1. CHOOSING THE PROPERTY :
Whether for a small apartment near the beach, or for a high class villa on one of the most famous Golf Courses, the prices differ greatly along the Algarve. If you have already defined the area and type of property you want, you can greatly reduce the amount of time (time is money) you will spend searching for and viewing properties.
You find a property! A new property (with 5 years guarantee) or a second hand property? In what condition? If necessary request a surveyor to do an inspection to evaluate the structural and mechanical conditions of the property.
2. CONSIDERING RESALE FACTORS
You may want to sell the villa or apartment you’re thinking of buying in a couple of years time. You must think about the home’s potential re-sale value and consider the following:
- Decide whether you want a newly constructed Algarve villa or apartment, an older home, or a home that is in need of work or “modernisation”.
- For holiday purposes properties with 2-3 bedrooms, inside condominiums, generally have more appeal and appreciation potential than those with less.
Well located properties, in good condition, are the easiest to re-sell. In line with this, well-maintained complexes are the most desirable, but check that the maintenance fees (local rates) are within your means. If you are about to buy the most expensive house on the street, stop for a moment and re-think the business. From an investment standpoint, it’s better to buy a moderately sized villa or apartment in the right location, rather than the largest, most expensive villa in a high-priced area.
3. NEGOTIATING THE PURCHASE & SIGNING A PROMISSORY CONTRACT
Having chosen the property and price agreed you will need to establish the purchase terms with the seller. At this stage you will appoint a Lawyer (or a solicitor) to advise you and conduct all the legal steps of the business.
You should not decline to use a Lawyer. Your Lawyer will conduct the appropriate searches of the property, namely at the Town Hall (to verify the property has the relevant license), Tax Office (to make sure there are no tax debts) and Land Registry Office (to confirm the person selling the property actually owns it and whether there are any charges on the property) and will confirm all registrations match.
Your lawyer will discuss with you in more detail, the purchasing process and will draw up a promissory purchase and sale agreement , taking into account all terms and conditions previously agreed with the seller. A down payment or deposit is usually paid to the seller to reserve the property until completion.
4. QUALIFYING FOR A MORTGAGE
The most relevant factors that will be taken into account when lenders are determining whether you qualify for a mortgage loan are:
1- Your financial strength (based on your income, debts, and credit history)
2- The property’s value (assessed by a valuation made by an independent surveyor). This value is normally very close to the market value and the amount lent is usually around 75% of the valuation (LTV- Loan to Value)
5. COMPLETION OF THE PURCHASE: NOTARY DEED
The sale is duly completed when the title deeds of purchase are signed in front of a Notary, the final payment has been made, and the purchaser takes possession of the property.
The completion of the purchase is usually executed by the lawyer representing the purchaser by Power of Attorney.
6. REGISTRATION OF THE PROPERTY IN THE PURCHASER’S NAMES:
The Lawyer will also arrange the necessary registrations at the Tax Office (Repartição de Finanças) and Land Registry Office (Conservatória do Registo Predial).
7. HOUSE INSURANCE FOR NON RESIDENTS
It is very important to arrange buildings and contents insurance for your property.
Many different types of policies are available in any Insurance Company. It is important to contract the adequate coverage:
-The buildings which includes the rebuilding costs or repairing costs in case of damage.
-The home’s contents.
A standard house insurance policy usually protects you against: Fire, lightning, wind, storms, flood, hail, explosions, aircraft wrecks, vehicle crashes, theft, breaking glass, falling objects and water damage.
A standard policy will usually not protect you against: Earthquake, nuclear accident, war, riots, vandalism, electrical damage and IT equipment. Although earthquakes rarely occur, the Algarve is considered a seismic area. It is recommended to include this risk in the policy.
If your property is located in a Condominium or Resort the Insurance is usually required.
8. PURCHASE ASSOCIATED COSTS
The costs associated to the purchase are variable to the property price.
The costs are:
Transfer tax (IMT Tax, between 2% to 8%, equivalent to stamp duty)
Registrations & search
Annual Council Tax (IMI - municipal property tax - equivalent to "rates"). This is an annual tax levied on the property's rateable value.
9. FINAL RECOMMENDATIONS
Although your Will is valid in Portugal, it is advisable that you make a Will.
Jointly owned property does not automatically pass in full to the surviving spouse or partner. Ask your Lawyer for further information.
- Give a Power of Attorney to your Lawyer or to a member of your family to deal with your affairs, should you become incapable.
- Insure your property and it's contents.
- Have all utilities and services contracts transferred into your name.
- Open a local bank account.
- Keep on file all documentation related with the purchase of the property as well as all invoices (subject to VAT) related with any capital improvements (these can be offset against any capital gain within five years if you decide to sell the property).