Transcription
The exact 15 Steps to buy real estate property in Brazil.
[Music]
Hello there, my name is Luciano Rivera. I'm a presidio attorney. This is an intro video, and we have specific videos for each of the 15 steps. So, if you want to have a general idea about the process, you can just watch this video. If you want to know each of the 15 steps in more details, go to the description below where you can find the link to each of the 15 steps. Watch this video until the end to know how to get our ebook, "The Seven Most Common Mistakes Foreign Citizens Incur When Buying Properties in Brazil."
The first step is to decide whether you're gonna handle the process by yourself or if you're gonna hire an attorney to assist you. Some attorneys, they are going to help you with the entire transaction, and some attorneys, they are gonna work in the specific key moments of the transaction, such as contracture drafting, due diligence, assisting with money remittance, and reviewing the closing papers. Before you attend the closing, one of the factors you consider is how much money are you spending in this purchase? Is this like your retirement money, or is this just one more property that you're buying? Do you have a network already in Brazil, like trusted friends, maybe a realtor in the family of your spouse? How much can you rely on this network to get this purchase done, or are you entirely new to the Brazilian real estate market? Finally, how comfortable are you with risk? Are you okay with assuming some degree of risk and having this transaction handled mostly by a realtor, or do you need an attorney who knows the laws and are gonna make sure that you are in the safest position possible? A decision early on it's helpful because if you hire an attorney before you may even make an offer, you're gonna have someone to help you assess if the property is suitable or not for a foreign citizen. Some of our clients, they are going to hire us like in the middle of the transaction, and at that point, there is not much we can do about the terms that were agreed in the contract. Therefore, if you're considering hiring an attorney, do that even before you actually find the property because again, the property may have issues with the title or with the seller, and the attorney would be able to help you detect such issues early on in the process.
After you decide whether you're gonna use or not an attorney, you can move to the second step, which is to obtain a Brazilian tax ID called CPF. The CPF tax ID, it's a must for anyone to buy real estate in Brazil. It doesn't matter if a Brazilian or a foreign citizen. If you are getting started with a real estate transaction in Brazil and the seller does not ask you for a CPF, that may be a yellow or red red flag because without a CPF, you cannot buy real estate in Brazil. To get a CPF, you have a few different options. You could, for instance, go to a postal service agency in Brazil, or you could go to the Banco do Brasil or the Brazilian bank personally in order to apply for the CPF. However, some of these banks and entities, they are refusing issuing the CPF because nowadays there is an option where foreign citizens can apply by email, and of course, email is more convenient. So, even from the foreign citizen's perspective, applying remotely it's a better choice. Some Brazilian consulates may also assist you with the CPF. If you have an appointment with a Brazilian Consulate to handle a different matter, you may take advantage of the same appointment and apply for the CPF tax ID. However, if you don't have any appointments, you may want to to apply via email because getting an appointment with a Brazilian Consulate and taking the time to attend such appointment is usually not ideal because again, via email is much easier for you to obtain the tax ID. To apply for the Brazilian tax ID known as CPF via email, you're gonna follow the exact steps we have in our video related to the CPF tax ID. You're gonna find the link to the CPF video in the description below.
The third step in our guide is finding the property. To find the property, first, you need to decide by yourself in which area of the country you're going to be looking for properties. That's a matter of course of personal taste and preference. Brazil has continental dimensions, so there are areas pretty different in terms of geography, culture, customs, cost of living, and so on. Once you decide on an area, you can use one of the many property search engines available in Brazil. In the US, you have just a couple of main search engines. However, in Brazil, there are many. We have a list of the main search engines in Brazil in the description below.
Step number four in our list is to check the property records. Even before you make an offer or you start discussing the terms of a purchase agreement, you should do a check on the property. That's because many properties in Brazil, they are not suitable for foreign citizens. Some properties, they are not going to have legal title. Other properties, they are going to be entangled in an auction. In Brazil, it's pretty common for people to start selling the property even before they acquire the title. In some circumstances, some sellers, they have debt. In some cases, the seller may try to avoid recording the property on his or her name until the last second to avoid creditors finding out about the property. So, there are many issues that are sometimes acceptable to a Brazilian who's willing to incur a higher degree of risk that are not going to be acceptable for a foreign citizen. That's why it is important for you again, even before an offer or getting it started with the contract, to make a check and read the property history and know the type of property records you're dealing with.
