How to Draft a Purchase & Sale Agreement for Real Estate in Brazil

This agreement is the first step towards the transfer of ownership. It creates the assumption and expectation of the ownership transfer, but it doesn’t automatically entitle you to the ownership (other steps are required).

The Purchase & Sale Agreement document addresses not only price, terms of sale, but also the timeline for the transactions and allocation of obligation and right to the parties. Contracts will almost always be drafted in Portuguese and local currency although they can be translated so you understand the content.

Accept a Template Agreement or Have a Lawyer Draft One?

When buying a low-cost property, you may consider using a Purchase & Sale Agreement provided by the seller’s realtor as a start point. Have a lawyer review it to ensure it is reasonably fair and not too one-sided. For higher-amount properties, you may want your lawyer to draft the initial Purchase & Sale Agreement since this would give you the flexibility to address most of your needs and also bring you maximum protection against common risks of buying real estate in Brazil.

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Allocate enough time for you to perform

Among other concerns, stipulate at least 60 days between the signature of the agreement and the closing. You should have enough time for all the checks on the seller and the property and, equally important, for you to have the balance of the funds successfully transferred to Brazil.

Realtors in Brazil are Trained to Rush Buyers

Never allow a realtor to rush you. Realtors in Brazil will almost always suggest that you will lose the property if you don’t act soon. Curiously, there will always be another interested party ready to place a bid. The true reason is that realtors want to secure the deal and collect their commission asap. They will chase you and not rest until you either sign a contract or tell the realtor you don’t like to be rushed.

Timeline:

• If the seller is willing to draft one (usually the real estate agency will do), this could save you money since you won’t have to pay a lawyer to draft it. Having a lawyer review the seller’s draft agreement is advisable since it will obviously be drafted favorably to the seller.
• For higher amount acquisitions, you may want to consider paying a lawyer to draft the initial version according to your specific needs.
• A standard agreement can take between 2 to 3 days to be drafted. A well-thought agreement, on the other hand, should take between 5 to 10 days

Some of the Items Customarily Present in a Purchase Agreement in Brazil

1. Identification of the Parties

Understanding Both Sides: Every purchase and sale agreement begins by clearly identifying both the seller and the buyer. For foreign citizens, this typically involves providing passport details, proof of residence, and a Cadastro de Pessoas Físicas (CPF) number. For Brazilian residents, standard identification and proof of ownership are essential.

Legal Representation: Especially for foreign buyers, it might be beneficial to have a legal representative in Brazil. This ensures that all communications, especially those during the drafting phase, are understood clearly and are legally sound.

2. Description of the Property

Precise Property Details: The agreement must contain an exhaustive and accurate description of the property, including its exact location, land size, built-up area, boundary details, and any other pertinent specifics. This ensures there’s no ambiguity about what’s being bought or sold.

Verification with Public Records: Before finalizing the description, cross-checking with Brazil’s property record database is crucial to ensure the description matches public records. This can help in avoiding potential disputes in the future.

3. Purchase Price and Payment Terms

Determining the Price: Based on negotiations, the agreed-upon price should be clearly stated in the agreement. This includes any deposit or “sinal” to be made upfront and the balance payment’s schedule and method.

Clarity on Currency and Exchange: Since we’re focusing on foreign citizens, it’s essential to note which currency the transaction will occur in and if the payment is based on a specific exchange rate. This can prevent misunderstandings and potential financial disputes later.

4. Liabilities and Property Conditions

Existing Liens or Encumbrances: The agreement should clearly specify if there are any existing liens, mortgages, or other encumbrances on the property. If present, terms for their clearance before the sale concludes should be clearly outlined.

State of the Property: Whether the property is being sold ‘as is’ or if there are specific repairs the seller is obliged to complete before the sale should be explicitly mentioned. This helps in setting expectations right for both parties.

5. Conditions Precedent

Stipulating Preconditions: These are conditions that must be met before the sale can go through, such as a satisfactory property inspection by the buyer or the approval of a mortgage application. Both parties must agree on these conditions, and their fulfillment is essential for the contract’s execution.

Failure to Meet Conditions: The agreement should also dictate the course of action if the conditions aren’t met. This could include the return of the “sinal” or other penalties, depending on what’s mutually agreed upon.

6. Closing and Possession Date

Finalizing the Sale: The closing date is when all paperwork is signed, payments are completed, and the property legally changes hands. This date needs to be explicitly mentioned to ensure both parties can make the necessary preparations.

