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Monday, July 28, 2014

Buying property – Salvador, Bahia – How the process works

WHAT IS INVOLVED IN THE PROCESS OF BUYING PROPERTY IN BAHIA?

Here is a detailed analysis of the steps you will typically go through when purchasing property in Bahia, from the first decision to invest to the receipt of the title deed to your new property registered in your name.


THE DECISION TO BUY IN BAHIA

Buying property Salvador Bahia Brazil graphic

When considering buying property in Brazil, the first step is to evaluate your needs and price range and compare them with the current market possibilities in Salvador to narrow down the neighborhoods and types of property that you will be looking at. Some questions to ask yourself are:

  • Do you prefer an apartment or a house?
  • Do you prefer property within the city limits of Salvador or outside of the city, such as on a remote beach?
  • How much time will you spend in the property per year?
  • What will you do with the property while not using it? Do you plan to rent it out?
  • How often? Who will look after the property while you are away?
  • What is most important for you? Price, location, or security?
  • What kind of a return on investment are you looking for? Returns from vacation rentals? or are you looking to sell the property in the short term for a profit?

The answers to these questions can help you narrow down your possibilities and select the right property for your needs.

» View a list of Frequently Asked Questions about buying property in Brazil

THE REAL ESTATE INDUSTRY IN BRAZIL

Salvador Bahia Brazil property investment graphic Real estate transactions in Brazil are not carried out in the same way as in the United States, Europe or other countries. In most cases the process can be quite simple and quick, as long as all of the documents for the property and the previous and future owners are in order – as quickly as within a few days, provided the funds are already in Brazil. Delays and setbacks are usually due to international money transfers or problems with regularization of documents. It is strongly recommended that you have an experienced professional assisting with your purchase.

Most transactions involving foreign investors are cash deals rather than financed – for two reasons:

  • Rigorous bank requirements and high interest rates in Brazil mean that finding local sources for financing your purchase will be unlikely.
  • Prices of real estate in Bahia are of such incredibly good value compared to prices in the US or Europe.

As such, buyers avoid delays associated with bank mandated property inspections and appraisals. You may, of course, privately contract an engineer or architect if you have doubts concerning the structural integrity or expansion possibilities for the property.

One exception to the no-financing rule is in the case of pre-construction properties. Construction companies usually offer an option of splitting payments up over a 3 year period.

ONCE YOU HAVE FOUND YOUR IDEAL PROPERTY, HERE ARE SOME OF THE STEPS INVOLVED IN PURCHASING AND TRANSFERRING OWNERSHIP IN BRAZIL:

buying property Salvador Bahia Brazil graphicI. A final purchase price is agreed upon between buyer and seller, the terms of payment are agreed upon, and a preliminary contract is signed.

The real estate agents or lawyers will prepare a preliminary contract called a Contrato Particular de Promessa de Compra e Venda. This contract will outline all details concerning the terms of down payment and the final payment as agreed upon between buyer and seller. At this time, you should have someone research that all documents related to the property, the selling party, and the purchasing party are in order, that the taxes are up to date and that there are no liens against the property. Should any irregularities need resolving, make sure that they are taken care of before signing the preliminary contract, or at least have those details included in the contract as contingencies.

Once the property and documents have been verified, the buyer gives the down payment to the seller and both sign the preliminary contract. The time between arriving at a purchase price, signing the preliminary contract and paying the down payment is usually within a day or two, so be prepared to have your research done quickly and have a down payment available. On the other hand, the amount of time between signing this contract and making the final payment is up to negotiation between the buyer and seller. It could be immediate, within a week, or even up to a month.

The preliminary contract will include the terms, time limits for final payment and penalties should either party fail to adhere to the terms. In general, if the buyer fails to pay the final amount within the allotted time, the seller keeps the down payment and the contract is terminated. If the seller fails to adhere to any of the contractual duties or deliver the property on the agreed upon date, he or she will have to pay back the down payment in double to the buyer.

Once the preliminary contract is signed and a down payment has been made, the deal is sealed legally and rarely will you have problems of either party withdrawing from their contractual duties – especially if final payment is expected soon.

Property investing Salvador, Bahia, Brazil graphicII. Payment of transfer taxes, associated fees and preparation of final official contracts.

The buyer should use the time between signing the preliminary contract and the awaiting of final payment to complete these fee payments and ensure that all documents are properly prepared and ready for the day that you will take possession.

Principal fees that must be paid in order to purchase and transfer ownership of property in Salvador, Brazil:

  • ITIV – 3% of total purchase price
  • Laudêmio – 2.5% to 5%, (note: not all properties require the payment of a laudêmio fee)

The final sales contract must be prepared in a Cartório de Notas and then registered in the separate centralized Cartório de Registro de Imóveis. Extra fees for power of attorney documents, certifications, etc. vary depending upon the circumstances of the sale.


» Click here to see a sample breakdown of fees for the purchase of a three bedroom apartment in March of 2006

Salvador Brazil property investmentIII. Final payment, taking possession of your new property and registration of the property in your name

You should have all contracts and documents in order by the day of final payment and the handing over of the keys. On that day, you make final payment, the official sales contract is signed, and you take possession of the property. The official sales contract must then be registered in the Cartório de Registro de Imóveis. Once your name appears on the title in that office, you are the official owner of that property.

In a decision handed down by the Supreme Court of Brazil, for all legal purposes, the only true owner of a property is that whose name appears on the deed in the city’s Cartório de Registro de Imóveis. As such, when purchasing property it should be the buyer’s primary motivation to ensure that his or her name appears on that deed as quickly as possible. Because of the centralized record keeping of real estate documents in Brazil, you may contract a lawyer or another professional versed in checking the status of real estate documents in these government offices to ensure that all items are in order for the transfer of ownership. Again, it is important that you do this before signing any contracts or making any down payments as title insurance is not common in Brazil.

Paradise Properties Bahia is here to help facilitate the process and can coordinate among various local professionals to guarantee a smooth and efficient transfer of ownership into your name.

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Buying property Salvador, Bahia, Brazil
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