Madeira vs. America – Key Differences You Need to Know

When investing in real estate abroad, understanding the differences in procedures can help ensure a smooth transaction.

Whether you're considering purchasing property in the stunning island of Madeira or navigating the U.S. real estate market, knowing what to expect is crucial.

1. Buying Process and Legal Framework

Madeira

In Madeira, as in the rest of Portugal, the property buying process follows a structured legal framework designed to protect both buyers and sellers. The process typically includes:

• A Promissory Contract (Contrato de Promessa de Compra e Venda) signed between buyer and seller, with a deposit ranging from 10% to 30% of the purchase price.

• A Public Deed of Purchase and Sale (Escritura Pública) signed before a notary, which officially transfers ownership.

• Land Registry & Tax Verification, ensuring the property is free from encumbrances.

• Energy Certification, required by law before listing a property for sale.

• No Title Insurance, but extensive due diligence is conducted through public records.

United States

In contrast, the U.S. real estate system operates differently:

• Buyers and sellers often work with real estate agents who facilitate negotiations.

• A Purchase Agreement is signed, typically including contingencies (such as inspections and financing approvals).

• A Title Search and Insurance are mandatory to protect against ownership disputes.

• Escrow Services hold funds securely until all conditions are met.

• Closing occurs at a title company or attorney’s office, finalizing the deal.

2. Financing and Mortgage Regulations

Madeira

• Foreign buyers can obtain mortgages from Portuguese banks, though loan-to-value ratios may be lower than in the U.S.

• Interest rates tend to be lower in Europe due to different banking policies.

• Strict affordability assessments ensure buyers meet income criteria before mortgage approval.

United States

• U.S. mortgages often require a higher down payment for foreign investors (usually 30-40%).

• A broad range of mortgage products is available, including fixed-rate and adjustable-rate loans.

• Buyers need a credit history in the U.S., which can be a challenge for non-residents.

3. Taxes and Fees

Madeira

• IMT (Property Transfer Tax) is calculated based on property value and ranges from 0% to 8%.

• Stamp Duty (Imposto do Selo) is typically 0.8% of the transaction value.

• Annual Property Tax (IMI) varies between 0.3% and 0.45%.

United States

• Property Transfer Taxes vary by state and can range from 0% to 2.5%.

• Capital Gains Tax applies when selling, with different rates for residents and non-residents.

• Property Taxes are usually higher than in Madeira, averaging 1-3% of property value annually.

Conclusion

Madeira and the U.S. offer excellent real estate opportunities, but the purchasing process, legal framework, and financial considerations differ significantly. Understanding these distinctions can help you make informed investment decisions. Whether you seek a tranquil island retreat or a high-yield investment, Prime Properties Madeira Real Estate is here to guide you through every step.

For personalized advice, contact us today!

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