Home Buying Process Brazil

Daniela Quiros,  Thursday, 4 December 2014

 

This article is part of a series of 8 articles about buying property in Brazil. The other articles in the series cover the following topics:


Brazil is famous for its beautiful beaches, mild climate, carnivals, culture, sports and music. Nowadays, Brazil is in the spotlight for its real estate opportunities. Brazil is one of the top destinations for foreigners looking to buy a second home to live or retire, or those wishing to invest in real estate. Foreign investors benefit from acquiring real estate in Brazil due to low value of local currency and quite affordable property prices, even considering the recent market up trend.

Currently, inflation seems at its lowest pace, and government encourages foreign investors. Real estate opportunity is highly dependent on timing, and defining moments on the market and Brazil realtors state the right moment is now. It is their job to urge buyers, but your job is to research the market before you dive head over heels not knowing local specifics.

The Buying Process

Some resources insist on starting with a due to a number of reasons. Namely, a local realtor knows the market, the procedures and underlying implications. If you contract a reputable agency, you may receive more than just the property listings and assistance, but advice on regions and areas, safety, neighbors, local traditions, historic background and all things that matter in property acquisition. Besides, professional assistance will help you avoid fraudulent offers, non-existent properties offered for sale, or properties that are legally unavailable for sale.

Negotiating the Price and Making A Formal Offer

If you want to get a better idea of adequate real estate prices in Brazil, as much as in any other country, you can start by reading real estate classifieds in local newspapers. You must understand there is a difference between the value of the land itself and the value of a square meter in the constructed structure. As with any product, prices can be negotiated. You can negotiate a discount if you can pay the full amount in one payment.

In Brazil, payment conditions are rather flexible and largely depend on the seller’s requirements. Sometimes, a buyer will make a 25% down payment and divide the remaining 75% in three monthly payments. Sometimes, a pre-sales deposit constitutes as little as 0.25% of the total value. Acceptance of the offer does not bind the buyer and seller, but it is the buyer’s responsibility to verify the status of the property before proceeding with the transfer.

Compromisso Particular de Venta e Compra, or the purchase-sale agreement is an important part because it summarizes guidelines for further actions. Both the buyer and seller will have a clear idea of what is going to happen next, their rights and obligations, the formalized deposit, sinal, amount and other pre-sale formalities. The buyer usually pays directly to the seller in cash, or by wire transfer, because there are no escrow companies in Brazil. However, international escrow companies can be a part of the process securing the deal. If you wish to resort to an international escrow provider, you must first obtain the seller’s written consent.

Property Status Verification, Period of Due Diligence

This is an important part of any real estate transaction because the property’s status needs to be thoroughly verified. Your lawyer or real estate agent can do it for you, but make sure your representative specializes in this field.

Cartório de Registro de Imóveis, or Real Estate Registry Office issues the certificate of title that displays all transactions relevant to the property over the past 20 years. It usually takes up to five business days to receive the certificate; the price of this procedure differs depending on the region.

Buyers are strongly recommended to stay away from offers that relate to properties not registered with the Real Estate Registry Office as the status of the property may be difficult to verify, or worse, it may not be subject to sale altogether.

Once you obtain the title, focus on the following facts:

  • Were the structures constructed legally?
  • Did the City Hall approve of the specifications?
  • Are there any pending liens that may render the property illegal to transfer?
  • Is the owner duly registered at the real estate registry office? Are the seller and the owner one and the same person?
  • Are there any state debts or third-party obligations binding the property, such as taxes, maintenance and condominium payments and fees?
If you are buying a pre-order, i.e. a property which is yet to be constructed, and the purchase is based on specifications, check the legal status of the construction company. Do they have approval from the City Hall, Architecture Council, Environmental Secretariat, and Regional Engineering? An unbiased third party must examine the paperwork to establish whether the property is ‘clean.’

At this stage, property inspections must be carried out by a professional inspector. Also, order or request from the buyer a survey plan to verify the property’s parameters are documented accurately.

In Brazil, there are no companies offering title insurance, but the international providers.

Contracts

Escritura Publica is then prepared by a notary or your attorney, or both, to declare legal description of the property, price, transfer taxes, legal fees that need to be paid upon closing the deal. Usually, this is drafted some two or three weeks after the initial offer, when status property has been verified, inspections made, and the deposit transferred. The Notary officer registers the deed and the signatures of the parties. This is a binding document that must include:

  • The price of the property.
  • If the property is under construction, the time frame, deadline and other conditions.
The contract is then submitted to the Real Estate Registry Notary's Office with the new owner’s credentials and signature. It is at this point when both the buyer and seller pay the related taxes.

You need to provide a picture ID, and your CPF, or Tax ID Card obtained in Brazil. A foreigner can obtain a CPF card within the 48 hrs since the application, so make sure you do it beforehand. Foreigners can apply for CPF from abroad, but obtaining it with a Brazilian consulate or embassy can last for up to two or three months, and there is no guarantee of the issuance. For more details on the required documents, please refer to the article.

Another type of contract that should be mentioned here is the quitclaim deeds, or assignment of rights. The assignor, in this case, only conveys property rights to the assignee. There is no deed as such, thus the title does not pass from one owner to another. It is the possession that is transferred, but this scenario is highly inadvisable because it reduces property value for further transactions. This option is often used in poor neighborhoods because it does not impose the transfer tax on the deal.

Registration of the Property Rights

You are not the new owner of the property until your rights have been properly registered with the Real Estate Registry. Your notary, or attorney registers the contract, escritura, as soon as possible after the closure. After the registration has been completed, you are the new legal owner of the property.

A Few Words on Taxes

We dwell on in our dedicated article. Be advised, however, that the overall cost of transfer taxes, legal fees and property taxes can amount up to 8% of the purchase price. When selling property, capital gains tax can amount to as high as 27.5%.

Buying restrictions

Foreigners do have the same rights as the locals do when purchasing real estate in Brazil, be it beachfront property, condominiums, houses, or urban land. Residency is not required, but you need to have the tax identification card. Nonetheless, restrictions apply to foreigners looking to buy large tracts of land in rural areas for agricultural purposes. For reference, see Law # 5.709/71. The most relevant of them are the following:

  • Foreigners must have Brazilian residency to be able to buy rural properties of 50 land modules, and more.
  • The land must be used productively. A project of use must be presented to INCRA.
  • One municipality is only allowed to sell no more than 25% of its total area to foreigners.
The above are only excerpts from the Law, but it only concerns large rural acquisitions.


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