Real Estate Closing Costs in Brazil: A Comprehensive Guide

When buying a property in Brazil, understanding the closing costs is crucial. These are the additional fees and taxes buyers need to pay on top of the property’s purchase price. Let’s break down the primary and secondary costs associated with a real estate closing in Brazil.

Some clients ask us if the closing costs may be negotiated. These costs are customarily borne by the buyer. It would make more sense to simply ask for a price reduction on the overall price than to try to change this deeply ingrained practice in Brazil real estate transactions.

Also worth to mention that differently from what you see in the US, these amounts are usually based on a strict and fixed specific tax or fee schedule. You are not paying a mortgage or title company so there is no sense in asking for a “discount”. Closing costs in

A) Primary Closing Costs

Let’s start with the main one:

1. ITBI (Imposto sobre a Transmissão de Bens Imóveis)

The ITBI, which means Tax on Transfer of Real Estate) is a municipal tax levied on property transfers. Its rate varies depending on the city where the property is located. Here are some ITBI rates for main Brazilian cities as reference:

• São Paulo: 3%
• Rio de Janeiro: 3%
• Belo Horizonte: 3%
• Salvador: 3%
• Curitiba: 2.4%
• Fortaleza: 2.5%
• Brasília: 3%

ITBI Name Variations
Note that the ITBI has a slightly different name in some places. In Natal, Rio Grande do Norte, for instance, it is called ITVI instead of ITBI. Same concept, though, and similar rates.

When to Pay the ITBI
The registries (“cartorios”) are required by law to make sure that the ITBI was correctly paid before allowing a closing to happen. In some places like Rio de Janeiro, cartorios will want you to have the ITBI paid several days upfront so the city’s system will show the tax as paid in their records.

How to Pay the ITBI

The ITBI is usually issued by either the cartorio assigned to the closing or the seller’s realtor. They will issue the so-called “Boleto” which is a coupon with a bar code that will allow the buyer to pay it using a bank account in Brazil. Never pay any closing costs without double checking you are paying the right party. There are scammers who may try to get you to pay bogus fees after learning that you are involved in a real estate transaction in Brazil.

2. Escritura (Deed Fee)

The “escritura” is the public deed that formalizes the property’s sale. It’s prepared by a notary public, known as “Cartório de Notas.” The cost varies based on the property’s value and can range from 0.5% to 2% of the property’s price. This cost will be a combination of a bunch of government fees, taxes, as well as the compensation to the registry itself. Cartorios are usually strictly regulated and usually do a good job in presenting a correct calculation of the total amount.

Usually, the higher the property value, the smaller the percentage will be. Some cities will have fixed amounts per price brackets while other cities will apply a percentage of the actual amount.

Customarily, cartorios will NOT bother to present you with a breakdown of the costs. Buyers will usually receive a single amount to be paid along with the payment instructions. It is very common for the bank account details (or “PIX” number”) to match the cartorio’s principal officer’s personal account since they represent the cartorio itself.

3. Registro do Imóvel (Property Registration Fee)

Once the public deed is ready, the property needs to be registered at the local Real Estate Registry Office (“Cartório de Registro de Imóveis”). The registration cost also fluctuates based on the property’s value, typically between 0.5% and 1% of the property’s price.

Most of the details discussed about the “Escritura” will apply to the Registro do Imóvel as well.

Important to note that some realtors will ask you to pay both amounts at the same time while others will ask for these two amounts to be paid as needed (first the Escritura and the Registro do Imóvel down the road).

State-Specific Taxes

In some Brazilian states, there are additional taxes. For instance, in Santa Catarina, buyers pay a tax to fund the judiciary system. It’s vital to inquire about any state-specific fees before finalizing a property purchase.

Base Amount for Calculation of ITBI Tax, and Escritura and Registro Fees

Foreign citizens are naturally curious about which amount will be used for the calculation. Tax and fees will be based on the highest of these two: either the transaction amount or the valor venal as per the city’s price list.

While the valor venal may be substantially lower in most cities, some cities such as Rio de Janeiro will go out of their way to have their price list comparable to actual market prices. It is not uncommon in Rio de Janeiro for the “valor venal” to be actually substantially higher than the market value of a property.

Also worth mentioning is the practice by some unscrupulous sellers to have part of the property price paid “under the table” to avoid taxes. Don’t do it since this is a crime and not a “Brazilian custom”.

B) Secondary Closing Costs

1. Document Legalization and Translation

Foreign buyers will encounter costs related to the apostille-legalization and sworn translation of necessary documents. This is a crucial step for non-Brazilians to legitimize their documents in the Brazilian legal system. Costs can vary but expect to spend between $100 to $300 per document, depending on the complexity.

Many cartorios will ask – in addition to the above – that the apostilled sworn translated documents be recorded with a special type of registry called Registro de Títulos e Documentos (aka RTD). This is also costly depending on how many pages of documents you are recording.

2. Costs of Attending the Closing

If you’re a foreign buyer, you may need to travel to Brazil to finalize the property purchase. This means bearing travel and accommodation costs. While these are not strictly “closing costs,” they should be accounted for in your budget.

