BUYING PROPERTY IN PORTUGAL

A 7-Step Guide

Here at Mialex we have a team who have helped many overseas clients to purchase property in Portugal over the past 10 years and we know that a different buying process, language and foreign laws can be confusing.

This guide will give you an overall understanding of how the process works, to help you feel comfortable and confident with your purchase from the start.

The Portuguese property purchase process may be different to what you are used to, but it isn’t complicated.

As with anything, once you understand how it works, it becomes less daunting. Having an outline knowledge of the process from the start, will help you to feel at ease with your purchase throughout all stages.

STEP 1: DEFINING YOUR SEARCH

We all start somewhere and getting our search criteria clear in our own minds is the beginning of the process – it isn’t always easy! Some of us are very logical, others make emotional choices. A list is a good place to begin when trying to clarify what is important.

When you have defined your search, it is a good time to drop an email, or pick up the phone, to our team.

We know that every client search is an individual case. This is why the team will help to hand pick properties that are tailored to each client’s specific requirements. All team members live in the Algarve so their local knowledge will be an invaluable tool in your search.

Once you have selected the properties that you wish to view, the team will organise a viewing itinerary for your visit.

It is important to take things at a pace you are comfortable with you will have a lot of information to process. Our team will step things up or slow things down based on your individual needs.

WHAT’S RIGHT FOR YOU?

To help you clarify your search criteria think about…

  • Your budget: How much do you have? Are you a cash buyer? Do you need a mortgage? Could a small mortgage increase the scope of your search?
  • What part of the Algarve?: There are so many different landscapes and ways of life in the Algarve. Establishing (and agreeing!) what you are looking for from an area, will help you to determine your search criteria.
  • The basics: How many bedrooms, how much garden, what style of property? Renovation, redecoration or relaxation…. Do you want to do any work on your new property? Defining this will help to focus your search.
  • The most important thing?: Proximity to the beach? A sea view? Complete privacy? Rental Income? To be part of an expat community? Family activities? If there is something that you must have, it’s good to establish it as soon as you can.

STEP 2: VISITING PORTUGAL AND VIEWING PROPERTIES

We know that property viewings can be exciting and sometimes a little stressful. Your Mialex property expert will accompany you on every property viewing, guiding you through the process. Any of our team members can give you the inside track on local schools, restaurants, tourist spots and community life. This local knowledge will help you to feel better informed about the area in which you are considering buying property and set you out on the right track from the start.

 

Its just like being on your very own version of a place in the sun, but without the cameras of course!

If you want any help organising accommodation for your viewing visit, we will be happy to help and recommend places to stay.

ARRANGING FINANCE BEFORE YOUR TRIP

Mortgages

It is important to decide how you are going to finance your purchase as early as possible. Your budget is one of the key elements of your search criteria. If you wish to get a mortgage you can:

  • Contact a Portuguese bank directly
  • ​Use a Portuguese bank who specialise in mortgages for expats
  • Use a mortgage broker

If you want any help organising an “in principle” mortgage your Mialex property expert will be happy to help. This would put you in a strong position for any future price negotiations.

Currency exchange

Often, it proves more economical to conduct your currency exchange through a specialist currency exchange expert, rather than through your bank. If you want any help organising your currency exchange, your Mialex property expert will be happy to help.

STEP 3: AGREEING YOUR VIEWING TRIP

If you want any help organising accommodation for your viewing visit, the team at Mialex will be happy to help and recommend places to stay.

STEP 4: MAKING AN OFFER

When you have decided on the property you wish to purchase, decide how much you can pay for it. It’s important to have all your finances organised prior to making an offer.

If you have any conditions to your purchase, for example you wish to fund the purchase with a mortgage; or only proceed with the purchase if you are able to put in a swimming pool, it is best to establish these with your Mialex property expert at this stage.

You should feel committed to a house prior to making an offer on it, and only ever offer on one property at a time. Once you have made an offer you should stop viewing other properties.

Discuss your offer with your Mialex property expert, they may have knowledge on whether the offer is likely to be viable and will advise an appropriate strategy.

Your Mialex property expert will negotiate on your behalf. Your property expert will keep you informed on negotiations as they progress.

At this stage, your Mialex property expert may ask you to sign a reservation agreement normally this is set around 6000 euros this shows your commitment to purchase the property and funds are held in a lawyers segregated client account. The reservation is not legally binding and can be returned or moved to another property should you have a change of heart.

Once your offer has been accepted by the vendor and a reservation has been signed, it is usual that they will not show the property to any other potential purchasers and will feel completely committed to selling their property to you. Your Mialex property expert will immediately begin gathering the information required to pass on to your chosen lawyer in preparation for the promissory contract.

PROMISSORY CONTRACT

In a nutshell

The Promissory contract is the first of two legally binding documents which make up the Portuguese property purchasing process.

