Portuguese Real Estate

This is the stuff you need to know about Portuguese real estate – stuff that people don’t know they have to tell you, because they’ve always done it this way? It’s unlike US real estate in, I dunno, just about every possible way.

Mortgages

Mortgage brokers are good, they will get you the best deal. But what they won’t tell you is that when you get approved, you have to open a bank account with the bank you got approved by! And that wouldn’t be a big deal, except Portuguese bank accounts generally suck, and slowly drain money over time, sometimes 3 – 7 € per month.

But what’s worse – for the deal to go through, you have to move your direct deposits to the new account, and they will almost 100% sign you up for some extra stuff you don’t want like credit cards, pre-paid cards, etc! I mean, I guess I understand why they want this – so they can snag your money before you do, if they have to? But it especially sucks if you have a bank that you (kinda) like, and you’re moving to one you dislike. As our real estate agent suggests, you can set up scheduled transfers over to your ‘preferred’ bank, which is a work-around, but I don’t know what those transfer times are going to look like, and now you have two Portuguese bank accounts that are slowly leaking money all the time. YUCK.

Process

And here’s where it gets weird – there is no such thing as escrow. This weirds us out, for sure. So here’s the (general) process.

• If you’re smart, you want to get pre-approved for a mortgage before you start. Even if that’s not the mortgage you go with. Probably easy to do this with your current bank.
• You look at places. You find one you like. You make an offer. They tentatively accept.
• (Optional) The seller may ask for a good-faith deposit to show that you’re serious. That could be €10k euros.
• You shop for mortgages, find one you like, and they have to do an appraisal. If this number comes up “short” – too bad! You’re on the hook. This is because appraisal values can vary pretty widely, bank-by-bank. But if it comes up “long” that gives you a bit of an edge – you could cut down on your down payment, or get some extra money back, or whatever.
• The appraisal comes through, formally, as well as a formal mortgage offer.
• You sign the promissory contract (CPCV). In Portugal, CPCV stands for Contrato de Promessa de Compra e Venda, which translates to “Promissory Contract of Sale.” It is a legal document that solidifies the buyer’s and seller’s intentions and obligations in a property transaction. This process is a BIG meeting, with tons of people, at some fancy place, and takes an HOUR. You’re going to be initialing and signing and initialing and signing and reading and there are lawyers and while it’s perfectly pleasant, it’s also a giant pain in the butt and LONG.
• Now, immediately, you make a “real” deposit. This isn’t your entire down-payment, mind you. But it’s going to be a LOT. Still, it’s just an initial deposit. But this is real money. Do NOT try to make this payment using your bank’s website, or your mobile app. Go into the branch. My banker seemed absolutely bored by the idea of doing a large transfer like this, which was weird. Another thing that’s weird? You’re transferring DIRECTLY into the seller’s account! There are some legal protections and stuff. If the seller tries to sell to someone else at this time, they have to pay you back double what you put down. So you’re pretty locked-in at this stage, as long as you don’t blow your deadlines.
• Now, if you’re a US’ian, it’s SCRAMBLE TIME. Remember that shitty bank account that you had to sign up for? It’s time to shovel money into this account as fast as possible. No, not the seller’s account. This is your bank account, and it’s the one associated with your mortgage. You’ll see why in a moment. You need to get the rest of the down-payment into here. And if you’re a US’ian, that means you’re going to be doing lots of Wise transfers from your US accounts, and there are lots of limits on how much you can actually transfer, so you’re going to be doing transfers every day. It’s really pretty anxiety-inducing, as you’re waiting days for funds to show up from one place to another, also with an idea of when the deed-signing is going to kick in. And banks will randomly cause delays, and Wise will cause delays, and it’s stressful. Like, will we make it in time?! (Note: we did make it in time. But we ended up making a spreadsheet showing which transfer was in-process at which time, and where it was going. Just so we could keep track of everything that was moving around)
• Finally, you go to the final deed-signing. This is another big deal, and I think it might’ve taken even longer than the CPCV process. The bank presents a certified check to the seller – from your money, (probably?) minus that initial deposit, plus the amount that the bank has promised to lend you. This gets you your KEYS. This was kinda a fun little formal ritual! But you’re not done!
• At the same time as this, you will also be paying your IMT Tax – this is very expensive, but in exchange you will end up paying very little for property tax. I guess this is designed to keep people from ‘flipping’ properties? This can be 1-10% of the value of your property, and you have to pay it right now, so make sure you took that into account and have it available! There are some other taxes that will be due at the same time, so make sure you know how much you need to have on-hand. Those taxes don’t need to come from the same account your mortgage is with, but they do need to come from a Portuguese bank account! We were able to pay much more than the standard amounts you can do on a Portuguese debit card here, because they’re directly to the government.
• Next up – time to sign up for utilities! Our real estate people – who are completely awesome – have done a ton of heavy lifting for us on this stuff. They are the Portugal Pro Team and their name is very accurate. We had the odd hiccup here and there due to various issues with water and internet access, so it’s been rocky. I would say, probably don’t work with the assumption that you’re going to go move in to your apartment right after you get your keys – there’s going to be some “Portugal Jank” that’s going to happen and you’ll want some overlap as things get shored up at the new place.

All in all the process here isn’t too bonkers – it’s just different. You do have some safety around you, but you won’t want to do this without a real-estate lawyer. And having a ridiculous bad-ass real estate agency like ours can be a huge help as well.