Step number five is to make an offer. Sometimes sellers are going to ask you to make an offer in writing, but you don't need to be formal. You just need to mention how much you're willing to pay for the property and of course, contingent to the seller obtaining all the clearance certificates, which we gonna be addressing later on. Note that in Brazil, it's not mandatory or required that you secure a realtor as a buyer. You have an option to do so, but if a realtor purchases this as a requirement or as a standard, do not go their route. Feel free to decide whether you want to retain the realtor or if you want to keep looking for the ideal property by yourself.
After an offer has been accepted in terms of price, it is time to draft the purchase agreement. In our practice, we like to have the seller starting with a draft because then we can focus on the real requirements that we need in the agreement for our clients. There are specific clauses required for transactions in which foreign citizens are participating. Just to give an example, one of the clauses that we always have in our clients' agreements, it's a clause stating that the seller is going to collaborate and share every single document required for the currency exchange to be done. For you to know, in Brazil, you send the money, and the money doesn't arrive automatically at the seller's bank account. There is a total compliance procedure required before the bank actually releases the money into the seller's account. Some of the documents may be concerning to the seller, such as a tax return, but if you have a clause in the agreement stating that the seller is going to provide every document necessary, the seller is not going to have any option other than providing the required documents. However, if you don't have such a clause, the seller may very well say, "Well, I'm not going to provide this document. I'm selling a property, I'm not financing the property. Why do I need to provide my tax return to the bank?" However, as sellers don't know that is actually a requirement from the Brazilian Central Bank for the receiving party of this money coming from abroad to prove that they are tax diligent, that they are taking care of their obligations as a taxpayer. With a clause in the contract stating that the seller is going to provide the needed documents, you make sure you have everything for the money to arrive in Brazil and for you to fulfill your obligation to pay for the property. As a foreign citizen buying a property in Brazil, you may need to present documents that a Brazilian buyer would not have to present. In this sense, it is important to have in the contract the timeline that's going to be enough for you to obtain and provide all the needed documents. Other aspects related to the due diligence may also be addressed in the draft. In our video addressing specifically the contract draft, we do discuss the main clauses that you should have in your purchase agreement.
Step number seven is to legalize or nationalize your documents required for the closing and issuance of the new deeds. If you are a single buyer or if your marital status as a person is of a single person, you're gonna need to have your birth certificate and apostille, and then sworn translated in Brazil. An apostille is a document that's going to be issued, for instance, in the United States by the main state authority. So, in New York, it's going to be the Department of State. California, for instance, is going to be the Secretary of State. After you get the apostille, you're gonna ship this document physically to Brazil. So, this document is going to be sworn translated and then recorded with a specific type of registry in Brazil. So, these papers, they can be used for the closing and for the issuance of the new deeds. We discuss in detail the legalization of your documents in the matching video.
It's also important to think upfront if you're gonna attend the closing or not. There are a couple of options. If you don't want to be physically in Brazil at the closing, one option is to get a power of attorney in place. When you get a power of attorney done in Brazil, physically present in Brazil, that's something easy to be accomplished. However, if you are abroad as a foreign citizen, it's not easy to get a power of attorney done and legalized. There are way too many steps for you to handle. Anyhow, we have a specific video addressing the power of attorney.
Step number nine in our list is providing a down payment to the seller. Sellers and realtors, they understand that until it is time for the closing, there is a lot of steps and documents to be obtained. So, they ask a good faith deposit or payment or "sinal," as we say in Portuguese, to have this contract binding and to wait until everything is clear for the closing, when you're gonna pay the balance of the price. This down payment or "sinal," it's going to be usually between five to ten percent. Particularly when the buyer is a foreign citizen, it is not rare for realtors to try to get something higher, like 20 percent. And the main idea behind this attempt is to be able to collect their commissions at the beginning of the transaction. We recommend that you do not accept that and that you try to pay as little as possible. Two reasons: the first reason is, if something happens in the middle of the transaction, you're not going to lose a lot of money. The second point is, by paying the commissions towards the closing, you make sure that the realtors are going to be around to assist you as much as needed until the closing.
