October 24, 2017
Or Avoid This Panama Real Estate Con Job.
Betsy and I always try our best to paint a realistic picture of life here in Panama,
We are dedicated to helping people determine if moving to Panama is a good idea.
We obviously think Panama can be a great option.
But there are risks to any move.
In this post, I want to warn you of some risks, so you can avoid them.
Risk: Being Pressured To Buy A Property
The number one risk I see for expats is that some expats moving to Panama are rushed into buying a property too fast.
Often licensed or unlicensed real estate agents, taxi drivers, hotel owners, or others will work the newcomer fast, or sometimes subtly, in an effort to get them to make a purchase. These types of purchases are far more beneficial to this real estate agent/ “finder” than they are to the buyer.
The buyer is made to feel that there is no time for a thorough background investigation of the property. No time to find out if this is actually a good property investment or even a safe one.
Sometimes the buyer is so charmed by the agent that they trust too much. The buyer is “primed” to make a quick purchase by being told that several other expats are also interested in buying the property, or that the price is so low that it can’t last. Or, in the case of Puerto Armuelles, since Del Monte is coming to town, they had better buy now, rather than wishing that they had.
A too-fast purchase can even be made after 3 or 4 previous visits to a destination in Panama.
Just because you feel that you know the town, does not mean that you know enough about the specific property that you are about to purchase.
Unscrupulous real estate agents/”finders” know that since you have been here before, and you are back looking for a property, you are more likely to be “hot” to make a quick purchase. Obviously, repeat visitors are the “likely” ones to buy.
No Code of Ethics for Realtors
Sadly, the bar is very, very low, in terms of what is considered honest real estate practices. In Panama, there are no legal requirements for “full disclosure” in property sales, nor is there a code of ethics for real estate agents here.
Risk: Paying a 30 – 300% “Commission” without Realizing it.
The actual commission or hidden profit you pay an agent is often not fully disclosed. A real estate agent (licensed or unlicensed) can effectively earn 30%, 50%, even 300% of the sale price on a property. They do this without the buyer knowing it.
How agents earn these high commissions
Basically it is a con job. Although you do end up owning the property.
The agent/finder simply “ties up” the property just before you buy it. They may buy it in their name, a ghost buyer’s, or in a Panamanian corporation’s name. However they do it, the agent buys the property at the seller’s asking price. Then the agent sells that property to you as if you are buying it from the original seller. However, they sell it to you at a much higher price than what the original seller was asking or the price they paid.
Typically, this agent brings the buyer to look at the property. If the buyer wants to make an offer, the agent then “pre-buys” the property since they already know that they can make a “killing” on the flip.
There are variations on this theme, but in general, the price the original seller gets is much less than what the expat buyer pays. The agent pockets the difference. And the buyer never knows what happened.
In another example, an unscrupulous agent might email a potential customer who has already visited once or twice, telling them that “an amazing property has just come up for sale”. If the person is truly interested in buying, these helpful agents then “tie up” the property, using minimal funds of their own, or more likely, the money that the expat buyer gives them, or sends them long distance. In this way, the unscrupulous agent, putting none of their own money at risk, sells a property to an expat buyer as if the agent’s only connection with the property were as someone helping the expat to make the purchase from the original seller.
In one case, we know about a property in Puerto where the Panamanian seller had been asking $5,000 for 2 or 3 years. These folks were desperate to sell. Suddenly, we learned from the neighbors that this property has just sold for $20,000! Amazing! (Not really). When we discovered that it sold to someone new to Puerto and which local “agent” helped broker the deal, it is quite clear what happened.
When I met the new owner, all I could do is smile and congratulate them on their purchase. What can I do now? It is too late to help them. Plus, no one wants to hear that they have just been swindled.
Of course, this practice can happen anywhere. To avoid it, the solution is to take your time so you, and your lawyer, can review the property’s transaction history carefully. You should meet the seller yourself, with a translator if needed, and without your realtor, to ensure you are buying the property from them, not from your agent/property finder.
Sadly, these victims may continue to trust the “friendly” agent and even allow them to help manage a remodel or new construction project for them, all without having any idea of the true costs for these services.
In this particular practice, not only is the innocent expat buyer paying what amounts to a monumental real estate commission, but they are taking on another, even greater risk as well.
Risk: Ownership Challenges
It is usually within the first few weeks after a property changes hands that problems concerning ownership begin to surface. This risk is there regardless of any commission-slight-of-hand. It is due to the too-quick purchase without thorough investigation.
That is, you will discover that the owner you bought the property from is not the only owner of the property. Most common and most distressing is that additional owners of the property may claim the sale void since they did not sign off on it. Or they may demand additional payment from you, the buyer.
