The real estate market in Portugal is fraught with bad practices and policies that often disadvantage buyers, sellers, and agents alike. Navigating this system can be complex, and understanding the key issues can help buyers and sellers avoid pitfalls and make more informed decisions. This article outlines the most common problems in the industry, highlighting areas of concern so you can better prepare for real estate transactions in Portugal.
Common Flaws in the Portuguese Real Estate Market
1. Becoming a Real Estate Agent: Low Barriers to Entry
In Portugal, obtaining a real estate license is a surprisingly simple process. The requirements are minimal: agents must have no criminal record, purchase mediation insurance, pay the necessary fees, and complete annual training on tax evasion and illegal capital screening. Real estate agencies can extend their licenses to employees, meaning many agents work under an agency’s license without having earned one individually.
While agents are required to undergo some form of training, the quality of that training is not strictly monitored, and there are few guarantees of competence. Most agents work solely on commission, without a base salary or job security. This creates a system where agents lack the incentive to fully understand buyers’ needs unless they have properties that fit those buyers’ criteria. Without exclusivity in contracts, there’s little motivation for agents to develop strong relationships with clients or ensure a quality service.
2. Real Estate Agencies: A System Designed for Short-Term Gains
Many real estate agencies in Portugal capitalize on the fact that they incur no direct costs in hiring agents, as most agents work on commission. This leads agencies to invest little in their new hires. Instead of offering proper training or mentoring, agents are often left to “sink or swim,” with agencies merely observing which agents can close deals the fastest. Those who don’t succeed quickly are left to exit the industry without any cost to the agency.
This results in a market filled with unqualified professionals, many of whom work part-time due to the instability of their income. The highly competitive nature of the market, combined with the lack of support from agencies, fosters a culture of secrecy and unethical practices. Information is rarely shared between agents, and there is a tendency to withhold critical details from both clients and colleagues. For instance, it is common for property listings to be vague about the exact location to prevent other agents from swooping in and closing the deal first.
3. Unbalanced and Unregulated System: Conflict of Interest
Most real estate transactions in Portugal are biased toward sellers, with agencies signing contracts to promote and sell properties on behalf of property owners. Agents typically charge a commission of between 3% and 8%, with the average being around 5%. However, there is often a conflict of interest, as it is perfectly legal for the same agent to represent both the seller and the buyer in the same transaction. In many cases, this dual representation can harm buyers, as the agent’s loyalty is naturally tilted toward securing the best deal for the seller, from whom they are guaranteed a commission.
Even when different agents represent the buyer and seller, commission-sharing is not legally mandated. Agencies can, and often do, refuse to split commissions with other agents or agencies, further limiting buyers’ options. As a result, many agents push properties within their agency’s portfolio, avoiding listings outside their company to maximize their commission. This practice works against buyers, who may miss out on better-suited properties. The lack of exclusivity and transparency often leads to inflated prices and misinformation, leaving buyers underrepresented and uninformed.
4. Lack of Exclusivity: Chaos for Buyers and Sellers
When properties are listed without exclusivity, the process becomes chaotic for both buyers and sellers. Sellers often receive multiple calls from different agents, creating confusion and frustration. For buyers, the situation is equally troublesome. A house may already be sold, but due to poor communication between agents, buyers could continue viewing the property without knowing its actual status.
For sellers, granting exclusivity to a single agency can feel risky given the widespread incompetence in the market. Many sellers believe that by allowing multiple agents to market their property, they are increasing the likelihood of a quick sale. However, this approach often leads to fruitless interactions with unqualified agents, repetitive questions, and no clear progress toward closing a deal.
Exclusivity can be beneficial when there is a trusted relationship with an agent who is both competent and transparent. In these cases, sellers can expect a more streamlined process, but finding such agents in the Portuguese market can be challenging.
Current Market Conditions: Prices and Negotiation Trends
1. Negotiations Have Become More Challenging
During the COVID-19 pandemic, the Portuguese real estate market saw a sharp decline in foreign buyers, which led to significant room for negotiation. Sellers, eager to close deals during uncertain times, were willing to accept offers 20%-30% below asking prices. However, with the market now rebounding and demand rising, the window for negotiation is narrowing.
