Published on 31 October 2006 at 10:36 am
Filed under: Europe:- Portugal Property Guides » Portugal and How to Buy Property in Portugal
The property buying process in Portugal is relatively straightforward but we would not recommend an investor proceeds without the aid of a local solicitor who is used to property conveyancing and who can explain the entire process to them because laws change and a language barrier can always add an extra air of confusion.
In terms of how to buy property in Portugal this guide details every single essential step for investors, holiday home hunters and those looking for a retirement property or new home overseas.
The first thing any investor or real estate buyer should do is speak to a mortgage lender about how much they can borrow and about the current interest rates that they will likely face so that the purchaser has a fair idea of how much money they will have to work with, this will prevent them from over stretching themselves and make the whole purchase process more comfortable. We recommend Barclays Bank in Portugal as an excellent starting point for those considering making a purchase because they have local presence and expertise but an international perspective meaning that they are flexible and approachable about every aspect of the financial side of things – click here to contact Barclays via a short form, they’ll call you back and discuss your requirements.
(Please note that it is worth allocating an extra 15% on top of the purchase price for associated taxes, costs and fees.)
With the finances covered for the time being it’s important to search for a suitable property - having done a fair amount of due diligence on a region being considered in terms of the actual types of property most in demand and likely to return a good level of income and the best level of capital gain possible when investing in Portuguese property.
Many who have already bought property in Portugal advocate the appointment of a surveyor to examine any properties under consideration as they can not only speak from a professional and educated standpoint on the property’s construction quality but they will have local knowledge about any proposed developments or changes to roads etc., which might negatively affect the property’s desirability and value.
Once a suitable property has been found it is possible to sign a reservation contract – these are not standard agreements but they are worth negotiating as they give the buyer longer to look into the property, the vendor, the area and the title deeds etc. A reservation contract is conditional and it will see the buyer pay about GBP 2 – 3,000 to the vendor for withdrawing the property from the market with the conditions that if something untoward is found with the property the buyer can pull out and get the money back but that if nothing untoward is discovered then the sale proceeds.
At this stage the buyer’s solicitor must begin legal investigations into everything from the right of the vendor to sell, the correct declaration of boundaries, the correct completion of taxation and building forms (where applicable), and whether there are any outstanding debts or claims on the property. This is the stage at which the buyer will again speak to their mortgage lender to formalize and finalise the request for funds.
The next stage is to sign the preliminary contract or Contrato Promessa de Compra e Venda in front of a notary. Both the vendor and buyer sign this contract and the buyer has to hand over between 10 and 30% of the final purchase price – this is non-refundable if the buyer pulls out and they may even be liable for compensation if they withdraw from the sale so it cannot be emphasized enough how certain the property purchaser needs to be before reaching this stage in the process!
To continue the buyer needs a tax number or Numero Fiscal de Contribuinte which they can get if they open a bank account or if they apply to the local tax office – the solicitor, vendor, mortgage lender or notary involved in the purchase and sale process will likely all be able to point the buyer in the right direction! In between signing the preliminary contract and the final contract there is normally a period of 30 days or four weeks during which time the buyer’s solicitor has to conclude satisfactorily all of the legal checks which will include obtaining copies and checking the license of use Licenca de Utilizacao, the property registration document or Certidao de Teor and the Property Tax document or Caderneta Perdial.
Once the property finance is in place and the legal checks have been completed the buyer and vendor (or their solicitors if they have power of attorney) sign the final contract which is known as Escritura de Compra e Venda in Portuguese. The final money will be transferred, transfer taxes and notary fees will become payable and the title of the property will be registered at the Land Registry in the new purchaser’s name as soon as the buyer’s solicitor submits the registration documentation.
Finally, as mentioned earlier it is wise to set aside 15% on top of the purchase price for property transfer tax, also known as IMT which varies from 0% to 8%, notary fees and stamp duty which comes to about 1%, legal fees of between 1 and 2%, mortgage arangement fees and surveyor’s fees.
Europe:- Portugal Property Reports
Complete listing of all current property reports for region: Europe:- Portugal
