General information about the buying process in Portugal

The buying process in Portugal differs in some points from other foreign countries. It is therefore recommended that you contact a good real-estate agent, who will guide you through the process. If you buy a property, listed by that real-estate agency, you do not pay any commission to the agency. In general the agency commissions are payed by the vendors in Portugal.

Also highly recommended is to hire a lawyer for the legal guidance through out the buying process. We can recommend you with lawyers who are good, reliable and affordable.

The steps to take when you buy a property in Portugal

1. You have found your dream house. Better ask the opinion of your real-estate agent about the price and condition of the property. If it all fits, you put in an offer through the real-estate agent. A good agent can better negotiate with the owners, because they know their situation and have experience with negotiations. A counter offer can be expected from the owners. When you want to buy a newly build or off-plan project the price might not be negotiable. A good real estate agent can try to get for instance appliances or extras included. You agree with the vendor about the price, what is next?
    
2. You have a first meeting with a lawyer or solicitor. The first thing the lawyer does after this is obtaining your fiscal number “Numero de contribuinte” for you at the financial department of the ministry. For this a copy of your passport or identity cart is sufficient. Because you probably do not live in Portugal at that moment you would need some one to take the fiscal responsibility for you to apply for this card. Family or friends living already in Portugal can take this responsibility but better is even to do that through your lawyer. Be aware of companies in Portugal that ask high sums for this fiscal responsibility, so ask you agent for the right adresses.
    
3. It is recommended to then have a promissory contract drawn up by a lawyer. In Portugal a type of reservation contracts can be signed, but these often are between you, the buyer, and the real-estate agent, thus does not bind the seller. Your rights and obligations are better guarantied as a buyer, if you secure the property through a promissory contract. If the seller does not keep what is written in the promissory, the seller has to pay you double the amount of the deposit back, due to Portuguese law.
   In the promissory contract the following details should appear:
   - The identification of the sellers and the buyers
   - Details of the property, inclusive the registration at the land registry office, licence a.o. (see attachments 1; documents necessary)
   - Agreed price of the property, with the amount of the deposit paid and the schedule of payments (in agreement with the owners).
   - The period of time, as to when you and the owner or builder can exchange the final contract.
   - Whenever your apply for a mortgage, a clause can be put in the promissory, that if the mortgage is rejected, the deposit would be paid back to you and the contract is of no effect.
   - That the property will be delivered, free of debts.
   - Whenever you get inclusive or buy furniture/ equipment or extra works agreed upon with the owner, a list could be added to the promissory contract.
   - When you buy through an official real-estate agency, this has to be  mentioned with their name and licence number
    
4. The deposit or downpayment in Portugal is in general 20% of the purchase price. It is most common that if you are on a house-hunting tour that you have no access to that amount  at that moment .A smaller amount (whatever you can withdrawn with your credit card at that time) can be agreed with the owner. When you are back in your country, you can then transfer the rest of the 20 % deposit to either the owner or to a client account of your lawyer. These details should be of course written down in the promissory contract. To transfer down payments to the selling real-estate agency should be avoided. Except when you have your own buying broker to complete on buying the property for you.
    
5. Between signing the promissory and the exchange of the contracts, it is best if your real-estate agent or your lawyer helps you opening up a Portuguese bank-account in your name. Among others this is useful to transfer the larger some of the purchase (80%= plus cost of buying) to your own account to pay for the exchange and deed etc. Usually a guaranteed bank check will have to be handed over, when signing the deed. Also the cost of buying (see point 8 and 9) can be then paid directly from your account. In Portugal regular bank checks are still available.
   
   To open up a bank account in Portugal in general you need to hand in copies of:
   - Your passport or identification card
   - Your fiscal number, so called “numero de contribuinte” (see 2)
   - Proof of address of your residency: a copy of an electricity bill or water bill of your current residency, is most common used.
   - Some banks want to know what your profession is, so payslips or proof of self-employment can be asked for.
   - Bank Forms need to be filled in and signed by the accountholder
    
6. For a mortgage request in Portugal  you need to supply besides the above documents (point 5) the following:
   - Payslips from the last 3 months
   - A statement from your employer with your position, salary and date when you started working there.
   - Tax-declarations
   - Bank statements from the last 3 months
   - Recommendation letter from your main bank
   
   Whenever these documents are not in Portuguese, English or French, they have to be translated by an acknowledged translator or the Portuguese Consulate. If the bank is flexible, better wait with translations until you know more or less if the mortgage will be granted in order to save costs.
   
   The bank will verify if your income is sufficient, after that a pre-approval will be given. Then the bank hires an external specialised company, who would then go to evaluate the property. In general this estimated value by the “bank” is below the market value, this is for security reasons of the bank. This estimate will be at your expense and varies between 300 and 500 euros. Depending on more factors, the bank may grant you 60 % to 70 % up of the estimated value for your mortgage. Your age, your credit rating, the pay-off time and the bank commission will determine the monthly payments of your mortgage. The interest rates are connected to the Euribor and therefore most are variable. At the time of the deed, some-one from your bank would be there, also to hand out the bank check to the owners, in the amount of the mortgage.
    
