Buying Property in Portugal - the costs and process

Editorial Lifestyle

A guide to the basic processes and costs in buying property in Portugal

Step by step guide to buying property in Portugal. What to expect and what to check during the property sale. What additional costs can you expect in property transactions and what due dilligence you should do.

Buying property is a big undertaking. Buying property in the Algarve, where you are perhaps not totally familiar with the language, laws and ways of doing business, even more so. You owe it to yourself to learn as much about the process and steps involved as you can, so that you can plan and budget based on realistic information.

The team at Abacoz Properties have put together a quick guide on the basic processes of property transactions in Portugal. An independent real estate agency based in Lagos, they excel in giving practical, realistic advice to both buyers and sellers and in negotiating sales so that all parties are happy. They work to ensure that each transaction runs smoothly, with no surprises along the way. Having an understanding of the process and additional costs that are involved is an essential element of sucessfully completing property sales.

Buying A Property In Portugal – The Process & Costs by Abacoz Properties

You may have been thinking about buying a property in Portugal for a while. We understand that it is a big step, regardless if it's your new primary residency, a second (holiday) home or an investment property. Investing your money into a different country can seem daunting.
You will undoubtedly have many questions. What do you need to take into consideration when buying a property? Which costs will be incurred in addition to the asking price? How are these costs calculated?
Abacoz Properties Algarve will guide you throughout the whole process, but to help you we have created this guide to provide the basic information you need to know about the Portuguese property buying process and costs.

The most important thing about buying a property in Portugal, is finding the right one for you. Whether you’re looking to buy an apartment, commercial premises, a rustic farmhouse or luxury villa, the Abacoz Properties multi-lingual team will guide you through the process with expert advice and recommendations.

Due Diligence
When you have found the property of your dreams, we advise you take on a lawyer/solicitor. They will carry out the due diligence, report the findings to you and draw up the first contract (Promissory Contract).
All documents will be checked by your lawyer, including:
-    Certidão Permanente
This document contains details of the property ownership.
 -   Caderneta Predial
 This document proves the property has been registered for tax purposes.
-    Licença de Utilização
 This document is the license of the property usage/purpose (e.g. Habitation, Commercial)

The Promissory Contract
Only after you and your lawyer/solicitor are sure that due diligence is complete and everything is correct and legal, the first legally binding contract is signed. This contract includes the following information: 
  • The agreed price
  • What is included in the price
  • The date of the final deed
  • Other terms and conditions
The promissory contract is made up by your lawyer and will be signed by you and the current owner/vendor.
On promissory contract, the deposit is paid. As this contract is legally binding, the deposit is non-refundable. If either party changes their mind, they lose the deposit to the other (for you this means that you lose your deposit if you change your mind, and that you get your deposit back double if the vendor changes their mind).

The Escritura/Final Deed
 Approximately 30 to 60 days after the Promissory Contract as been signed (variable timescale depending on the situation), the Final Deed (Escritura) is signed and paid.
This process involves the buyer, the vendor, the buyer's lawyer, the vendor's lawyer, the buyer's bank representative in case of a mortgage, and the notary. The final contract is in Portuguese. As the notary goes through every word of the contract with all parties, the lawyers can translate into English or other language.
The remaining balance of the agreed purchased price is paid at this stage. The balance is always paid by cheque at the final deed.
 When both parties have signed and the cheque has been handed over, you are the legal owner of your dream property in Portugal!

When buying a property in Portugal it is important to be prepared to pay for other costs, in addition to the purchase price.

Agency Fees
The Agency Fees in Portugal are for the seller, not for the buyer, so none for you to pay.
Legal Fees
 A lawyer will check all the documentation and legal side of the property you want to buy. For example, a lawyer carries out a title check and due diligence reports on the property. Using a lawyer, you know exactly what you are buying, without falling into any traps.

Notary Fees
Every buyer needs a notary to legally sign the Final Deed (Escritura) of the purchase of the house. There is a cost involved for a notary to set up the final contract and the final deed service, this cost varies.

Property Transfer Tax (IMT)
The Property Transfer Tax (IMT) is a cost to be paid at the transfer of the property into your name. It’s an unavoidable part of the property buying process and costs.
Two different rates apply, there is a different percentage of the property purchase to pay if it is a 1) primary residence or 2) secondary property, holiday property, or rental property.
There are online tools available to help you calculate the rate of IMT you’ll pay, or ask your lawyer or real estate agent.

It is important to consider the ongoing taxes you will have after buying your property in Portugal.

Property Tax (IMI)
The Property Tax (IMI) is the tax to be paid to the council, also known as council tax or rates. It is a percentage of the rateable value of the property, which is set by the tax office. Please note that this is different from the market value. The tax varies depending on the council. For example, the IMI for a property within the council of Lagos may be different from the IMI of a property within the council of Portimão.

Rental Income Tax
When you own a property that you are renting out, you need to pay tax on the income.
For Portuguese residents, the rental income is added to the wage and together the income will be taxed as a total amount.
 For non-residents this is different. A non-resident that rents out a property long term, pays tax on the income of the property, minus costs.
A non-resident that rents out a property short term (holiday let), pays tax on only  a percentage of the income, meaning  the majority of the income is tax free. 

For more personalised information regarding  property buying costs, taxes, and the buying process in Portugal, please contact Abacoz Properties  Algarve on or call +351 282 044 886.

This article was written by the Abacoz Properties team.

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