted. Most often this information is kept confidential for various marketing and competition reasons, but you can get an inkling by how they respond to your questions and how many other buyers show up to the lawyer’s office with you. In Mr. Kahana’s case, it was hard to even make the appointment for the contract signing and a bunch of buyers were made to sign the contracts at the same time and in the same room– which in my experience, is very unconventional. Also just about every clause was non-negotiable and no one was pressured to sign or give a deposit, implying that a buyer could easily be replaced with another buyer. This in my opinion was a good sign of oversubscription and an indication of a very large and strong interested Buyer Group.

f. Is the Buyer Group honest and not willing to cut corners? In Mr. Kahana’s case, other not-for-profits involved in the tenders were indeed altruistic and even honest when it came to their members, but by not conducting themselves properly at the auctions, they ended up being disqualified which caused their members to lose a portion of their investments.

g. Where is your deposit being held? Is your money being held in escrow with a reputable attorney? Is the escrow agreement clear that no money can be released except to actually purchase the land if the auction is won by the Buyer Group? In Mr. Kahana’s case it was and the escrow agreement was quite impressive and buyer-slanted in my opinion. Also, I believe you should always retain your own attorney and not rely on the Buyer Group’s attorney, although I must say that I did notice that the Buyer Group’s lawyers did a fine job patiently explaining the risks of the transactions to the buyers who came to sign without their own attornies present. There still is nothing like someone advocating just for you.


Gershon Kayman, Esq. is a seasoned real estate lawyer both in NY and in Israel. He can be reached at