Property Sales Process | Selling Costs

Introduction

When it comes to selling your Portuguese property, the main thing to consider is timing. Portugal has a cyclical property market and you need to ensure that you are selling at a time when the market value of your property is high. However, if you are trading up in Portugal it might make sense to sell during a downturn if the cheaper price of the larger property you're purchasing offsets the reduction in price of the house you're selling. If in doubt, you can always hold on to your property and rent it out and rent in the new location you are going to and wait for the property cycle to move in your favour.

It is advisable to remain in Portugal during the sale period, at least until the signing of the promissory contract, to ensure things run smoothly. You will also need to consider the capital gains tax implications of selling up. You can find out how much capital gains tax could be due by consulting your tax office (financas).

Legal requirements

Vendors are in a more secure position than buyers as a rule in Portugal. The vendor has to make sure that his property rights are entered in the Land Register in accordance with the law. The description of the property in the Land Register must correspond with the description of the real estate at the tax office or in the caderneta predial. If this is not be the case, then the two descriptions must first be harmonised before the conclusion of the purchase contract. The vendor also has to comply with the legal notification requirements vis-a-vis those who hold rights of pre-emption.

Vendors must ensure they possess relevant property documents, including the escritura, and make sure they have paid any outstanding IMT or utility bills on your property prior to sale.

The seller is obliged to sell the property free from defects which reduce the value of the property or prevent the use of the property for a particular purpose. If the property lacks a particular characteristic which the vendor claimed it possessed he/she is liable.

The process of selling property in France

1. Market research

Before you do anything, check out the market. Unless you're forced to sell, steer clear of slumps when prices are depressed and perhaps consider letting out long-term until the market recovers as an alternative.

2. Preparing your house for sale

It is worth doing some research through consulting with local agents to get advice on how to prepare your home to increase its attractiveness to prospective buyers.

3. Marketing your property

Once you have decided it's the right time to sell and are confident your property is in a condition which will appeal to prospective buyers, you are ready to go to market. The normal means of marketing a property in Portugal is via an estate agent who can also value your property. If you used an agent to buy your Portuguese home, it could make sense to use the same one to sell it, as they will already know the property. Before you take on their services, you should check carefully what they will and will not do in terms of marketing and what they will charge as commission – make sure you shop around to get the best service! It's advisable also to find an AMI-numbered estate agent (Associacao de Mediadores Imobiliarios).

However, it's increasingly easy these days to sell without using an agent. There are an increasing number of specialist websites and magazines advertising property for sale in Portugal. The key advantage here is avoiding the high estate agents' fees. You will need to do your research to get the price right. Just looking at the adverts will not be enough. You will need to get out and see comparable properties in your area and check out their facilities. Alternatively, you could try to sell your property at auction.

4. Organising legal representation

Once you have found a potential buyer, the next thing to organise is legal representation. There are three legal professionals you would be advised to deal with:

A public notary (notario)
– Unlike traditional lawyers, Portuguese notaries are neutral government legal representatives who act as witnesses to and registrars of property transactions. Under Portuguese law, only deeds of sale (escrituras publicas de compra e venda) witnessed and authorized by a notario can be registered at the land registry. He or she will carry out checks on the property and ensure all the paperwork is in order so that registration can take place. The notario also has a responsibility to make sure the appropriate property taxes are paid on time. Outside of the Algarve, Lisbon and Porto you are unlikely to find a notary who speaks enough English to properly explain the process to you which mean that you run the risk of missing out on advice on important matters such as inheritance. As the notary performs a neutral function, finding a notario is relatively straightforward. The local phone book will have details, and the estate agent you are dealing with will have a handful of regulars to choose from.
A reputable English-speaking Portuguese solicitor (advogado)
– It is essential to find an independent lawyer to represent your interests and offer impartial legal advice. If an estate agent recommends a lawyer, always consider that this lawyer may be working for the seller and therefore will not have your best interests in mind.
An UK solicitor versed in Portuguese property law
– Although you may be able to find a reputable, independent Portuguese solicitor who speaks good English, this solicitor will not be versed in UK law so it's advisable to also engage the services of a UK professional who has specialist knowledge of Portuguese property law in addition to a Portuguese solicitor to advise on the international dimensions of the transaction and on the key issue of UK taxation.

5. Negotiating a price and reservation contract

Once you've found a potential buyer and have organised legal representation, you are ready to start negotiating over price. You should be willing to walk away from the deal if you don't secure your minimum requirements. If at this time you have already identified alternative buyers that you would be equally happy to sell to, this will be easier to do.

In Portugal , there is a practice where some of the purchase price is paid “under the table”. This means that some of the purchase price is paid to the vendor in cash, undeclared to the authorities, while the balance is paid in the normal visible manner. In spite of apparent financial benefits for both parties, this can be a risky strategy. For starters it is illegal and there are severe penalties. Secondly, you may have difficulty hiding such a large cash sum from widespread anti-money-laundering regulations.

Once you are happy with the price you might accept £2,000-£3,000 from the buyer for the property to be taken off the market while your lawyer draws up a contract.

6. Signing a preliminary contract

Once all the necessary legal checks have been completed to the satisfaction of the buyer, you will be ready to sign an initial promissory contract (contrato promessa de compra e venda, literally meaning “promissory contract of purchase and sale”). Before this stage you should have had the contract translated into English and ideally have English-speaking assistance on hand during the signing. The contrato promessa can be signed in front of a notario or privately.

The contrato promessa details the finer points of exactly what you are selling, and includes all the fundamental information about the sale such as the purchase price (including how and when it should be paid), the list of fixtures and fittings included in the sale, and the completion date when the deeds will be signed and the property transferred into your name.

This agreement commits both buyer and vendor to complete the transaction and at this point the buyer must pay 10% of the purchase price as a deposit. If the buyer walks away from the deal subsequently, the deposit will be forfeit; if the vendor walks away, they are liable pay the buyer twice the value of the deposit in compensation.

7. Completion

After all the legal paperwork has been completed, the buyer will be ready to sign the title deeds (escritura). This is the moment of truth when ownership of the property will pass from vendor to buyer. The notary (notario) must be present at this event to formally witness and register the transfer of ownership on behalf of the Portuguese government.

Both parties will need to provide passports or other proof of identity and unless you speak good Portuguese the notary will insist that a translator is present to ensure you understand the full implications of the contract you are entering into. If the buyer isn't able to sign the deeds in Portugal, they can either grant power of attorney to a representative (probably your Portuguese advogado) to sign on their behalf or can arrange for a UK-based notary to witness their signature in the UK and pass it to the notario in Portugal.

Upon completion, the buyer must pay the balance of the purchase price, all professional fees, transfer (IMT) tax and notary fees.