How to Buy Property in Portugal
Buying property in Portugal can be emotional, as well as a sizable business transaction and therefore must be treated with due care and diligence. If you take the time to prepare a detailed and systematic plan on how to buy property in Portugal, you can be certain of avoiding costly errors. Below you will find a number of suggestions on how to make the best of your house buying experience in Portugal.
Obtain the right information
How do you determine the right price to offer on a house for sale in Portugal that you like? Is the listed price too high? Have you found a superb deal? Your own due diligence is vital, as is the information provided by your agent. A professional real estate agent should be able to offer an unbiased opinion on the value of the house in Portugal, based on a variety of known before factors and knowledge of the local real estate market.
Without this local knowledge of the existing market, you may offer more than the house is worth. Worse still, you could potentially ignore a terrific buying opportunity. When you are looking for a real estate agent in Portugal make sure you hire a professional agent who you can trust and whom will take care of your interests.
Buying a house in Portugal
The following question may sound simple but do you truly know what type of house in Portugal you require? Having a complete understanding of your house needs will allow you to have a clear objective which will put you in a much better position when looking for your new house. How many bedrooms do you require? Where will you spend most of your time? How big a house do you really require? If you buy a house in Portugal which is not large enough you may feel without freedom.
On the contrary if your house in Portugal is too large the maintenance and upkeep may be more than you wish to cope with. It is at this stage prior to buying a house in Portugal that you should make an accurate list of all the things you want from your new house so that as well as finding a great house you will at the same time discover a great house that is right for you.
Is the Title free and clear?
Prior to you completing any transaction make sure that you know how to buy property in Portugal by making certain that what you are buying is registered and free of all liens. Many houses in Portugal are not registered correctly and it is therefore imperative that before you sign any documents that you know the full parameters of the property title.
The lawyer that completes your transaction will on your behalf make sure that your new house has free and clear title.
Read the Title document
A large proportion of buyers of property in Portugal overlook the discrepancies that exist between the Title document and what has actually been constructed. The title document will highlight the boundaries of the property and state the size of the property.
By consulting the Title document you will be certain of getting what you are paying for.
Paying for a survey
The majority of Portuguese buyers do not obtain a structural survey for the house that they are purchasing which unfortunately leaves them completely vulnerable to unexpected faults within the house.
For a fee in the region of €1000 your surveyor will provide you with a detailed report that will highlight any flaws or problems that your new house may have. It is recommended that any offer you make is subject to a satisfactory report.
Qualify for funding first
Before you decide to buy a new house in Portugal it is recommended that you obtain your funding first. With many of the requirements for obtaining funding changing recently it makes sense to know beforehand what is available for you. Pre-approval will also put you in a better negotiating position as the seller will be aware that your funding is already in place.
Apart from the funds required to buy a house in Portugal you will also need additional funds for taxes, legal fees, surveys, and insurance. These fees and taxes will vary from house to house, however you may wish to budget for an additional 10% of the house value for additional expenses.
Signing the contract
The signing of the contract will be done at a local Notaries office who are licensed by the Portuguese Government. As a foreigner who probably doesn’t yet speak Portuguese it is imperative that all documents are read out in your own language. This can be arranged prior to your purchase with the help of your realtor, lawyer or even at the notaries office.
Avoid Mistakes when Buying Property in Portugal
Buying Portuguese property can be emotional, exhaustive, time consuming and comes with a myriad of details that need to be taken care of. Some clients who buy Portuguese property who are caught up in the excitement of buying a new home tend to overlook some of these important items with their home purchase then turning into an expensive and not so nice experience.
Errors generally fall into three areas
Paying too much
Losing your perfect home to another buyer
Buying the wrong home
To avoid these errors when you buy real estate it is highly recommended that you have a systematic plan before you shop and try not to allow your emotions to carry you away. Here are some suggestions that may help when buying a home in Portugal.
Bidding without sufficient information
What is the right price to offer the seller? Is the seller’s asking price too high? Is it a fantastic deal? Without market research and comparable home pricing, you could lose thousands of Euros. Before you make your offer to buy Portugal property, be sure you have researched the market thoroughly.
A professional realtor can offer an unbiased and professional opinion on the value of a property before you buy, based on market information, the condition of the property and the neighbourhood where the property is located. Without local knowledge of the market, your offer could be too much, or worse, you could miss out on a great buying opportunity.
