We’ve put together a brief guide to the buying process in Portugal
Step one: Search for a property in Portugal
The first step is to look at properties online, narrow down a list of areas and property types and whether they suit your needs. These will differ, depending on whether you are buying as your own holiday home, a property investment, or for a permanent move to Portugal. Assess the price compared to other properties and areas, the location, its appeal to holidaymakers and expats, and do some research on others who have made a similar property purchase. You can then narrow down potential properties and areas to suit your need and prepare to view the properties in person in Portugal.
Step two: Visit Portuguese properties and areas
Once you have selected several properties you think fit the bill; you need to visit in order to make sure both the property and the area is everything it is advertised to be. When visiting a property, it’s a good idea to talk to locals and expats about what the area is like and check it out at different times of day, and in different seasons, if you have the luxury of time before your purchase or move. Make good use of your real estate agent’s expertise and knowledge of the local area. They should be able to help guide you on the best areas and property types for different purposes, point you in the right direction of local amenities, and help you throughout the property purchase, even helping you get everything set up at the other end. Read our tips for finding the right estate agent.
Step three: Get legal and financial matters in order
When you’ve found the right Portuguese property, it’s offer time! Before you take the leap, check that all your finances are in place, you have the support of a good real estate agent and a solicitor who is experienced in the Portugal property buying process.
• Do you need a mortgage? If so, can you get the mortgage you need? How will you make the payments?
• If you’re a cash buyer, have you got the funds ready?
• Will you need to transfer these funds internationally?
Whether it’s your cash payments for the property deposit of final payment or mortgage payments, if you are making these payments from another country and currency into Portugal, they will be subject to exchange rates, which change all the time. Look into getting help with your currency exchange to find the best rate for you and the best time to make any international transactions for your property purchase – and beyond. A currency specialist can help protect these international money transfers from the ever-changing currency markets.
Check that you have enough money set aside for extra, hidden, costs such as legal fees and agency commission? These costs roughly total around eight per cent of your purchase price, so make sure you have this set aside before you proceed with the offer.
Step four: The offer
Once your finances are in place, and you have engaged a lawyer to work on your behalf, it is time to make an offer. You should look for a lawyer who speaks good English – especially if you can’t speak Portuguese – to ensure nothing is lost in translation. Typically, you make an offer via an agent. They will then work on your behalf to come to an agreement with the seller on the offer. Many, although not all, sellers will accept offers below the market value, so it is worth starting with a lower offer, just to test the water. At this stage, it is also worth negotiating what is included as part of the purchase to save time and, potential problems, at a later date. Once a provisional offer has been accepted and agreed upon, the buyer will often lodge a Reservation deposit (normally around 6,000 Euros) with their lawyer as a proof of their intention to complete the purchase. The vendor will then take the property off the market.
Step five: Check everything!
Before signing a binding contract – which tends to happen around two weeks after an offer has been made and accepted – it is essential that you instruct your legal representation to carry out due diligence checks for you.
This should include checking the legal status of the property; that it’s free of debts and charges; that utilities and community fees are paid; and that there is correct planning permission and licences for future improvements.
If your lawyer is not satisfied by what they see, then you will be advised to pull out of the property purchase. Although this may be frustrating, it will most likely be safer in the long run. If necessary ask for a second opinion.
Feel free to speak to your Halo Financial consultant for guidance and recommendations.
Step six: Promissory Contract of Sale and Purchase
Providing you are happy with all your due diligence, then typically within 14 days of lodging your reservation deposit, it is time for the buyer and seller to sign a Promissory Contract of Sale and Purchase (Contrato Promessa de Compra e Venda). This is a legally binding document which establishes in detail all procedures by which the transaction will be effected and all the conditions of sale, such as stage payments, the maximum term allowed for completion, what is included in the sale and exactly who the buyers and vendors are. Once signed, the buyer will then make another deposit (normally 30 per cent of the total purchase price agreed less the reservation deposit). If the buyer pulls out after this stage of negotiation, they will not get this deposit back. The contract can be signed personally by the parties or by the lawyers acting for them based on a power of attorney.
Step seven: Completion date
On the date of completion (which will have been agreed upon in the Promissory Contract), the Public Deed (Escritura) will be signed in front of a Portuguese Notary who will check all the documents in the purchase and ensure that the purchaser has paid the Purchase Tax (IMT). The cost of the IMT is complicated and worked out on a number of factors, including the price of your property and whether it will be your primary residence. Once the Notary is happy that everything is in place, the Notary office will issue certified copies of the corresponding entry and this serves as official proof the transaction has been made lawful. Tt this stage the balance of the agreed purchase price is paid in full – often the buyer will need to pay associated costs, legal fees, notary fees, etcetera, at this point, too. The buyer’s lawyer will then proceed to register the new owner of the property into the Land Registry (Registo Predial) and will give a copy of the registration to the new owner. At this point, the purchase is complete.
Choosing a notary
As the buyer, you have the right to choose the Notary to witness the signing – your solicitor will be the best person to help with this. The Notary does not work for either side of the purchase, however, as the person who chooses the notary, you will be the one organising the date and time of the signing.