After the document is provided, the seller will have to provide the certificates of clearance. Certificates of clearance are certificates issued by different Brazilian authorities addressing tax obligations of the seller and tax obligations related to the property as well. And it's not just tax; there are certificates related to litigation, there are certificates related to labor duties, to labor taxes, to labor obligations. So, all of that is going to be required at the closing so the registry knows that at least the most basic due diligence was done. Important for you to understand that the required certificates of clearance, they do not guarantee that the property and the seller will not have any issues. Again, they address the most basic concerns from a buyer's perspective.
Step 11 in our list is to plan for the closing. The closing, it's an official moment, an official gathering or meeting between the buyer and the seller for the papers to be signed. Most transactions are still done in person, where the seller is going to attend and the buyer is going to attend as well. And a closing done physically, it's usually better than a closing done remotely. Remote closings are something new in Brazil, so there is always a risk that something doesn't work well or that the registry ends up missing some legal requirement, and the closing could be disputed down the road. It's also important to have a target date for the transaction so you can work with the currency exchange of remittance. In the meantime, it is pretty complex for you to send a large sum of money to Brazil, so you actually need to plan weeks up front so when the money arrives in Brazil, the money is ready to be released to the seller. If you use a currency exchange specializing bank in Brazil, this bank is gonna ask you for all the paperwork up front. This way, again, you can be prepared to release the money on the day of closing. However, if you just send the money straight to the seller's bank account, you're not going to have control of this process, and this is going to be up to the seller to do so. The concern here is the seller is going to control the release of the money. If something happens in the meantime, there is no way for you to recall the money. That's why we always recommend you to work with currency exchange banks.
Step number 12 in our list is to pay for the transfer tax and the registry fees. Registry in Portuguese, it's called "cartório," and the "cartório" is in charge of handling the closing. And a second "cartório," not the same one, is in charge of issuing the new deeds. All of that is going to cost money, and there is no closing until you actually pay for the transfer tax and you pay for both "cartórios" fees. And the way you're gonna do that is to usually send the money to either the realtor or your attorney. You don't send this money to the seller, of course. You want to send the money to the person who's going to actually pay those things and prepare for the closing to happen.
Step number 13, when all of those things are walking together towards the day of the closing, you're gonna have your attorney reviewing the transfer deed. The transfer deed is just a term in English we're trying to explain, you know, a process in Brazil by using the similar terms that you use in the United States. The actual name is gonna be the "escritura." The "escritura" is the legal step of the seller transferring the property to the buyer. That's when the seller signs the transfer deed or the "escritura," and the buyer signs it as well, therefore giving publicity, as a legal term that we use in Brazil, making public that there was the sale of the specific property that you buy. By getting the transfer deed reviewed by an attorney, you make sure that all the information in the transfer deed is correct, that the buyers are actually getting the ownership, that the certificates of clearance are correctly addressed in the transfer deed, that the amount, the taxes, that everything it's well described because all of those things, they are the support you need for the legal conveyance of the property from the seller to you as the buyer.
Step number 14, attending the closing. The closing itself, it's usually pretty fast because again, the transfer deed was reviewed up front, and most of the time spent is going to be taken by the registry verifying the IDs of those attended the closing, as well as some small talk conversation, which is part of the Brazilian culture. But once the transfer deed is signed, the ceremony is going to be over, and each party is going to go its way.
Step 15 in our list is to make sure that the transfer deed, it's sent to the "registro de imóveis," which is a different registry in most cities. And the second registry is going to be the one actually issuing the new deed, which we call "matrícula." And this is gonna show the chain of ownership with your name as the buyer as the most current owner. Again, do not forget to check the description below where you're gonna have a link to each of the individual videos. You're also gonna have links to other resources that you're gonna need in your journey of buying a property in Brazil. Finally, I hope you enjoyed this video, and if that was the case, please like it so other people can find this important resource for the journey. Thank you for watching us and see you in our next video.
[Music]
Thank you.