Taking Possession: After the sale is finalized, there will be a stipulated date when the buyer takes possession of the property. Any agreements about the property’s state at the time of possession (like repairs or removal of specific fixtures) need to be in the agreement.

Purchase Agreement in Brazil?
We Can Help You

[email protected]
(214) 432-8100
+55-21-2018-1225

#1  Contact us to get a free quote, or
#2 Schedule a Consultation now.

Special Clauses We Typically Add to Our Clients’ Contracts

We almost always have to add these clauses to our Client’s purchase agreements, so they, obviously, are not customary in Brazil real estate transactions. By adding these clauses, we make the transactions safer from a buyer’s perspective. Depending on the specifics of the real estate transaction, other clauses may be needed.

1. Seller Representations

This clause pertains to the declarations and affirmations made by the seller concerning the property. Under this clause, the seller would typically confirm that they are the legitimate owner of the property, that the property has no undisclosed liens or encumbrances, and that all provided property details are accurate and genuine. It acts as a protective measure to ensure the buyer is getting exactly what they believe they are purchasing.

Sellers of property with hidden title issues or incoming litigation will think twice before signing a contract with such representations.

2. Specify payment to a single bank account for the seller

Ensuring transparency and security in transactions, this clause mandates that all payments related to the property’s purchase be made to a specific bank account in the seller’s name. This prevents any disputes or confusion regarding payment and acts as a safeguard against potential fraud or money laundering attempts.

Unfortunately, tax fraud, money laundering, and other “games” are more common in Brazil than in other countries such as the US.

3. Payment through Currency Exchange Bank

For international transactions, the transfer of funds can be complex. This clause specifies that all payments must be processed through a designated Currency Exchange Bank in Brazil, ensuring the proper conversion rate and adherence to Brazilian financial regulations. It also helps in providing a clear trail of the transaction for both parties.

One of the requirements for payments sent from abroad to Brazil is that the seller shares their tax returns with the bank. As some sellers may not want to do that, having this clause added to the contract will avoid issues down the road.

4. Closing at the Registry

To ensure that the property transfer is legally recognized, this clause mandates that the closing of the sale – the finalization of all paperwork and transfer of funds – occurs at the official property registry office in Brazil. This ensures all legal protocols are observed, and the transfer is registered in public records.

Some sellers will try to have the closing done in a place of their convenience (for instance, their office). Although this is not illegal, it is also not ideal. Getting a closing done at the registry will have a commitment of the registry’s officers, increasing the buyer’s safety.

5. Purchase agreement signed through electronic certificate

Reflecting the digital age and the need for convenience, especially when dealing with international clients, this clause allows for the purchase agreement to be signed using a recognized electronic certificate. This ensures that even if parties are in different locations, the agreement is legally binding and recognized by Brazilian law.

Incorporating these clauses into the contract is pivotal for a smooth, transparent, and legitimate property transaction, especially tailored for our clients’ unique requirements and challenges.

Watch our YouTube Video “Draft a Purchase Agreement for Real Estate in Brazil”

A couple of minutes of watching this video can save you from wasting hundreds of thousands of dollars. Watch it now!

Become a Pro in Brazil Real Estate!

To learn all about purchasing real estate in Brazil, check our How to Buy Properties in Brazil guide.

Learn about the advantages of buying real estate in Brazil in our Why Buying Real Estate in Brazil guide. Find opportunities and decide where to buy using our Know Where to Buy Real Estate in Brazil guide.

Purchase Agreement in Brazil?
We Can Help You

[email protected]
(214) 432-8100
+55-21-2018-1225

#1  Contact us to get a free quote, or
#2 Schedule a Consultation now.

 

LEGAL WARNING

This content is intended for general information purposes only and does not constitute legal advice. For legal issues or decisions of any kind, the reader should retain and consult legal counsel. You should not act or rely on the information on this website without first seeking the advice of an attorney. The determination of whether you need legal services and your choice of a lawyer are very important matters that should not be based on websites or advertisements.

Common Questions

Q1: As a foreign citizen, can I legally draft a purchase agreement for a property in Brazil?

Yes, foreign citizens can legally draft a purchase agreement for properties in Brazil. However, it’s advisable to consult with a local Brazilian property lawyer to ensure compliance with all regulations and norms.

Q2: What’s the significance of having a Cadastro de Pessoas Físicas (CPF) when drafting the agreement?

