Buying a Property in Portugal: A Comprehensive Guide for Americans

Navigating the process of buying a property in Portugal can be a complex task, especially for those unfamiliar with the country's unique real estate practices. This guide aims to simplify the process, providing a clear, step-by-step overview of what to expect when purchasing a property in Portugal.

 

The first step in buying a property in Portugal involves making an offer and negotiating the final price. This process differs from the USA, where it's common to make offers on multiple properties at once. In Portugal, once an offer is accepted, both parties are expected to honor the agreement and move forward to the signing of the reservation or the Promissory Contract of Purchase and Sale (known as "Contrato-Promessa de Compra e Venda" or CPCV).

The offer should include the following elements:

• Offer Price: The proposed price for the property.
• Promissory Contract of Purchase and Sale (CPCV): This document outlines the terms of the transaction, including the earnest money deposit (typically 10% to 25% of the purchase price), and the timeline for signing the CPCV.
• Deed of Sale ("Escritura"): This legal document transfers ownership from the seller to the buyer. It specifies the amount to be delivered at closing and the timeline for signing the Deed of Sale.
• Financing/Mortgage: Indicate whether financing is required and the amount needed.
• Other Conditions: Any conditions for the signing of the CPCV and/or deed of sale, such as a contingency clause dependent on the approval of bank financing. Note that most sellers in Portugal prefer not to sign the CPCV before the mortgage is approved and the house appraisal is completed, to avoid potential contingencies.

It's advisable not to make an offer before having the mortgage pre-approved, unless you're able to make the purchase without any financing contingencies. We can introduce you to a credit intermediary who can help you secure the best financing conditions in the market through MaxFinance, the leader in Portugal. Often, conditions through a credit intermediary are better than going directly to the bank, and this service is typically free of charge.

Incomplete offers can often complicate the signing of the CPCV. Therefore, it's crucial that the offer contains all elements that will be included in the CPCV. Otherwise, any elements not discussed at this stage will likely represent a hurdle later on, and may even jeopardize the deal.

 

This optional step allows the buyer to reserve the property by paying a symbolic amount (e.g. 5,000€ or more), effectively taking it off the market for a short period, usually up to one week. This is typically done when one party cannot immediately proceed to the CPCV. The reservation is usual in new developments, and less usual in used properties, depending on the timeframe for the signing of the CPCV.

 

This involves investigating the property to ensure there are no legal or financial issues that could affect the purchase. This includes checking the legal status of the property, any existing liens or encumbrances, and ensuring the seller has the right to sell the property. Unlike in the USA, Portugal has a unique central database for property records, eliminating the need for title insurance.

 

It's important to note that there are many old properties in Portugal that have undergone renovation works that were not licensed. If the property was renovated but the usage license was not updated, it means there was no licensing project. This may or may not be a problem, depending on the nature of the works. For instance, if the works didn't change the structure (removing or adding walls), and didn't change elements in the building facade like the windows, a license may not be needed. However, if internal walls are removed, licensing is mandatory and the project needs to perform stability calculations in the whole building to safeguard against risks such as earthquakes.

 

While not common practice in Portugal, it's advisable to have the property inspected by a professional to identify any potential structural or other issues that might not be immediately apparent. From a contractual point of view, the buyer accepts to buy the property as it is and the seller should not hide any defects that he/she is aware. But sometimes, there are some bad surprises and we prefer to recommend an inspection, especially in houses.

 

This is a legally binding contract between the buyer and the seller in which both parties agree to the terms of the sale. The contract outlines the conditions of the sale, the purchase price, and the date of completion. The buyer pays a deposit to the seller, typically between 10% and 20% of the purchase price. This amount is paid directly into the seller's account, which is a departure from practices in the USA where such funds are usually held in an escrow account.

 

If the seller fails to appear and sign the deed, they are obligated to pay double the deposit back to the buyer. Conversely, if the buyer fails to appear and sign the deed, they forfeit their deposit.

 

Typically, the deed is signed 2 to 3 months after the Promissory Contract of Purchase and Sale (CPCV), but these terms can be negotiated between the parties. In the case of new construction, the process usually involves an initial deposit, followed by additional deposit(s) ("reforços de sinal") after 6 months and again after 12 months, according with the payment plan established. Usually, between 50% to 80% of the total price is held for the final deed signing, but these terms can vary from developer to developer and able to be negotiated.

 

This is the final step in the property buying process where the property is officially transferred from the seller to the buyer. The deed is a legal document that proves the buyer's ownership of the property. It's signed in the presence of a notary and then registered in the Land Registry and in the Tax Agency. The transfer tax (IMT) and stamp duty are paid before the deed (mandatory).

 

To ensure a smooth transaction, the following documents are needed for the deed:

Remember, it's always a good practice to consult the valid antecedents ("antecedentes válidos") in the municipal archive to ensure that what you are buying corresponds to what is registered. This is the ideal scenario and most people don't do it, but it may not be a relevant issue for the resale.