Buying the wrong home
What do you need and want in a home? It is imperative that when you buy Portugal property that you have clearly identified your needs and that you are bringing an objective view to home shopping.
Sometimes, home buyers buy a home that is too large or too small. Perhaps they didn’t consider the drive to work, the distance to school, or the many repair jobs waiting for completion. Plan ahead. Use your needs list as a guideline for every home you view.
Before you sign any document, be sure that the Portuguese property you are buying is free of all encumbrances and actually belongs to the seller. It is recommended that when you purchase a property in Portugal that you always use the services of a professional property lawyer. No matter which country you originate from we can help you find a lawyer that speaks your own language.
Before the purchase is completed, an updated survey is essential. This report will indicate boundaries and structural changes (additions to the house, a new swimming pool, neighbour’s new fence which is extending a boundary line, etc).
For five to eight hundred Euros a professional surveyor will conduct a thorough inspection of the home you intend to buy in Portugal. This way you will have an idea of the current condition of the property and the cost of any future repairs. It is always recommended that you make the final contract subject to a favourable report.
Get your funding first
It only takes a few days to get financing pre-approval. When you are shopping for a home in Portugal, this gives you more power. A seller is more likely to consider an offer from a serious buyer who already has funding in place.
Whether you have your own funding facilities or whether you are just putting them in place, why not let us see if we can find you a better deal. We work with a number of financial institutions and in many instances can offer our clients funding with better spreads and conditions.
Buy Real Estate at the Best Price
The process of buying property in Portugal and especially that of being able to buy at the best price can be an emotional, time-consuming venture; Therefore feeling that in the end you got the best price on your purchase can make all the difference. Like most major decisions, the amount of work and research you undertake before you start shopping can have a dramatic effect on how well you do in the end.
What do you really need?
Everyone can picture their ideal home but if you have not thoroughly prepared yourself prior to viewing properties? The chances are that you will find what you think is your ideal home and will more than likely end up paying too much. It is essential to treat the buying process in a slightly detached manner. Those who fall in love with their homes in Portugal usually pay too much and that is why we recommended you to develop a list of needs and one of wants.
When you are looking to buy the best priced property in Portugal, make sure that all your needs are fulfilled. Things like adequate space, a good neighbourhood, perhaps a garage and then have fun with items on your wants list. Treating the process in a regimented manner will help you to make a rational, informed decision.
Visit your lending institution prior to shopping for your new home. Be sure to get a mortgage commitment in writing as being pre-approved gives you a solid price range, and lets your realtor and potential sellers know that you are serious and not just browsing.
Get the right people behind you
Buying property in Portugal at the right price is a complicated process, with many people involved and having the right people on your side can make a big difference. An experienced, dedicated, and knowledgeable realtor can put a team of advocates, including lenders, lawyers, home inspectors and movers, on your side immediately.
The more you share with your real estate agent in Portugal, the better he or she will be able to represent you. Let your representative at Living Portugal Property know exactly what you’re looking for, in terms of needs/wants, price range, and location. This will eliminate unnecessary trips to unsuitable houses and that your dynamic and detailed focus can help ensure that you wind up in the right home.
Location, location, location
It’s still true, the desirability and resale value of your house depend on location more than any other factor. People want a desirable community. That includes character, quality schools, access to work, major transportation arteries, recreational facilities, etc. On your viewing trips, take a careful look and ask some of the following questions:
How does this house compare to others in the neighbourhood?
Are yards fenced?
Are there many children playing in the streets?
Are the front and back gardens and the exteriors of the homes properly maintained?
The least expensive houses in Portugal to buy, in a better area tend to appreciate faster than the most expensive houses in a less desirable area. Additional factors that affect the property value of a home include traffic, sounds, smells and planning laws. Be objective, make sure you are completely satisfied with the neighbourhood. If you choose a neighbourhood with problems, you likely won’t get as much as you hoped with it comes time to sell.
Use your realtor’s knowledge
Your realtor is trained in all aspects of real estate, including understanding supply and demand, economics, and the neighbourhoods of the city in which they practice. A professional realtor can do much of the work for you, by reviewing your needs, reviewing available properties, and making an informed match.
A comprehensive knowledge of the available houses in your neighbourhood in Portugal is one of your realtor’s strongest assets. With the aid of computerized systems, a realtor is notified within hours when a house for sale becomes available.
