Once you have identified a property you wish to purchase, it is standard procedure to make an offer through your real estate agent.
After agreeing on a price, the property is taken off-market and a gentleman's agreement is signed. At this stage, it is advisable to engage a lawyer* who will guide you through the buying process and help you sign a Promissory Contract promptly.
The overall duration of the purchase process can vary, ranging from a couple of weeks to several months, depending on the parties' preferences and the completion of necessary paperwork.
The Promissory Contract (Contrato Promessa de Compra e Venda) is a legally binding agreement signed between the buyer and the seller, encompassing the following details:
- Identification of the parties involved
- Description of the property
- Staged payments
- Standard penalty clause
- Inclusions such as furniture, listed in an inventory
- Completion date
Upon signing the Promissory Contract, the buyer (either directly or through their lawyer) pays the seller an agreed deposit, typically ranging from 10% to 30% of the purchase price. This contract safeguards both parties, requiring the seller to refund double the deposit if they withdraw, while entitling the seller to retain the deposit if the buyer withdraws.
The last step of the process is called the Deed (Escritura de Compra e Venda) which serves as the official Deed of Purchase and Sale, which can be signed independently or without a preceding Promissory Contract. There is usually a time gap between these contracts, determined by mutual agreement. Once the Deed is signed before a Portuguese Notary, you receive the property keys and your lawyer will register the property in your name at the Land Registry (Conservatória do Registo Predial) and transfer utility contracts to your name. The registration at the Tax Office (Autoridade Tributária e Aduaneira) is now automated through the notary.
*By the Portuguese law, an attorney-at-law is known as an advogado, combining the roles of solicitors and barristers. Usually, the buyer's lawyer prepares the Promissory Contract after conducting essential legal searches on the property to ensure it is free from any outstanding charges, such as utility bills, taxes, mortgages, and condominium fees. Your lawyer will also assist you in obtaining a Portuguese fiscal number. With a Power of Attorney (Procuração), your lawyer can represent you and sign the Promissory Contract, Deed, and other related documents on your behalf.
When buying a property in Portugal, you will have to take the following buying costs into account:
- Legal fees - can either be a fixed rate or a percentage of the purchase price, which can range up to 1.5%.
- Transfer Tax (IMT - Imposto Municipal sobre Transmissões Onerosas de Imóveis) - the buyer is responsible for paying this tax before completion, i.e., before signing the Deed. The tax amount varies based on the purchase price. As an example, for purchase prices exceeding 550,836.00€, there is a fixed rate of 6%. The Transfer tax for plots or properties within a touristic complex is always 6.5%. The tax rate for second homes may differ slightly from permanent residences. Your estate agent and lawyer can provide you with an accurate simulation.
- Stamp Duty - is currently 0.8% of the purchase price and can be paid along with the IMT tax or at the notary during the signing of the Deed.
- Notary, and Registration Fees – these fees vary depending on the purchase price.
Rest assured, your lawyer will be able to provide you an exact breakdown of costs.
Lastly, please note that in Portugal, the Real Estate Agent's fees are paid by the seller.
Contact us today at info@jessicaproperties.com to discuss your property criteria and benefit from our professional services.
