Portugal attracts! Tourists, expatriates or retirees but also real estate investors who see it as a kind of paradise for real estate adventurers looking for beautiful properties at incredible prices.
One of the sources of opportunities comes from foreclosures which are frequent even though Portugal has partially overcome the effects of the 2008 crisis. Many foreclosed homes for sale in Portugal are offered at attractive prices. We show you where to find them!
A brief overview of the real estate market in Portugal
According to the Portuguese National Institute of Statistics, housing prices increased by 9.9% in the third quarter of 2021. In the first quarter of 2022, housing prices increased by 13%, following an increase of 27.5% between March 2020 and January 2022.
This upward trend, which began well before 2020, was reinforced by the Covid-19 pandemic, which stimulated the market under the influence of foreign buyers attracted by Portugal’s quality of life and more affordable property prices. A house in Portugal, it’s an envy!
The average price of a city property in Portugal is just under 3,000 euros per square meter with the average price peaking at around 5,000 euros per square meter in Lisbon. By comparison, the average price per square meter in Paris is just under 10,900 euros. These figures are indicative as they vary according to the estimators but they show that the Portuguese real estate market remains affordable compared to France.
Since the 2008 real estate crisis, Portugal has experienced episodes of instability in the real estate market. Over 93% of mortgages taken out in Portugal are variable rate mortgages. The increase in interest rates suggests that loan defaults are likely to increase in 2023 with the feared consequences of an increase in foreclosures on the properties concerned.
Why acquire a foreclosed property?
foreclosed house in Portugal Lisbon
The main, if not the only, argument is financial. Foreclosed houses and apartments are generally put up for sale by the organization or institution that is behind the foreclosure in order to pay off debts that the owner of the property has been unable to pay.
Thus, buying a foreclosed house is an opportunity to try to get the best property at the most interesting price possible.
The institutions and organizations that put foreclosed properties up for sale are the following:
- The tax and customs administration
- Social security
- Banks
These organizations use all or part of the following sales methods:
- Sale by tender
- Sale by auction
- Private negotiation
- Classic sale
The tax administration uses the first three sales methods. The Social Security only uses calls for tender for judicial sales or private negotiation for extra-judicial sales. Banks, finally, exclusively use the classic sale by publishing offers of sale to which interested potential buyers can make a proposal.
How do I find a foreclosed house for sale in Portugal?
You are looking for a property in Portugal. You opt for a foreclosed house in the hope of making a good deal. How do you go about finding it?
The answer is simple: you have to know where to look! And that’s the most complicated thing to do. Here are some tips.
Monitoring of the institutions
The first thing to do is to go directly to the websites of the institutions that are responsible for putting houses up for sale that have been foreclosed.
Indeed, whatever the method of sale – auction, call for tenders, private negotiation or classic advertisement – the properties put up for sale are advertised on the websites of the tax authorities, the social security or the banks.
Contact the order of notaries
The association of notaries and enforcement agents, the OSAE, can inform you about seized real estate insofar as they are involved in these proceedings.
In addition, the OSAE can also conduct auctions of foreclosed houses and apartments.
Watch out for real estate agencies
Of course, real estate agencies are a resource to keep in mind as they can relay advertisements for foreclosed homes. Some agencies also publish home auctions.
Activate your network on the ground
If you have contacts on the spot, activate them! They are in the front line to inform you of possible opportunities but also to protect you from certain inconveniences regarding the purchase of a home that has been subject to foreclosure (scams or misleading ads for example).
Buying a foreclosed home: what are the risks to be aware of and how to prevent them?
Indeed, the financial advantage of buying a home that has been foreclosed upon is offset by a few risks that must be guarded against.
The points to watch out for are not very different from the usual points that any investor who is thinking of investing in a property must think about.
At the top of the list is the general condition of the house for sale. It would be a shame to make a bargain on the purchase price only to find yourself with a money pit in renovation, for example. Visit the house or have it visited by a trusted third party.
If you’re buying a foreclosed home for rental purposes, be even more thorough about its location and everything that makes it attractive for seasonal rental or not.
In the case of a dwelling that is part of a condominium complex, make sure that there are no debts left by the owner whose property has been seized. Inheriting a large debt of charges is likely to make your investment less advantageous.
Finally, a house that has been foreclosed on is not necessarily a vacant house. If the former owner is still occupying the premises, you could potentially find yourself in a difficult situation if he or she refuses to leave the house.