C) Costs Not Necessarily Classified as Closing Costs

There are some categories that may or may not be categorized as closing costs. The main ones are as follows:

1. Certidões Negativas

There’s a need for various certificates to ensure the property is free from legal and financial encumbrances. Each of these documents often comes with associated fees. Because this cost is customarily borne by the seller and not the buyer prior to the closing, this is not customarily considered a “closing cost” per se.

2. Real Estate Brokerage Fees

If a real estate agent or broker was involved in facilitating the sale, there might be commission or service fees. In Brazil, this commission can range from 5% to 6% of the property’s sale price.

Because this cost is customarily borne by the seller and not the buyer, this is not customarily considered a “closing cost” per se at least from the Buyer’s perspective.

3. Property Valuation or Appraisal Fees

Before the sale, buyers or lenders might require a property appraisal to determine its market value. This appraisal comes at a cost. Formal valuations or appraisals are not customary in Brazil. It is more common for the seller’s realtor to provide an “educated guess” based on their experience and comparison to other properties in the area.

4. Attorney Fees

While not mandatory, most foreign citizen buyers will opt to hire an attorney to navigate the legal intricacies of buying property in Brazil. These legal services are an added cost.

5. Banking Fees

If the transaction involves international wire transfers or currency conversion, banks usually charge fees for these services.

6. Tax on Financial Transactions (IOF)

If a foreign buyer brings funds into Brazil for a real estate transaction, there might be a levy known as IOF (“Imposto sobre Operações Financeiras” meaning Tax on Financial Transactions). It’s a tax applied to various financial transactions, including foreign exchange.

7. Property Inspection Fees

It’s often recommended for buyers to have the property inspected before purchasing. This ensures there aren’t hidden defects or issues that might emerge later on. Inspection services have associated fees.

8. Insurance

Some lenders may require buyers to have insurance covering the property. This could be for fire, theft, or other potential damages. And, even if not required, insurance is highly recommended.

9. Condominium Fees

If the property is in a condominium, there might be outstanding condominium fees or special assessments that need to be settled at the time of sale.

10. Utility Transfer Fees

When utilities (water, electricity, gas) are transferred from the seller’s name to the buyer, some companies might charge a fee for this service.

11. Other State or Municipal Taxes

As mentioned, some states like Santa Catarina have additional taxes. It’s essential to check for any region-specific levies.

D) Closing Costs that (Unfortunately) Do Not Exist in Brazil

These are virtually non-existing in Sao Paulo. Although some startups are trying to offer some type of escrow, the reality is that almost all real estate transactions in Brazil will have neither title insurance not escrow.

1. Title Insurance

Title insurance is a concept that evolved primarily in countries like the U.S., where the population recognizes the importance of insurance. Brazil developed its unique system of checks and balances in real estate transactions, which might unfortunately reduce the perceived need for title insurance (despite the amount of fraud).

The concept of title insurance is not widely known or understood in Brazil, so there hasn’t been significant demand for it. Without a strong push from consumers or the industry, there’s less incentive for insurance companies to offer it.

2. Escrow Account

In Brazil, the lack of escrow accounts in real estate transactions is both surprising and concerning, especially when compared to international standards. The country heavily depends on the cartório system, a network of notary offices, to oversee and validate property transactions. While these notaries do verify document authenticity and ensure transfers comply with legal requirements, they don’t offer any type of intermediation when it comes to the funds exchange hands between seller and buyer.

Escrow accounts serve as a neutral third-party holder of funds, releasing them only when both parties have fulfilled their contractual obligations. Without them, there’s a greater risk for potential mismanagement or misappropriation of funds. Given the considerable sums of money involved in property transactions and the increased vulnerability to fraud, the absence of escrow accounts in Brazil represents a tangible risk for any foreign investor or buyer.

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Common Questions

What are the primary closing costs when buying a property in Brazil?
The primary costs are the ITBI (Tax on the Transfer of Real Estate Ownership), the cost for the “Escritura” (public deed), and the “Registro do Imóvel” (property registration) fee. Together, they will range between 3% to 5% of the property value.

How is the ITBI calculated?
The ITBI is a municipal tax and its rate varies depending on the city. It’s usually a percentage of the property’s sale value or its appraised value, whichever is higher.

Are there different ITBI rates for different Brazilian cities?
Yes, each municipality sets its own ITBI rate. For example, São Paulo, Rio de Janeiro, Salvador, and Brasília might have varying rates.

What is the “Escritura” cost?
“Escritura” refers to the public deed of sale. Its cost is determined by the “Cartório de Notas” (Notary Office) and usually depends on the property’s value.

Why do I need to pay for “Registro do Imóvel”?
The “Registro do Imóvel” ensures the property is legally transferred to your name in the official land registry. This registration guarantees your ownership rights.

Are there additional state taxes on real estate transactions?
Some states, like Santa Catarina, impose additional taxes such as a tax to fund the judiciary system.

How much should I budget for secondary closing costs?
Secondary costs can include certidões negativas, real estate brokerage fees, property appraisal fees, attorney fees, banking fees, property inspection, and others. It’s wise to budget an extra percentage of the property’s price for these.

