Buying property in Panama is very similar to buying property in the US or Canada
Although there are differences, which I will cover.
6 Steps to Buying Panama Real Estate
You do not have to be in Panama buy property. You can appoint your lawyer, or someone else, as your Power of Attorney.
You can even sign the Power of Attorney document while you are out of the country. However, that process does take time and involves a Panamanian consulate.
Step 1. Verify The Title
If the seller says the property is titled, you must confirm that it really is titled.
The seller should provide you with 2 documents.
- The title, also called the public deed or escritura
- The Ownership and Encumbrances Certificate (Certificado de Registracion) issued by the Public Registry (Registro Público).
It is possible that the seller does not have these documents. If they don’t, ask for the assigned property number, which is often called the finca number. Finca translates as ranch.
With the finca number you, or your lawyer, can search for the title.
The Public Registry now has a website that greatly assists this search. Go to the Public Registry’s website at www.registro-publico.gob.pa.
If the seller doesn’t have these documents, I recommend an even more careful examination of the title to ensure the property you are buying is the same as the one you are researching.
If the property is titled, you should request an updated Certifiado de Registracion from the Public Registry.
When you receive a signed and stamped Certificado de Registracion, it means you have verified the property’s ownership, its location, and that it has no liens or other complications.
Whether To Hire A Lawyer
Unless you have alot of experience buying property in Panama, you will want to hire a lawyer to help you. Real estate transactions anywhere can have unexpected complications. A good real estate lawyer can avoid or guide you through those easily. Plus, all the paperwork is in Spanish “legalize” which Panamanian lawyers are very familiar with.
Getting a good lawyer
- Research (ask on forums, facebook groups like Expats in Panama, etc) to find someone reputable.
- Make sure the lawyer is not affiliated with the seller. The rules governing an attorney’s ethics and conflict of interest in Panama are marginal at best.
- Be clear about what you’d like for them to do
- Get a quote up front for their services
A lawyer can help with many tasks: review and ask for changes to the sale contracts, assist in setting up an escrow account (or other payment option), assist with the title search, research ROP properties, register the title once the property is yours, and obtain English translations of all documents.
Step 2. Ensure There Is A Survey
If a survey has never been done, get one done by a licensed surveyor. Place survey markers at each corner of the property. Walk the entire property and make visual contact with these survey markers. This is especially important with ROP property particularly if it has never been surveyed before.
You should be aware of the dimensions of the property you are buying.
We advise you to only buy land that has been surveyed. If it hasn’t been surveyed before, get it done before you purchase it.
Step 3. Enter Into a Agreement
Real estate purchases in Panama typically involve 2 contracts.
- Promise To Buy (or Buy-Sell)- an optional contract
- Purchase And Sale Contract.
The promise contract states:
- The price
- Deadline for Title Transfer
- Legal description of the property
- Any other stipulations and details that are important to the transaction.
- Usually requires an earnest money deposit, which is typically around 10% of the purchase price.
- Normally there is a penalty if either party backs out, except if there is a failure to meet a contingency or condition.
Both types of contracts are binding for both parties.
Only enter into a Promise To Buy Contract if you are positive you want to go ahead with the transaction, subject to any contingencies.
Make sure all those contingencies are clearly described in the contract.
Keep in mind that the contract will be in Spanish. This is true even though the law does not require contracts to be in Spanish .
What is done in practice and what is law in Panama are often not the same thing. To ensure you know what you are signing, it is important that you obtain a good English (or whatever your native tongue is) translation of the contract.
Sometimes the purchase & sale contract will be written with a purchase price that is less than the amount actually paid to the seller for the property.
This is sometimes done to decrease the tax bill, for both the seller and buyer. If someone asks you to do that, you must think carefully about whether you think it is in your interest or not.
The Following Taxes Are Based On The Sales Price
- Sales Tax = 2% of sales price
- Title Transfer Tax = 2% of sales price
- Capital Gains Tax = 3% of sales price or 10% of gain, whichever is lower
- The capital gains tax is alittle complicated. The seller will initially be charged, and must pay, 3% of the sales price. After this payment, if 10% of the actual gain is less than 3% of the sales price, the seller can then apply to the government for a refund for the difference. However, getting this refund could take an indefinite amount of time.
Property Tax = 1.75% of value for property at $30K -$50K & up to 2.10% for property over $75K
- Only titled properties pay property taxes in Panama.
- Property valued at less than $30,000 are exempt from property taxes.
- Properties are typically valued at their sales price.
Important – If you buy titled property, it is up to you to remember to pay your yearly property taxes. You will not receive a property tax bill or reminder. If you don’t pay your property taxes, they will be collected when you sell – plus a fine.
UPDATE – On Oct. 18, 2017, Panama passed Property tax reform. Starting Jan. 2019, the rates and exempts will change. Overall, it means big savings for Panama property owners. Find out about the 2019 Panama property tax rates and exemptions here.
FYI: All of these taxes are avoided if you are buying or selling ROP land.
However, if you plan to title your ROP land, then the sales price of your ROP property will be used for tax purposes.