Pay attention to red flags
When evaluating a house in Portugal be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting, or unattractive wallpaper can be easily remedied, and can be used as negotiation items, as there will be costs involved in updating the home.
Major problems however are clearly red flags. Look for items such as major foundation cracks, water damage, outdated electrical systems, and inadequate plumbing. These items could be too expensive to remedy to make the house a worthwhile investment.
Hire a home inspector
A home inspection is an inexpensive way to gain peace of mind, and guard your pocket book. A proper inspection will cover all areas of the house including foundation, electrical, heating, plumbing, floors, walls, ceilings, attic, roof, siding and trim, porches, patios, decks, garage and drainage. A professional inspector can give you an objective view of the property, with a written report, indicating the present condition and items that will need repair.
Be cautious with fixer-uppers
Sometimes, a fixer-upper can be purchased below market value, and once sufficient repairs are made, can be sold at a significant profit. However, not all fixer-uppers will bring in the profits you might expect. Consumers often overestimate their level of dedication to doing extensive renovation work, and underestimate the costs associated with such work.
A wall that needs to be replaced can often lead to the discovery of faulty plumbing, electrical, or other major undertakings. Your realtor and home inspector are your best allies when it comes to cost-benefit analyses.
Consider your future needs
A move can be a major undertaking, so take a good look at your current lifestyle and consider the future. Will you need extra space for a home office, a child, or perhaps a child moving back home? It may be easier and less expensive if you purchase property in Portugal that can meet these needs now, rather than moving up to a larger home a few years down the road.
When you’re ready to buy, act. Good properties sell. This is especially true given the current state of most real estate markets.
However, when you work with a realtor, you have access to the latest technology. As part of the MLS and Agent Handshake networks, a realtor has access to properties within hours of when they are listed. Technology works to your advantage. Many realtors now have personalized websites which allow you to sign on as a client, and receive notification of new listings via email. You save time and effort, and you can view only those homes that come closest to meeting your needs.
In any real estate transaction, be very clear about who is working for whom, and what the relationship represents. Unless otherwise stated, an agent represents the seller in transactions for the sale of a home. This agent, as part of his or her fiduciary duty, must ensure that the seller’s (and not your) position is represented throughout the entire process. Get a buyer’s agent on your side, or ensure that someone is acting in your best interests.
Pay for a written CMA
A Comparative Market Analysis (CMA) is an analysis of comparable homes in a given neighbourhood. It shows you the sale prices of comparable houses in the neighbourhood, along with asking prices of other homes in the area currently on the market. A realtor can request this report for any home and neighbourhood. Ask for this report in writing. With this valuable document, you’ll have solid, reliable information about how fairly a house is priced compared to its real market value.
Know the seller
Understanding a seller’s reasons for moving could work to your advantage during negotiations.
For instance, a seller who has been transferred to another city may be more motivated to sell than someone who is still shopping for a new home in Portugal. A vacant house or a house that has been on the market for several months and has been reduced in price, could also provide the opportunity for lucrative negotiations.
Keep it impersonal
Conversely, information could be used to your detriment. Information about your mortgage, size of down payment, move-in deadline, or circumstances for buying could be used to the seller’s benefit in negotiations. While you want your realtor to know these details, maintain your poker face and keep your cards hidden with the sellers and their agents.
Measure twice, sign once
While you definitely want to move quickly once you’ve made the decision to purchase, you don’t want to cave in to pressure for a quick close. Someone who is trying to pressure you into buying a house is likely doing so for a reason. Make sure the reasons for you to buy a home are your reasons, not theirs.
Exercise your negotiating skills
Even if you prefer not to haggle, it’s worth it, especially when it’s your new home and one of your biggest investments. Most people expect to haggle over the price as there is always room for negotiation. Let your realtor who should be a professional negotiator help you achieve the best price.
Avoid bidding wars
In some cases, the seller’s realtor may use scare tactics to rush the sale or increase the price. Falling for this trap could cost you money. If there is another buyer, or some other reason this pressure is being applied, whoever wins also loses because they tend to overpay. Let reason be your guide, not passion.
Get it in writing
Legally, sellers must disclose all known material defects of a property in Portugal. Ask for this in writing. Also be sure to consider the ramifications of these defects. Will they be costly down the road? Are they “serious” defects?
