Home Buying Process Portugal
Alcino, Wednesday, 8 January 2014
This article is part of a series of 8 articles about buying property in Portugal. The other articles in the series cover the following topics:
Buying a property in Portugal has become a relatively straightforward process, provided you approach it in a step-by-step fashion in compliance with the law. Gone are the days when Portugal was an overly bureaucratic country. Nevertheless, as a foreigner to the language and local customs, it is highly recommended that you seek professional guidance and are represented by licensed and competent specialists.
When searching for your desired property, use government licensed real estate agents and appoint the services of a reputable and bilingual lawyer or solicitor that has experience working with foreigners.
Although the entire process can be completed quite rapidly these days, have your lawyer take time to run precautionary background checks on the property you intend to buy. If you require financing, make sure you have secured a deal before you sign any contracts.
Depending on whether you are applying for a mortgage or not, the time taken from acceptance of your offer to the drawing up of a Promissory Purchase and Sale Contract can be anything from 1 day to 4 weeks. Upon signing of the Promissory Contract, both buyer and seller must agree on a completion date, which will have to be scheduled at a public notary. This can usually be completed as quickly as you like, but if you are using a bank to finance your purchase, it is advisable to leave up to 90 days for the agreed completion date in order to have enough time for a solid mortgage offer to come through.
In 10 straightforward steps the property purchase process should unfold as follows:
Step 1) Find your ideal property
Step 2) Make an offer through your agent
Step 3) Get Legal Assistance
Hire a lawyer or a solicitor to guide or even represent you in the purchase process, providing them with a power of attorney to act and sign on your behalf and take care of all the necessary documentation. The lawyer should perform all the due diligence checks on the property, including inspection and comparison of the Land Registry Certificate (Certidão de Registo Predial), the Title Certificate (Caderneta Predial) and the Habitation Licence, among other documents. If you are referred to a lawyer by your estate agent, keep in mind that this lawyer may also be working for the seller and may not be in your best interest. It is worth the effort to locate and appoint an independent and impartial lawyer.
Step 4) Apply for a Fiscal Number
All resident and non-resident individuals and entities with any form of financial interest in Portugal, e.g. opening a bank account or buying a property, must acquire a Portuguese Tax Identification Number (known in Portugal as a Número de Identificação Fiscal or NIF). This can be requested in person at a local Tax Office (Finanças), by your lawyer on your behalf, or through the appointment of a local resident fiscal representative, which may be a person or company whose services you hire.
Step 5) Make a Reservation Agreement
Usually this entails the payment of a Reservation Fee to the seller or their agent. This will ensure that the property is taken off the market and that the price you have offered is secured, giving you and your lawyer the time needed to run all necessary background checks on the property.
Step 6) Secure a Mortgage deal from the bank
If you have applied for financing, you may have already received a letter of pre-approval, based on your financial situation and property budget. If that is the case, you now need to provide the bank with details on your chosen property and have them send their appraiser perform a valuation.
Step 7) Drawing up of the Promissory Contract of Purchase and Sale
The terms you have agreed with the seller are now reduced to writing and the document is signed by both parties, either in front of a notary or privately. The document will include a description of the property, the agreed price, payment terms and the completion date (Escritura). At this point a deposit of between 10% and 30% is also usually paid to the seller.
The Promissory Contract is a legally binding contract and provides protection to both the buyer and the seller: If the buyer backs out of the deal they will lose their deposit; if the seller fails to see the deal through they will be liable to pay the buyer twice the deposit back in compensation.
Step 8) Payment of the Property Transfer Tax and Stamp Duty
These taxes are based on the declared purchase price and must be paid before completion, as the proof of payment document will be requested by the notary prior to witnessing the signing of the title deeds.
Step 9) Completion (Escritura)
The signing of the deed of purchase and sale (known as Escritura de Compra e Venda in Portugal) is the final step to becoming the legal owner of the property in question. It is here that you will have to settle the remaining balance of the purchase price. Notary fees will also be due. The Escritura can be completed on your behalf by granting Power of Attorney to your lawyer.
Step 10) Property Registration
Without delay, the property must now be registered in your name at the local Land Registry Office and also at the Tax Office.
