Guide to Purchasing Property in Portugal: A 6-Step Client Overview

1.The process begins with the submission of a formal, complete, and comprehensive offer. In Portugal, it is crucial that the initial offer fully articulates all purchase terms, as this document sets the foundation for the entire transaction.

Key Components of the Initial Offer:

• Total Purchase Price: The definitive price you are offering for the property.
• Terms and Conditions: Any specific terms associated with the sale (e.g., subject to a specific date for a mortgage approval, although financing is typically handled during the waiting period).
• Inventory of Contents: A clear list of any furniture, appliances, or other contents that are included in the sale price.
• Intended Closing Timeline: The proposed date or timeframe for the final deed (Escritura).

The entirety of the final purchase terms and expectations are established upfront in this initial offer.

Negotiations and Acceptance

Following the submission of your offer, you should anticipate one of two responses from the seller: a counteroffer with amended terms, or a formal acceptance of your original offer.

Property Inspection and "AS IS" Sales:

At this stage, we can facilitate a property inspection if you deem it necessary. It is critical to understand the nature of sales involving existing construction in Portugal:

• "AS IS" Sales: All existing construction is sold "AS IS." The buyer assumes responsibility for any necessary repairs, renovations, or improvements after the closing.
• Existing Houses (Stand-Alone): We highly recommend securing an inspection for any stand-alone, existing construction house, as this provides a full assessment of the property's condition.
• Existing Apartments: For apartments, the inspection is typically limited to the interior of the specific unit, as access to the entire building structure or communal areas is often not provided.
• New Construction: Portuguese law mandates significant protections for new construction. The builder is legally required to provide a ten-year structural warranty and a five-year warranty on finishes (e.g., flooring, plumbing, electrical).

The Role of the Inspection:

It is vital to note that the inspection is not a contingency and cannot be used for renegotiating the accepted purchase price. Its sole purpose is for your information and planning. However, if the inspection is scheduled and completed during this point in the process, and the report reveals serious, unexpected concerns, you still retain the option to withdraw your offer without any financial penalty (no money will have been exchanged yet).

2. Contract Drawn Up (Contrato Promessa de Compra e Venda - CPCV)

This is a pivotal step. The Contrato Promessa de Compra e Venda (CPCV), often simply referred to as the Promissory Contract, is the official, binding, and legally enforceable agreement to purchase the property.

Key Features of the CPCV:

• Legally Binding: It formalizes the accepted terms agreed upon in Step 1.
• Contents Inventory: It includes the final, confirmed inventory of any contents (furniture, appliances, etc.) that are included in the sale price.
• Final Terms: It details all final closing terms, including the agreed purchase price, the down payment amount, and the closing date.

Both the buyer and the seller, or their legally appointed representatives, must review and sign this document. It is standard practice for both parties to initial each page of the contract in the top right-hand corner to confirm review and agreement to every clause. Once formally signed, the contract is ready for funding.

3. Funding the Promissory Contract

Following the signing of the CPCV, the contract must be funded to become fully effective and establish the serious intent of both parties.

• Transfer Deadline: You have a period of five business days from the signing of the contract to transfer the agreed-upon down payment.
• Deposit Amount: The traditional and minimum standard deposit is 10% of the total purchase price.

The Critical Non-Refundable Deposit Clause:

Once this deposit is transferred and the CPCV is funded, it becomes non-refundable for any reason initiated by the buyer.

• Buyer Default: If the buyer changes their mind or fails to complete the purchase (for any reason other than a clause explicitly detailed in the CPCV), the buyer forfeits the entire deposit. They will not receive the funds back.
• Seller Default: Conversely, if the seller is the party that backs out of the legally binding contract, they are penalized by law and are required to pay the buyer double the deposit amount in return. This severe penalty provides a strong guarantee for both parties to proceed to closing.

Currency Conversion and Transfer of Funds 

• It is important to plan for your currency exchange and transfer before you make an offer. Typically when you are in the United States you can initiate a transfer and it will be received within three to four business days (sometimes faster). If you are in Portugal it can take longer or may be difficult as banks have many security measures in place and may want you to be back in the United States to complete the transaction. 
• Generally you will find it is less expensive to transfer and exchange currency using a currency broker, Portugal The Place partners with SpartanFX and will make an introduction on your behalf. You will need to set up an account with them and do a small test transfer before proceeding with larger sums. This can take about a week to set up so it is important to have everything ready. 
• SpartanFX (or other currency exchange brokers) can transfer your funds directly to the seller's account, bypassing another transfer to your Portuguese bank account for the promissory contract. 
• The final balance can also be converted by the currency exchange broker but that amount will need to be transferred to your Portuguese account so a cashiers check can be issued before the closing. 

4. Waiting Period and Mortgage Process

The period between funding the CPCV and the final deed is the waiting phase, during which any remaining contractual requirements are met.

• Purpose: This phase is primarily used to secure financing, prepare documentation, and await the agreed-upon closing date.
• Securing Financing (Mortgage): If you are utilizing a Portuguese mortgage, the application process is finalized here. A crucial step is the bank's evaluation (appraisal) of the home. The bank's assessment of the property's value will determine the final loan terms and the amount they are willing to lend.
• Please review our mortgage and important financial and contractual considerations document linked here. Mortgage and Financial Information for Portugal
  1. For the calculator put in the sale price you are considering
  2. Always select second home, mainland Portugal
  3. Estimated closing costs include 3,000€ for the attorney fees, notary and filing expenses. 
• Outstanding Requirements: Any other conditions specified in the CPCV must be completed during this time.

5. Final Deed (Escritura)

The Escritura is the official closing process where the ownership of the property is legally transferred and registered.

• Attendance: You will sign the final deed either in person before a notary or through your appointed legal representative. If you are not present, your lawyer will act on your behalf using a formal Power of Attorney (POA).

Preparation for Closing Funds:

A critical financial period occurs in the days leading up to the final deed:

• Closing Funds Notification: Approximately 5 to 10 days before the Escritura, you will be provided with the exact, finalized amounts due for both taxes and the remaining purchase balance.

Handling of Funds:

• Taxes: Taxes (such as IMT - Imposto Municipal sobre Transmissões Onerosas de Imóveis, or Property Transfer Tax, and Imposto de Selo, or Stamp Duty) are legally required to be paid to the state concurrently with the final deed filing. You will be asked to transfer these tax funds directly to your attorney so they can manage this compulsory payment on your behalf.
• Balance Due: The remaining balance of the purchase price must be paid to the seller via a certified check (Cheque Bancário), which must be issued from a Portuguese bank. This requirement ensures the security and verification of the funds at the time of closing.

6. Utility Transfers and Home Improvements

The final step is the practical transfer of services and, if desired, planning for post-purchase work.

• Utility Transfers: The transfer of essential utilities (water, electricity, gas, internet) can only be legally processed after the final deed has been officially filed and ownership has been registered in your name.
• PTP Coordination: Your dedicated coordinator at Portugal The Place (PTP) will manage and facilitate these transfers. A preparatory meeting will be scheduled with the PTP coordinator approximately two weeks before the closing date to plan the transfers and any other handover details, ensuring a smooth transition into your new property.
• Home Improvements: Once ownership is formally transferred, you are free to begin any planned home improvements or renovations.