Do I need to pay for the legalization and translation of my foreign documents?
Yes, any foreign document you present will likely need to be legalized in its country of origin and then translated by a sworn translator in Brazil.

Is there a cost associated with the sworn translation of documents?
Yes, sworn translators charge a fee for their services, which is typically based on the number of words or pages.

Are there any costs related to foreign funds transfer for the purchase?
Yes, transferring funds from abroad can incur banking fees and the IOF tax.

What are “Certidões Negativas”?
These are certificates that confirm there are no outstanding legal or financial issues tied to the property or the seller.

Is there a cost for getting the property appraised?
Yes, if you decide to have the property’s value appraised, you’ll need to pay an appraisal fee.

Do I need to pay real estate agent commissions?
Typically, the seller pays the commission, but at the end of the day, you are the one paying the property price and enabling the seller to pay the realtor.

Are there any costs if I need a mortgage?
Yes, banks charge fees for processing mortgages, and there might be other related costs. Remember that it is extremely difficult for a foreign citizen to obtain a mortgage unless you are a legal resident in the country and can show consistent income also in the country (a Brazilian spouse would also be helpful for the application).

Do I need to pay for property inspections?
If you decide to have the property inspected before purchase, there will be associated fees.

What’s the cost of property insurance?
This varies based on the property’s value, location, and other factors. Some lenders might require specific insurance coverage.

Will I need to settle any outstanding utility bills?
Typically, sellers should clear all outstanding utility bills before the sale. However, it’s essential to check and clarify this during the negotiation.

Do condominiums have separate fees?
Yes, if the property is in a condominium, there might be monthly fees or special assessments to consider.

How can I find out about all the fees applicable to my property purchase?
Consulting with a local real estate attorney or agent can give you a comprehensive breakdown of all expected costs.

Can closing costs be negotiated?
Some costs, like real estate commission or property inspection fees, can be negotiated. However, official fees like the ITBI or registration costs are fixed.

Can I estimate the total closing costs as a percentage of the property’s value?
On average, you can expect closing costs to be a certain percentage of the property’s value, though the exact amount will vary depending on location and the specific costs involved.

Are there any taxes on luxury properties or high-value transactions?
Some cities may impose higher ITBI rates for properties deemed “luxury” or those surpassing a particular value threshold.

How do “Cartório de Notas” fees differ from one state to another?
Each state in Brazil has its own table of fees for notary services, so costs may vary based on the state and the property’s sale price.

What happens if I don’t register the property after purchase?
Failing to register might jeopardize your legal rights to the property. Registration ensures your ownership is recognized and protected by Brazilian law.

What are the consequences of not paying the ITBI tax on time?
You wouldn’t be able to attend the closing in addition to triggering fines and interest on the ITBI amount.

Are there any specific costs for foreign citizens compared to Brazilian citizens?
While the primary closing costs are the same, foreign citizens might incur additional fees for document translations, legalizations, and potential financial transfer fees.

What role do currency exchange rates play in my closing costs?
Exchange rates can influence the amount you pay in your home currency, especially when transferring funds to Brazil or paying for services priced in Brazilian reais.

Do I pay the closing costs upfront, or can they be included in the property financing?
Typically, closing costs are paid upfront. However, some banks or sellers might offer to include certain fees in the financing, though this could affect interest rates.

How soon after the agreement do I need to cover these costs?
Most of the costs, like ITBI and notary fees, are due at or shortly after the closing. However, some secondary fees, like property inspections, might be payable earlier.

What is the role of a “despachante” in the closing process?
A despachante is a specialized agent who handles bureaucratic tasks, like obtaining certidões negativas. Hiring one might add to your closing costs and would make sense mostly in Minas Gerais where one of the greatest mysteries in the state is how realtors collect their fat commissions without moving a finger to help with the closing. In virtually every other Brazilian state, realtors will work side by side with their clients until the “Escritura” is completed and the buyer gets possession of the property.

Are there any costs associated with post-purchase property modifications or renovations?
Yes, you might need permits or approvals for modifications, which come with associated fees.

Do I need to pay for title insurance in Brazil?
Answer: Unlike some countries, title insurance isn’t common in Brazil. However, thorough property due diligence and obtaining all necessary certificates can provide similar assurance.

Are there recurring costs after the closing?
Apart from the one-time closing costs, be prepared for recurring expenses like property taxes, utility bills, and condominium fees.

Are there any concessions or tax breaks for retired foreign citizens?
Some regions offer incentives for retirees, though specifics vary. It’s essential to consult with an attorney to understand potential benefits.

How are shared properties or co-owned properties taxed?
Shared properties are typically taxed as a single property.

What if I discover unpaid taxes or liens after the closing?
Ideally, thorough due diligence would help prevent such issues. If they arise post-closing, you may need to spend a lot on legal assistance to try to seek compensation. The Brazilian legal system is VERY slow, therefore the best approach is to avoid legal problems in the first place. Spending some money on an attorney review of your transaction may save you from serious issues down the road.