Be aware of hidden costs
While realtors often tempt first-time buyers with rent/mortgage comparisons, there is more to a home than simply the mortgage. You will be responsible for other items including mortgage insurance, appraisal fees, legal fees, inspection fees, transfer taxes, title insurance, inspections, property tax, increased bills, etc.
Your realtor can give you a good idea of the costs associated with buying a house in Portugal that are beyond its final negotiated price.
Buy a Holiday Home in Portugal
With interest rates low, many holidaymakers and investors are starting to think more about purchasing a holiday home in Portugal, however, while simple holiday rental costs versus mortgage cost comparisons can be very attractive, buying a holiday home in Portugal is a serious commitment, and there are many factors to consider:
How long you plan to live in the house?
Buying a holiday home in Portugal costs money and if you only keep the property for a short while, the value of your home may not have appreciated enough to cover the costs of selling on. The length of time that it will take to cover the costs of buying a holiday home in Portugal depends on various economic factors. Average appreciation tends to sit at around 5% per year.
In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs, however, the real estate market can be particularly volatile, and dramatic swings up and down are not uncommon.
How long will the house meet your needs?
What features do you require in a house to satisfy your lifestyle now and five years from now? People tend to keep their houses in Portugal longer than they initially intend, primarily due to the sunny weather, lifestyle and expense associated with selling.
Therefore it is worth considering buying a vacation home that will also suit your needs in the future. Could the basement be turned into a den or extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy your needs for years to come.
Is now the right time financially for you to buy a holiday home in Portugal? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, people with poor credit tend to pay far more to borrow. Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries.
The other school of thought says you should stretch to buy as much house as you can afford, because with regular pay rises and increased earning potential, the big payment today will seem like less of a payment tomorrow. It is, however, important to stay within your comfort zone. Purchasing a house in Portugal involves many up-front and ongoing costs, and the stress of worrying about those costs often outweighs the satisfaction that may come from owning a holiday home abroad.
To determine how much of a house you can afford, talk to a lender or go online and use a house affordability calculator. Good calculators will give you a range of what you may qualify for. Then call a lender. While some may say that the "28/36" rule applies, in today's home mortgage market, lenders are making customised to a particular person's situation. The "28/36" rule means that your monthly housing costs shouldn’t exceed 28 percent of your income and your total debt load shouldn’t exceed 36 percent of your total monthly income.
Depending on your assets, credit history, job potential, and other factors, lenders can push the ratios up to 40-60% or higher. While we're not advocating you purchase a house in Portugal utilising the higher ratios, it’s important for you to know your options.
Where will the money come from?
Typically, house buyers in Portugal will need some money for a down payment and closing costs, however, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary if you can prove that you are a good financial risk for a lender.
If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender. High-ratio mortgages can be a good option for those who haven’t managed to save a large chunk of money, but naturally, these have additional costs associated with them.
The costs of home ownership
Maintenance, improvements, taxes, and insurance are all costs that are added to a monthly house payment. If you buy a condominium or townhouse, a monthly homeowner's association or maintenance fee will be required. If these additional costs are a concern, you can make choices to lower or avoid fees.
Be sure to make your realtor and your lender aware of your desire to limit these costs. If you are unsure if you should buy a holiday home in Portugal after making these considerations, you may want to consult with an accountant or financial planner to help you assess how your house purchase fits into your overall financial goals.
To buy or not to buy luxury property
It’s easy to fall in love with certain features of a luxury home in Portugal, only to find out that those same features, in the long run, are your least favorite. Here are a few common ‘extras’ and a quick assessment of their relative values.
Also referred to as radiant heat, under-floor heating is a brand new invention for your luxury property in Portugal, right? Well, except that the Romans did it a couple thousand years ago by channeling hot air under the floors of their villas. Frank Lloyd Wright did it in the thirties with hot water, but other than that under-floor heat comes in two primary forms: hot water heat and electric heat, and there are many advantages.
The dramatic energy savings promised shouldn’t prompt you to ask for a decrease in salary just yet, since the more popular hot water radiant heat usually requires a second hot water heater and won’t shave too much off of your bill, but there are some notably appealing elements to in-floor heat in general.