7. If you are not able to come back personally to Portugal to complete on the purchase, a power of attorney “Procuração” can be used for completion. A representative, such as your lawyer, buying broker, or family member can sign on your behalf. The best and easiest way to make a power of attorney is while you are still here and it should be made by the local notary, where the deed will be also made. It is recommended to have a lawyer involved in doing this. You could also have a power of attorney drawn up by the Portuguese consulate or a notary in your country. There is still a chance then that the notary in Portugal does not accept the power of attorney from other countries or notaries, so better present the power of attorney previous to the deed,  to the local notary to make sure you can complete on the sceduled date.
    
8. The property tranfer tax IMT= Imposto Municipal sobre Transmissão Onerosa de Imóveis “and the stampduty “Imposto de Selo” have to be paid before you do the deed. Your lawyer can make these payments or the preparations of it, at the local financial department. Both these taxes you pay only once, before the deed. In Portugal the buying costs are for the buyers, among others these taxes. But the costs for instance to actualize or obtain documents of the property (see attachment 1) are the responsibility of the vendors, and they pay for that.
   There are 2 tables for the “IMT” property purchase tax, this depends on if you move permanently to Portugal (at least 6 months plus one day) or use the house only for holidays. Look at the price range within the purchase price, and multiply the price with the percentage behind that price-range and subtract the amount behind that (last column on right side).

    

   Property transfer Tax “IMT” for permanent residency
   Price range	Tax rate	Deduction
   Less then 92.407 euro	0%	No deduction
   92.407 – 126.403 euro	2%	-1.848,14 euro
   126.403 – 172.348 euro	5%	-5.640,23 euro
   172.348 – 287.213 euro	7%	-9.087,19 euro
   287.213 – 574.323 euro	8%	-11.959,32 euro
   More then 574.323 euro	6%	No deduction
   This table is in effect as of February 2011
   Property transfer Tax “IMT” for non-permanent residency
   Price range	Tax rate	Deduction
   Less then 92.407 euro	1%	No deduction
   92.407 – 126.403 euro	2%	-924,07 euro
   126.403 – 172.348 euro	5%	-4.716,16 euro
   172.348 – 287.213 euro	7%	-8.163,12 euro
   287.213 – 550.836 euro	8%	-11.035,25 euro
   More then  550.836 euro	6%	No deduction
   This table is in effect as of February 2011

   If you buy a plot of land the following property transfer tax apply, depending on the designation written in the land registry:
   - For plots without urbane destiny purpose so called “Prédio rustico” the tax rate is 5%
   - Plots of land with a commercial or urbane destiny “Prédio urbano” the tax rate is 6,5 % of the purchase price.
   - Mixed land “Prédio mixto” on the rustic part you pay 5 % tax and on the urbane part you pay tax, according to calculation in the above chart.
   
   The Stamp duty “Imposto de Selo” is also paid to the state and is 0,8 % of the purchase price. Recently it has been changed that you have to pay the stamp duty also before the deed and not at the notary’s office afterwards.
    

9. In Portugal it is advisable to go to a notary to make the deed “Escritura”. They are the specialized professionals for these types of documents. Also licensed lawyers may exchange contracts, however there is a chance that this law would become revocable, as the notaries order is fighting the government in court. It is not recommended that the buyers and sellers use the same lawyer, due to possible conflict of interest.
   
   Your lawyer and / or the lawyer from the vendors deliver all necessary documents (See attachment 1) of the property in advance to the notary. The notary reads the deed first in Portuguese. If you do not completely understand Portuguese you can have your lawyer or buying broker do the translation afterwards in a language that you fully understand. When sellers, buyers or representatives  sign the deed, a guarantied bank check is handed to the owners and you get the keys of your new home. The notary itself costs between 200 – 500 euro, it differs from notary to notary and depends if you have taken on a mortgage in Portugal.
    
10. After the deed the last important step in the buying process is to have the property registered in your name at the land registry office. At the local land registry “Conservatorio de Registo Predial” you have to be registered as the new owners. When you obtained a mortgage this also will be registered here. Therefore this is the most important document of the property (see attachment 1 about the contents of this document).
    
    If some one else has the fiscal responsibility temporarily (see point 2) and you come to live here permanently, then you have to change the address at the finance department “Finanças”as well. If you come to live in Portugal permanently (mimimum of 6 months and 1 day), you can apply for exemption of the yearly property tax the so called “IMI” = Imposto municipal sobre Imóveis”. This only applies if you are buying your first property here in Portugal.

Because of all the documentation needed , the buying process in Portugal is a secure procedure. If you opt to build a new house in stead, the process can be long to obtain all the paperwork needed, see Attachment 1.

When you want to buy a plot of land, it is recommended to ask for a written confirmation of the local council with the permission that you can build on it. The laws and building planning (PDM) per council in Portugal can vary from district to district.

It is therefore recommended that you are being advised and helped by the right people such as your buying broker or lawyer.