This article is part of a series of 8 articles about buying property in Portugal. The other articles in the series cover the following topics:
Buying a property in Portugal has become a relatively straightforward process, provided you approach it in a step-by-step fashion in compliance with the law. Gone are the days when Portugal was an overly bureaucratic country. Nevertheless, as a foreigner to the language and local customs, it is highly recommended that you seek professional guidance and are represented by licensed and competent specialists.
When searching for your desired property, use government licensed real estate agents and appoint the services of a reputable and bilingual lawyer or solicitor that has experience working with foreigners.
Although the entire process can be completed quite rapidly these days, have your lawyer take time to run precautionary background checks on the property you intend to buy. If you require financing, make sure you have secured a deal before you sign any contracts.
Depending on whether you are applying for a mortgage or not, the time taken from acceptance of your offer to the drawing up of a Promissory Purchase and Sale Contract can be anything from 1 day to 4 weeks. Upon signing of the Promissory Contract, both buyer and seller must agree on a completion date, which will have to be scheduled at a public notary. This can usually be completed as quickly as you like, but if you are using a bank to finance your purchase, it is advisable to leave up to 90 days for the agreed completion date in order to have enough time for a solid mortgage offer to come through.
In 10 straightforward steps the property purchase process should unfold as follows:
Step 1) Find your ideal property
Step 2) Make an offer through your agent
Step 3) Get Legal Assistance
Hire a lawyer or a solicitor to guide or even represent you in the purchase process, providing them with a power of attorney to act and sign on your behalf and take care of all the necessary documentation. The lawyer should perform all the due diligence checks on the property, including inspection and comparison of the Land Registry Certificate (Certidão de Registo Predial), the Title Certificate (Caderneta Predial) and the Habitation Licence, among other documents. If you are referred to a lawyer by your estate agent, keep in mind that this lawyer may also be working for the seller and may not be in your best interest. It is worth the effort to locate and appoint an independent and impartial lawyer.
Step 4) Apply for a Fiscal Number
All resident and non-resident individuals and entities with any form of financial interest in Portugal, e.g. opening a bank account or buying a property, must acquire a Portuguese Tax Identification Number (known in Portugal as a Número de Identificação Fiscal or NIF). This can be requested in person at a local Tax Office (Finanças), by your lawyer on your behalf, or through the appointment of a local resident fiscal representative, which may be a person or company whose services you hire.
Step 5) Make a Reservation Agreement
Usually this entails the payment of a Reservation Fee to the seller or their agent. This will ensure that the property is taken off the market and that the price you have offered is secured, giving you and your lawyer the time needed to run all necessary background checks on the property.
Step 6) Secure a Mortgage deal from the bank
If you have applied for financing, you may have already received a letter of pre-approval, based on your financial situation and property budget. If that is the case, you now need to provide the bank with details on your chosen property and have them send their appraiser perform a valuation.
Step 7) Drawing up of the Promissory Contract of Purchase and Sale
The terms you have agreed with the seller are now reduced to writing and the document is signed by both parties, either in front of a notary or privately. The document will include a description of the property, the agreed price, payment terms and the completion date (Escritura). At this point a deposit of between 10% and 30% is also usually paid to the seller.
The Promissory Contract is a legally binding contract and provides protection to both the buyer and the seller: If the buyer backs out of the deal they will lose their deposit; if the seller fails to see the deal through they will be liable to pay the buyer twice the deposit back in compensation.
Step 8) Payment of the Property Transfer Tax and Stamp Duty
These taxes are based on the declared purchase price and must be paid before completion, as the proof of payment document will be requested by the notary prior to witnessing the signing of the title deeds.
Step 9) Completion (Escritura)
The signing of the deed of purchase and sale (known as Escritura de Compra e Venda in Portugal) is the final step to becoming the legal owner of the property in question. It is here that you will have to settle the remaining balance of the purchase price. Notary fees will also be due. The Escritura can be completed on your behalf by granting Power of Attorney to your lawyer.
Step 10) Property Registration
Without delay, the property must now be registered in your name at the local Land Registry Office and also at the Tax Office.
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