If you form a corporation to buy or sell property, you can avoid the title transfer and capital gains tax. However, you will pay a 5% share transfer tax. So tax-wise the cost is the same. But of course, you will also have to pay to create a corporation and then pay an annual fee to keep it current.
Step 4. Transfer The Title
If you have a lawyer, he or she will draft the final purchase and sale contract. The Notary Public can do this as well.
You will need to submit the old title, all previous land documents, and the new tax form to the Notary Public. There is a minimal fee to do this.
The Notary then types up the new title with the new owner’s name, the seller, a description of the property, the location of the property, and any special terms that may apply.
Once the new title is approved by the Notary’s office, both the buyer and seller need to sign it.
If you want, you can skip the promise to buy and sell contract and go immediately to the final purchase and sale agreement. It all depends upon how you and the seller have negotiated payment. In Panama it is common to do both of these contracts.
NOTE: A Notary Public in Panama is not the same as a Notary in the States or Canada. In Panama, a Notary Public is a high ranking official. Notary Publics have the final authority when buying property.
Step 5. Pay For The Property
There are a number of ways to pay for property in Panama.
4 common methods are below.
1) You can pay in cash. If you do so, make sure you pay the seller in front of the Notary. That way there is an official witness of your payment to the seller. This method is very common in Panama.
2) Pay with a certified check or money order from the Panama bank that you wired the money to. A wire transfer from a U.S. bank is simple and fast, especially since there’s no currency exchange. A wire transfer from other countries are also relatively easy. You can then pay the seller, in the form of a certified check, once all obligations of the purchase contract have been met. Again, it is a good idea to present the check or money order in front of the Notary Public. If you don’t have a bank in Panama, you can also use option 3 below.
3) Through a bank or escrow company in Panama. (Until recently there was no escrow in Panama. But escrow services are increasingly popular and growing.) The bank or escrow company issues an irrevocable letter of payment at the time of your deposit. In this letter, the bank or company irrevocably promises to pay the amount owed to the seller immediately upon the transfer of the title or completed conditions. This is mostly used if an earnest money deposit is made for the property. But it can also be used if the buyer does not have a Panama bank account. The bank or escrow company will help ensure that every thing is in order before they turn over the money to the seller.
4) Provide your lawyer with the money, and have him or her distribute the property payment(s).If you feel confident in your lawyer, this is an excellent method since they are very familiar with the terms of the contract. However, some attorneys aren’t willing to be involved in this step. In such cases, a bank or private escrow company, is a good option.
Given the potential for corruption as well as the need to avoid using the slow and questionable Panama legal system, you should generally avoid giving money directly to the seller, and especially to the real estate agent. However, it ultimately depends on the reputation of the people involved in the real estate transaction.
Caution when buying from an anonymous corporation (Sociedad Anonima) in Panama
Read our “warning about signing a property contract with an Anonymous Corporation in Panama” before you buy a property directly from one.
Step 6. Record Your Purchase At The Public Registry
Your purchase is not final until you register it at the public registry.
If you are doing your transaction in David, Panama, the Public Registry is next door to the Public Notary pictured in the photo above.
After about 10 days to a few weeks you will get a signed and stamped title to your property.
Congratulations! You are now a property owner in Panama.
Differences In Buying Property In Panama
Your Panama real estate agent is one of the biggest differences.
About Real Estate Agents in Panama
Real estate agents are almost completely unregulated in Panama
- Many agents are unlicensed
- Licensed or unlicensed, there are almost no regulations governing real estate practices
- Panamanian realtors have no legal duty to protect in your interests
- There’s no multiple listing service (MLS) in Panama. Well one does exist but the listings are very limited and it is not used as an information sharing portal like it is in North America
- There is little or no cooperation or commission sharing among realtors. This means you will only be shown properties for which that realtor has a commission agreement with the buyer.
- Agents only make money if they sell you a property, so take everything they say with a grain of salt.
That said, it is a good idea to have a realtor in Panama. Mostly, because, without an agent, it can be hard to learn about all the property for sale in an area. In Panama, some sellers never list their properties online, especially Panamanian sellers. It is all word of mouth, which is why having a reputable real estate agent is a very good idea. Also, a good agent can help you successfully navigate the buying process. Of course, your lawyer can help with the purchase process as well.
There are good real estate agents in Panama. But you need to do your due diligence before working with one. You want to choose a real estate professional who is reputable, who understands your goals, and will help protect your interests. We advise you to run a google search on a realtor to see if his or her name turns up any negative information. Also, we are happy to give you a recommendation for a local realtor.
However, you can also buy property without a realtor. Many real estate transactions in Panama are done privately, without an agent.
Another difference is that most property in Panama is right of possession (ROP) property. You are much more likely to have the option of buying non-titled, or ROP property in Panama than in your home country.
You may have heard that there is no title insurance in Panama, but that is not correct.
There are several places where you can get excellent title insurance in Panama these days. Ask your lawyer, or Google it, if you want title insurance.
Overall, the property buying process in Panama is similar to the process in the US and Canada. However, it is complicated by the documents being produced in Spanish, as well as the differences in how real estate agents operate here.
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