The CPF is akin to a tax registration number and is essential for any financial transaction in Brazil, including real estate purchases. Without a CPF, you cannot legally complete the purchase process.

Q3: Do I need the property’s exact location and details in the agreement?

Absolutely. The agreement should contain a thorough and precise description of the property, including its location, land size, and other relevant details to avoid future disputes.

Q4: How does currency exchange impact the purchase agreement for foreign buyers in Brazil?

The purchase price may be influenced by currency fluctuations, especially if there’s a delay between the agreement and final payment. It’s crucial to specify in the agreement which currency the transaction will use and if a specific exchange rate will be fixed.

Q5: Is electronic signing of the purchase agreement legally recognized in Brazil?

Yes, provided it’s done using a recognized electronic certificate and that the agreement itself addresses the use of electronic signature as binding. This makes the process more convenient for foreign buyers not physically present in Brazil.

Q6: Can I stipulate conditions in the purchase agreement?

Definitely. Conditions precedent, such as the approval of a mortgage or satisfactory property inspection, can be incorporated into the agreement.

While there are customarily conditions in a real estate purchase agreement in Brazil, a foreign citizen could have any legally-acceptable condition added to the agreement as long as, of course, the seller agrees with it.

Q7: Are there any restrictions on properties foreign citizens can purchase in Brazil?

While foreign citizens can buy most types of properties, there are restrictions in specific rural and border areas. Ensure you’re aware of these before drafting the agreement.

Q8: How do I verify the seller’s representations in the agreement?

Cross-referencing with Brazil’s property record database and seeking the assistance of a local property lawyer can help verify the authenticity of the seller’s claims.

Q9: Is it essential to specify payment methods in the agreement?

Yes, detailing the payment method, whether through a Currency Exchange Bank or directly to a specified bank account, ensures clarity and transparency in the transaction while avoiding money laundering and other issues.

Q10: What happens if conditions in the agreement aren’t met?

The agreement should dictate the consequences, such as the forfeiture of a deposit or potential penalties, should any stipulated conditions remain unfulfilled.

Q11: Can I make changes to the purchase agreement once it’s drafted?

Both parties can mutually agree on modifications. However, any changes should be documented, and it’s advisable to have them reviewed by a property lawyer to ensure they’re legally binding.

After the actual purchase agreement is signed, however, one will not be able to unilaterally change it any longer.

Q12: How do I ensure there are no existing liens or encumbrances on the property?

Engage a local lawyer to conduct a title search and check against Brazil’s property record database to ensure the property’s free from any obligations.

Q13: Is there a standard format for drafting purchase agreements in Brazil?

While there are common elements in most agreements, there is no single template or format in Brazil as it is common in some US states.

It’s essential to tailor the contract to the specific property and terms negotiated between the buyer and seller.

Q14: Do I need to pay taxes or fees when drafting the purchase agreement?

Drafting the agreement itself doesn’t incur taxes, but the subsequent purchase will involve various fees and taxes like registration fees and property transfer taxes.

Q15: How do I address potential property repairs or improvements in the agreement?

If the seller agrees to make specific repairs before the sale, these should be detailed in the agreement, including the nature of repairs and their completion date.

Most real estate transactions in Brazil will be made on a “as-is” basis. This is concerning particularly because professional inspections prior to a purchase transaction are not customary in Brazil.

Q16: Can the agreement be drafted in English?

While it can be drafted in English for the buyer’s understanding, the official agreement for legal and registration purposes should be in Portuguese.

Q17: What happens if the seller backs out after drafting the agreement?

If the seller backs out without any justifiable reason, they may be subject to penalties as stipulated in the agreement. This could include forfeiting the deposit or facing legal action.

Q18: How long is a purchase agreement valid?

The validity is typically stipulated in the agreement itself. If certain conditions are unmet or if the sale isn’t finalized within the specified period, the agreement can expire.

Q19: How can I ensure my rights as a foreign buyer are protected in the agreement?

Consulting with a Brazilian property lawyer can ensure the agreement is drafted to protect your interests. This expert will be familiar with the intricacies of Brazilian real estate law, especially from a foreign citizen perspective.

Q20: Should I consider local customs or practices when drafting the agreement?

While the agreement should be legally sound, being aware of local customs or traditional practices in Brazilian real estate can help ensure a smooth performance of the transaction and avoid issues with the seller.