This document will contain almost all of the information which is in the final Deeds – what would be the Deed of Sale in England – (the document which you sign on the day you become the owner of the property.)

Information contained within the Promissory Contract will include:

  • Full details on the ‘civic status’ of both the purchaser and the seller (full names, DOB, POB, marital status etc.)
  • A description of the property, confirmation of the title deeds and confirmation of the plot references complete with surface area of the plots being sold (including buildings.)
  • The agreed price, including estate agency fees, estimated legal fees and the deposit amount
  • ​Circumstances in which the deposit may be forfeited, obligations of the purchaser and declarations from the vendor
  • Results of the land registry searches
  • ​A series of standard suspensive clauses, as well as any agreed additions
  • ​A target completion date – this is not a confirmed completion date. It is subject to change in certain circumstances
  • ​A list of any furniture or equipment included in the purchase, if applicable

A Mialex property expert will work with you to ensure that you understand the document prior to signing.

PURCHASE COSTS

There aren’t any ‘hidden costs’, however, it is important that you understand all of the costs involved with the purchase prior to making an offer.

The price that you see advertised on the Mialex website (and that which you agree when your offer is accepted) is the price of the property.

The only additional fees to be paid is the lawyer’s fee for pulling the whole sale together and checking all documents and the taxes. They lawyer will pay all necessary land taxes while working impartially for both vendor and purchaser. Their fee is paid by the purchaser and is in addition to the house purchase price. Fees can vary, but it is wise to budget for around 8% of the purchase price of the property (This will cover all costs necessary).

STEP 5: PROMISSORY CONTRACT – INITIAL DOCUMENT SIGNING

As soon as your offer has been agreed either at full asking price or a negotiated price, the initial sales document will be drawn up. This is called the Promissory Contract.

This is a legally binding contract and it is essential that you understand it fully prior to signing it.

You will be asked to provide some information for inclusion in this document such as full names, marital status etc. Work on the document cannot commence until you have provided this information, so you should do so as quickly as you can.

If you have any conditions to your offer (such as getting a mortgage to fund the purchase) these conditions can be written into the Promissory Contract. Writing in these clauses can protect you from having to forfeit your deposit if you are unable to complete your purchase.

At this stage you should be entirely happy with the conditions once the contract has been signed the full deposit amount will be paid to the vendor this amount can be anywhere from 10-30% of the property purchase price.

In the event that you change your mind at this stage you will lose your deposit, However should the vendor pull out they must return the double the deposit amount.

STEP 6: THE DEEDS – FINAL DOCUMENT SIGNING

Usually around three months after the signing of the promissory contract the lawyer will have undertaken all of the necessary work and you will have agreed a date for the final signing of the deeds. This will take place in Portugal, at the designated notary office. Once this final document is signed, you will be the owner of the property and will take the keys away from the meeting with you.

Before this meeting you will need to ensure that the balance of funds to complete the purchase of your property is in the lawyer’s bank account, this includes any funds which are being paid by a mortgage company. If you are using a currency exchange company to transfer funds being paid by yourself, they will work with you to ensure that this money arrives with your lawyer on time.

You also need to ensure that you have insurance on the property before you take ownership on the day of signing.

Property Taxes

If you purchase property in Portugal and you are not a resident in Portugal, you are liable to pay some taxes. By definition you are considered to be not living in Portugal if you do not spend 183 days per year (Tax Calendar Year) or more living in Portugal or if your primary address is not there.

As a Non-Portuguese resident, you are liable to tax on your Portuguese sourced income and a married couple are taxed jointly. When you purchase a property in Portugal you be subject to the taxes described below:

Property Tax – Immovable Property Tax – IMI (Council Tax)

As an owner of Property in Portugal you will have to pay property tax (Immovable Property Tax, IMI).

Each individual municipal has its own rate, and is decided by the municipal assembly. The person/Corporation that owns the property on the last day of the respective tax year is liable to pay the IMI Tax.

The Tax rates range from 0.2% to 0.8%.

Property Purchase Tax – IMT – Imposto Municipal sobre Transamissoes (Stamp Duty).

IMT is a property purchase tax which is calculated by the higher value of either the value of the deeds or on the rateable value. The rate is variable, and depends on the type of property and the value of the property.

STEP 7: CONGRATULATIONS – YOU DID IT!

Now it’s time to sit back, open a bottle of something and enjoy your new purchase. Portugal is a wonderful country to spend time in, and if you are anything like us you will fall in love with it over and over again as you really start to discover things on your own.

We hope our team are able to ease you through every step of the process and wish you every happiness with the purchase of your new home.

Are you ready to make the first step?

Get in touch with Mialex now to start your adventure of buying a home overseas and let us help you find the right property.