For: Radiant heat is even and consistent, without the up-and-down temperature shifts associated with most conventional heating systems. It’s also silent and invisible, with no bulky radiators or even vents ruining the feng of your shui. Radiant heat also won’t dry the air, and won’t have you hopping about looking for your slippers on a cold morning.
Against: Under-floor heating systems are still considered a luxury, and can add a fair bit to the cost of a home in Portugal. They are new, and potential long-term issues have not been entirely worked out. A handful of people also are leery about the prospect of piping a significant amount of water throughout their cherished luxury property in Portugal for fear of potential leakage.
Assessment: Find someone with in-floor heating who doesn’t love it. I dare you.
It’s the quintessential item of buying luxury property in Portugal that announces once and for all that you have arrived, and even though in parts of the country like this one where it may only be used for three to four months of the year, we still prefer to have one rather than not. From swimming pools that are little more than big pits of standing water to jewel-encrusted infinity pools that usually adjoin large bodies of water, swimming pools were once the thing, but are they still?
For: A recent 4-state NAR study found that having a pool increased property values from 8 to 15%. The idea of kicking back all summer with a piña colada, sitting next to the lapping water with friends can be quite attractive. And rightfully so.
Against: Safety issues have not been blown out of proportion by the media. Pool deaths happen all the time, there’s no getting around that fact. Pools are expensive to maintain, even without hiring a pool cleaner, and are a lot of work. As beautiful as a pool can be when it is maintained properly, it can be an eyesore if it is not. A pool tends to negate having any significant usable space for a backyard. Am I missing anything?
Assessment: The issues involved with owning can be overcome, and many people enjoy having a pool very much. You just have to want one really badly for it to be worthwhile.
Kitchens do cool things these days. Appliances paneled to look like cabinets, an extra tap above the stove for filling large pots of water, $15,000 pounded-copper range hoods, and 460 different countertop materials.
For: Kitchens are finally being designed with maximum utility in mind. When shopping for a luxury property in Portugal, focus on the kitchen. It is where you will likely spend a great deal of your time, and the room in which every party tends to congregate. Before you fall in love with that Kohler faucet, analyze the kitchen’s layout from a purely utilitarian standpoint. Is the magic triangle of sink-stove-fridge arranged conveniently? Are cabinets and other storage in logical places? Is there sufficient light? And most importantly, is this a space you will feel comfortable and happy in?
Don’t underestimate the importance of a functional and attractive kitchen.
Against: Be careful not to fall in love with the impermanent fixtures in a kitchen. While those glass-front, backlit uppers may brilliantly display the seller’s Royal Daulton bone china, will your mixed collection of garage sale Melmac have the same effect? Likewise, if your idea of cooking is heating up last night’s pizza, perhaps space would be better used elsewhere.
Assessment: The kitchen is the hub of virtually any luxury property in Portugal. Don’t underestimate its importance.
This is an overly broad categorization, of course, but activity rooms like workshops, games rooms, and exercise rooms tend to hold common appeal – and common drawbacks.
For: Having the right setup for a particular activity can be inspiring. Having a single power tool in each room of your newly purchased luxury property in Portugal and each corner of the garage and shed is not exactly the ideal situation for building that crib you started on for your daughter and are determined to finish before the birth of you granddaughter. Likewise, if you have the latest elliptical trainer and weight set in a room next to your bedroom with a 12 foot plasma TV facing it, perhaps you will find that six-pack after all.
Against: If you can’t make a dovetail joint, all of the tools in the world will not give you that knowledge. If you haven’t lifted anything heavier than a handful of pork rinds in the last decade, a workout room will likely soon become just a TV room with uncomfortable seating. Unreasonable expectations usually develop into unreasonable decisions.
Assessment: Once your have purchased your luxury property in Portugal it should and will inspire you, and to a certain extent, dictate your lifestyle. Be rational in your decisions, however, and aim for versatility rather than rooms that are locked in to a particular use that may not be as useful in the future.
The Bottom Line
With all of your luxury property features, try to let reason prevail (or at least get a word in edgewise). You may absolutely worship the tumbled marble rainforest shower with the heated towel rack, but it will be of little comfort every morning and night when you are cursing the home’s lack of closet space. It is often the most boring attributes of a home that will give you the most pleasure.
Now, off to luxuriate in my rainforest shower, I had to take out the bedroom to install it, but that’s okay, I don’t mind sleeping in the kitchen.