Panamanian families, particularly families with middle-aged siblings, often are quite large: 6, 8, 10 siblings all with an equal claim to the family home/estate.
If an elderly parent has died without a will (this is the norm, not the exception, in Panama), the house automatically becomes the property of all of the living offspring. However, when an expat buyer arrives to look at a property, the people living they may claim to be the sole owners of the property. They may say, “my mom always wanted me to own the house”.
Panamanian law does not work this way. There may be several legal owners of a property. You need to find this out in advance of investing your money. If there are too many conflicting claims of ownership, or if the family can’t all agree to sell the property, now is your chance to run away as fast as you can from what would have turned into a nightmare.
Why People Get Conned
Obviously, the people who are most successful at this kind of fraud present themselves as the expat’s friend. They might even introduce you to a few other expats who will vouch for them. The salient trait of a good con man is the ability to appear to be someone with insider knowledge who is going to be your friend for years to come.
Another tactic used by real estate agents who work in this unscrupulous way is to create a “smokescreen” (in Panama they call this practice “throwing feathers into the fan”) to disguise their dishonest business practices and to separate their prey out from others who could have warned them about the likelihood of a con job.
One practice that is popular in Puerto and other places is to assassinate the character of anyone they think could tip off the prospective buyer, whether those are their real estate “competitors” or simply other expats who might also caution you to take it slow. The agent keeps you in a bubble of people who won’t rock the boat for them, so all systems are “go” for a sale.
Another thing that the swindlers do to delay or camouflage these scams is to warn the expat buyer “Whatever you do, don’t tell anyone that you bought this. I don’t want any of the other folks who wanted the house to be upset.” Or “Don’t tell anyone you just bought this, because we don’t want anyone to know that the man/woman who sold the property has all this cash on them….they might get robbed”. I’ve heard this one several times over the years. These techniques are designed to isolate the buyer from those who might have been able to help them, until after all the payments have been made.
How To Be Safe Buying Property
I do not write this article to dissuade anyone who is considering a move to Panama.
You can be safe and happy buying property in Panama. The vast majority of people are.
But you need to resist the temptation to make a rash purchase, one you may regret.
This is especially true if you are buying through an intermediary/agent of some kind – particularly if the seller is Panamanian. In that situation, an unscrupulous agent will find it easier to work some kind of sleight of hand.
Investigate the Property
You should make sure you and your lawyer do a thorough job of researching a property before you buy it.
If it is titled property, the investigation is a simpler process than an ROP property. But in either case, research needs to be done.
For Titled property, a thorough title search and investigation needs to be conducted.
In the case of ROP property, this investigation will involve looking at the full history of transactions of the property. Including the knowledge that if one of the property owners died, most likely each that person’s children and spouse now have an ownership share of the property. If the children and spouse claim they are not owners, they must sign a notarized & stamped declaration to that effect. Your lawyer (or another person) should also ask all the neighbors about the property to ensure there is a consensus about who the true owners are. This sounds too simplistic. However, this simple asking the neighbors, never fails, if done thoroughly. In Panama, especially in small towns, there are no secrets.
Buying Property Safely in Puerto Armuelles
Puerto is no worse than other parts of Panama, or Costa Rica, as far as real estate integrity is concerned (There’s a comfort, eh?). And we want you to have the greatest chance of a successful landing here.
Get a Lawyer
For a property investigation, a local lawyer is best. They know all the players involved and can help intuit if something feels fishy. You may or may not choose them to help you with any subsequent property purchase.
Ask local expats for what lawyers they would recommend. There are both bilingual and Spanish-only lawyers in Puerto. We also have a certified translator in Panama who can help you communicate with the latter.
For instance, most lawyers can easily find out if the property was recently visited, even purchased by a local “realtor type” by simply talking to the neighbors. In this small town, everyone talks about everything. It is not too hard to get the facts, you just need to ask.
If you would like a recommendation or places to ask for recommendations, please ask via our contact page.
For more information on buying property, read this.
Puerto A Happy Place to Live
We are truly in love with this town. It is one of a kind, complete beach town and a super cool place to live.
Puerto Armuelles always benefits from the arrival of people who can enjoy a happy life here. Happy people contribute to the well being of everyone. Happy expats who find what they are looking for here contribute by helping our town continue to be a great place to retire or to start a business.
We want to continue to see Puerto Armuelles expat success stories.
Puerto Armuelles still holds amazing value for beachfront property, or property within sight and sound of the waves.
So do your research. Cross-check your references.
If you take it slow and check out your information thoroughly, you can be safe and happy buying property anywhere in Panama.
And slow is the pace of life in Panama, so you might as well start taking it slow from the beginning..
Betsy and I are always available to help answer your questions.
Thanks for reading