When planning to rent or buy property anywhere in the world, you are potentially susceptible to various frauds and significant red flags in the real estate market. Unfortunately, Buying a House in Portugal is no different. With the country currently being a hotspot for foreign real estate investment, the chances of encountering fraud have also increased.
In this article, we’ll cover essential red flags you should be aware of when considering buying a house in Portugal.
Red Flags to Consider When Buying Property in Portugal
1. Omission of Information and Lack of Diligence
One critical factor to understand is that the real estate market in Portugal is notably unregulated. This lack of oversight can result in listings being advertised that aren’t even ready for sale. Reasons include missing proper licensing documents or properties being listed without the consent of all owners.
Illegal constructions and extensions are also common pitfalls. For instance, illegally built pools are frequent culprits, and if you purchase a property with one, you may face the costly requirement of demolishing it. In the worst-case scenario, you might discover that the entire house was built illegally, making legalization impossible.
To avoid these situations, it’s crucial to verify the habitation permit for any property you’re considering. The habitation permit is a document that proves a property is habitable and meets all legal conditions required for such. This permit is municipal in nature, meaning that without an inspection by the Câmara Municipal (City Council), it is impossible to obtain.
This document not only confirms that the property is suitable for residential use but also determines its applicability for non-housing purposes, such as commerce, services, or industry.
2. Extensions
Consider this scenario: the property listed is a two-bedroom townhouse, but the previous owners made unlicensed alterations, turning it into a four-bedroom house. These unauthorized modifications render the property illegal. While it is possible to register these changes, the process is often complicated and may not even be feasible.
For this reason, it’s advisable to have a lawyer assisting you during your property purchase in Portugal.
3. Debts & Mortgages
Under Portuguese law, any debts associated with a property are inherited by the new owner. This means that if you buy a property with outstanding debts or mortgages, you will also inherit those liabilities. To ensure all debts are settled before any transaction, legal professionals should handle this aspect.
In mortgage situations, a bank agent typically participates in the final deed to confirm that any existing mortgage has been resolved.
4. Properties with Existing Tenants
If you’re considering investment properties in Portugal, be cautious of properties that are currently rented out. Often, these tenants may have old contracts that provide them with robust legal protection, making eviction challenging without prior agreements.
5. Auctioned Properties
When interested in an auctioned property, be aware that sometimes only a part of the property is up for auction. This can occur in cases where a property is inherited by multiple people. If one owner is in debt, only their share may be auctioned, which can lead to complications in ownership.
6. Buying Unfinished Properties
While not really a scam, it’s definitely something that you should keep an eye out for. If you buy a property in a project stage, while it can be much cheaper, it can be a big risk for two reasons:
- Construction timelines are rarely met, so construction will most likely take longer than it is expected to.
- If the business selling goes bankrupt, you will lose your money and you cannot get it back.
Not to say that this is not a good deal, it can definitely be, but you must be willing to accept the risk of waiting for the construction to be complete and to make sure the company selling is absolutely trustworthy and safe
Beware that listings for unfinished properties often feature 3D renderings that may not accurately represent the final product.
7. Properties Owned by Businesses
Sometimes, businesses acquire properties and establish real estate-related subsidiary companies because it is more profitable and tax advantageous to list the property under the business name.
The concern arises when these businesses decide to sell the company rather than the property itself. In such cases, potential buyers may be misled into purchasing the company instead of acquiring the actual property. This is a significant red flag because buying the business can involve various complications, such as inheriting debt and tax liabilities. It is not uncommon for this situation to occur with businesses registered in tax havens or offshore jurisdictions, where properties may be advertised, but in reality, you may be purchasing the company rather than the property itself.
8. Unlicensed Agencies and Agents
Obtaining a real estate license in Portugal can be surprisingly easy, with minimal training required. Unfortunately, there is often no verification of an agent’s qualifications.
Always check the licensing status of any agency or agent you plan to work with and you can do so HERE.
Conclusion
These red flags and oversights are something that if missed can cost you a lot of money! This is why hiring legal professionals is crucial when navigating the buying process in Portugal,
At Savvy Cat Realty, we maintain a rigorous business model to identify these red flags and scams, collaborating closely with our legal team to ensure our clients avoid costly mistakes and unnecessary headaches.
Our team at Savvy Cat Realty offers expert guidance, making the process of buying a house in Portugal simple and stress-free.
Whether you’re looking for houses for sale in bustling cities like Lisbon or peaceful retreats in the Algarve, we’re here to assist you every step of the way.
Let us help you find your ideal home in Portugal.
We are here to serve YOU, making it our mission to be your trustworthy partner in Portugal.
