Avoid Portugal Property Buying Pitfalls: 10 Tips

Published on 6th June, 2025

The Conversation: Navigating the Purchase Path

Alex: Maria, I’m thrilled about buying in Portugal, but also nervous. I keep hearing stories… what are the biggest traps I need to sidestep to ensure a smooth process?

Maria: That’s wise, Alex. Enthusiasm is great, but caution is key. Let’s break down the common stumbles. Mistake #1: Insufficient Location Research. People fall for pretty pictures online without truly understanding the neighbourhood, its year-round vibe, amenities, or future development plans. What looks idyllic in summer might feel isolated in winter, or lack essential services you require daily. Thoroughly investigating the micro-location is paramount.

Alex: Right. So, visit multiple times, different seasons if possible? Talk to locals and perhaps even other expats who have settled there?

Maria: Exactly. And check local council plans (Plano Diretor Municipal or PDM). You don’t want a surprise motorway appearing next door, or find out the quiet street is slated for major construction. Which brings us to Mistake #2: Underestimating Total Costs. The asking price is just the start. Buyers often forget or lowball the Property Transfer Tax (IMT), Stamp Duty (IS), notary fees, registration costs, and crucial legal fees. These can add 8-12% or more to the purchase price, a significant sum.

Alex: Ouch. So, budget significantly above the property price itself? That is a critical piece of advice often overlooked.

Maria: Precisely. Get precise quotes for taxes based on the property value and type from your lawyer. Don't forget ongoing costs like annual IMI (council tax), potential condo fees if it is an apartment, and insurance. Mistake #3 is Skipping Independent Legal Advice. Some buyers rely solely on the seller's lawyer or the estate agent. That’s a huge risk. You need your own independent lawyer, fluent in English and Portuguese, whose sole duty is protecting your interests. This cannot be stressed enough.

Alex: What exactly will my lawyer do that is so vital?

Maria: Crucial due diligence. They'll verify the property's registration (Certidão de Teor), check for outstanding debts or charges (mortgages, tax liens – some debts attach to the property, not the owner!), confirm the seller's legal right to sell, and scrutinise the habitation license (Licença de Utilização). This leads to Mistake #4: Ignoring Property Licenses. Buying a property without the correct license, especially the habitation license, can be disastrous. It might mean you can't legally live there, connect utilities, or resell it easily. This is a common issue with older or rural properties.

Alex: So, no license, no deal? Or is there a workaround?

Maria: Generally, yes, no license means no deal, unless your lawyer advises a specific, secure path to regularisation, which can be complex, time-consuming, and costly. It is usually best to avoid such complications. Mistake #5 involves the Promissory Contract (CPCV). Buyers sometimes sign this binding contract without fully understanding every clause, especially regarding the deposit (usually 10-30%). If you, the buyer, pull out without legal cause, you typically forfeit the deposit. If the seller defaults, they usually must repay double the deposit. Ensure all conditions (like mortgage approval, satisfactory survey) are clearly stated as clauses within the CPCV.

Alex: That deposit clause sounds serious. What about Mistake #6: Not Understanding Financing Options Early? This seems like it could derail things quickly.

Maria: Yes, many buyers start searching without knowing their true budget or how Portuguese mortgages work for non-residents. Get pre-approved for a loan before making offers. Understand the loan-to-value ratios (often lower for non-residents), interest rates, required documentation, and the timeline for approval. Relying on home-country financing might not always be feasible or advantageous due to differing regulations and property types.

Alex: Makes sense. What else should I be wary of?

Maria: Mistake #7: Overlooking Renovation Realities. Buyers often underestimate the cost and time involved in renovations, especially with older properties or those in need of significant modernisation. Get detailed quotes from multiple licensed and insured contractors before purchasing, if possible. Factor in potential delays for planning permissions (licenças de obras) and the rising costs of materials and labour.

Alex: Licensed and insured contractors – noted. How about Mistake #8: Falling for Outdated Incentive Information? The landscape seems to change.

Maria: This is increasingly common. People still arrive thinking the old Non-Habitual Resident (NHR) tax scheme is available (it closed to new applicants end of 2023) or that buying any property grants a Golden Visa (real estate investment was removed as a qualifying option in late 2023). Relying on old blogs or hearsay can lead to major financial miscalculations and disappointment. Always get current advice from qualified tax and immigration professionals who understand the latest legislation.

Alex: Good point. Two more to complete the top ten?

Maria: Mistake #9: Not Planning for Currency Exchange. If you're buying with funds from outside the Eurozone, fluctuations in exchange rates can significantly impact the final cost, sometimes by thousands. Simply transferring via your high street bank often results in poor rates and high fees. Plan ahead, perhaps using a specialist currency broker to lock in a rate or manage the transfer more effectively.

Alex: And the final one, the tenth pitfall?

Maria: Mistake #10: Rushing the Process. Buying property takes time in Portugal – legal checks, contracts, potential financing hurdles, and administrative steps. Rushing often leads to overlooking crucial details or making emotional decisions. Be patient, trust your independent advisors (lawyer, agent like Berkshire Hathaway HomeServices Portugal Property), and don't feel pressured into quick decisions, especially by sellers or less scrupulous agents.

Conclusion:

Alex: Wow, Maria, that’s incredibly helpful and quite sobering. It seems thorough preparation and independent advice are absolutely non-negotiable to avoid these issues.

Maria: Absolutely, Alex. Avoiding these common pitfalls boils down to due diligence, professional guidance, and patience. Portugal offers wonderful opportunities, but navigating the purchase smartly is key to ensuring your investment is sound and your experience positive. What's one step you'll take this week to strengthen your buying position and avoid these mistakes?

For more information, contact us at info@portugalproperty.com

Published in: Money / Portugal Property / Property