In the current market, negotiation margins are much tighter. Buyers may still find some flexibility in prices, but the market’s upward trajectory means that sellers are less inclined to lower their asking prices, especially as competition among buyers increases. It’s crucial to understand the specific circumstances behind a property sale, such as inheritance, divorce, or financial urgency, to determine how much leverage a buyer may have during negotiations.
Other Key Issues: Due Diligence and Transparency
1. Lack of Due Diligence: Incomplete or Missing Documentation
A common issue in the Portuguese real estate market is missing or incomplete documentation on the seller’s side. This can lead to significant delays, even when a deal has already been agreed upon. Sellers may not have all the necessary paperwork in order, causing frustration for both parties involved.
For example, there have been instances where properties were listed for sale without all owners’ consent, such as a spouse listing a house without their partner’s knowledge. In one case, a client had to withdraw their offer after it was revealed that the seller’s spouse refused to approve the sale. Similar complications arise in cases of inheritance, where multiple heirs may not agree on the sale of a family property.
These situations are unfortunately common in the Portuguese market and can derail otherwise smooth transactions.
2. Outdated Listings: A Common Marketing Ploy
Many property listings in Portugal remain online long after the property has been sold. This practice is often used by agencies to generate leads, even if they no longer have that specific property available. Sometimes this occurs due to simple negligence, but it’s also a deliberate strategy to attract potential buyers, who are then redirected to other listings.
This lack of transparency further complicates the buying process, as potential buyers waste time on properties that are no longer available, contributing to the overall dysfunction of the market.
What Savvy Cat Realty Does Differently
1. Our Team
At Savvy Cat Realty, the business model is structured to prioritize clients over quick sales. Unlike many agencies, all agents are salaried employees, ensuring that they provide the best possible service without being driven solely by commission. This approach allows agents to focus on assisting clients, conducting thorough research, and meeting their specific needs, rather than just chasing deals.
The company also invests heavily in its employees, offering training and promoting a healthy work-life balance. This investment in staff leads to higher service quality, as agents are knowledgeable, professional, and dedicated to providing long-term support to clients.
2. Tailored Services for Every Client
Savvy Cat Realty goes beyond the typical offerings of real estate agencies, providing a comprehensive range of services. These include assistance with visas, renovations, licenses, construction, opening bank accounts, and even local networking for professionals. The company also handles legal verifications and documentation, ensuring that buyers have a smooth and secure transaction process.
To offer this extensive service, Savvy Cat Realty uses a service package model, where clients pay upfront for support before the property transaction. This ensures that clients receive expert assistance throughout the entire buying process, independent of sales commissions.
3. Local Insight and Countrywide Service
One of the key advantages of working with Savvy Cat Realty is its nationwide reach. Clients can explore properties across Portugal without needing to switch agencies. The team collaborates internally, ensuring that clients receive comprehensive support based on their lifestyle, budget, and specific requirements, whether they are relocating to Lisbon, Porto, or rural areas.
4. Commitment to Transparency and Ethics
Savvy Cat Realty operates with full transparency, providing clients with detailed property reports, estimates, and timelines before purchase. The company works with all agencies and private sellers and offers access to off-market properties, ensuring that clients have a clear view of all available options.
The company’s goal is to slow down gentrification by helping foreign buyers make informed, fair purchases, ultimately benefiting both new expats and local communities. This commitment to ethical real estate practices sets Savvy Cat Realty apart in an often murky market.
Conclusion
Navigating the Portuguese real estate market can be daunting due to widespread bad practices, poor regulation, and a lack of transparency. Buyers and sellers alike must be cautious and well-informed to avoid common pitfalls. By working with a reputable agency like Savvy Cat Realty, clients can benefit from a tailored, ethical, and transparent approach to real estate, ensuring a smoother, more successful transaction.
Ready to start your relocation journey with Savvy Cat Realty? Contact us now at contact@savvycatrealty.com
