The 9 Easy Steps to Buy
a House in Panama

Thinking to Buy a House In Panama?

Savings To Buy a House in Panama

With the world economic crisis, real estate around the world has become a tremendous buying opportunity for those with cash, and buying a house in Panama is no exception. So if you are one of those lucky ones who still have cash, there are excellent deals to be found. Real estate purchases work a little different than in your home country, and of course it pays to know the procedures, so without further ado, here’s how to buy a house in Panama:

Savings To Buy a House in Panama
  1. Find a Property
  2. Negotiate a Price
  3. Perform an Initial Title Check
  4. Make a Promise to Buy/Sell Contract
  5. Do Final Title Checks
  6. Get the Building(s) Inspected
  7. Enter Final Purchase Contract
  8. Put the Purchase Funds in Escrow
  9. Record the Purchase

First Step to Buy a House in Panama: Find a Property

Panama has no MLS and no Zillow, so finding the right property for you takes a bit more digging. There are several websites that have real estate listings:

  1. encuentra24.com is the largest player for all categories of classified type listings, including real estate. It has decent search capability and lots of listings.
  2. compreoalquile.com is also a great site with 1000’s of listings and powerful search capability.
  3. bienesonline.com.pa
  4. casas24.com
  5. mlsacobir.com: Panama’s realtor association attempt at an MLS, but hasn’t gained a lot of traction as of this writing.
  6. inmopanama.com: Focused more on Panama City

When you are buying a house in Panama, keep in mind that there are some different communications customs and pitfalls that may not exist in your home country.

Firstly, most people have WhatsApp and use that for messaging rather than SMS. This is by far the fastest and easiest way to contact someone in Panama.
Many properties are “for sale by owner” and you can contact and deal with the owner directly, but with a buyer’s agent, you get far more protection and negotiating power for free. If the property is represented by an agent, and you want to see it, double check that they are an authorized agent of the owner, and they have full access to the property.

Open House Door

Be wary of pre-purchase of new developments. Some have gone so far to say in Panama, if it isn’t built, don’t touch it. At the very least, be sure the developer has a consistent track record of delivering what they promise. Developers often put an option to raise the final price in their pre-purchase contracts, and they always take it. So be aware your final price will always be more than the headline price.

Negotiate a Price

Look up comparable properties on encuentra24 to make sure their asking price is in a reasonable range. Asking prices are often well above actual market prices, so avoid offering full asking price unless it is already well below other comparable asking prices.
Before you make an offer, ask to verify directly with the owner what their current asking price is. Sometimes agents advertise prices well above what the owner wanted to ask and hope to pocket the difference.
In most places as of this writing, including Panama, it is a buyer’s market, so you as a buyer are in the dominant position during negotiation.

Perform Initial Title Checks

Your lawyer or buyer’s agent should check the title on the property to make sure you are avoiding the problems that sometimes occur when you are trying to buy a house in Panama:

  1. The registered owner is the same person who claims to be the owner. The property may be registered in the name of a corporation (or foundation), which will actually make the property easier to transfer, but they should then make sure the person who claims to be the owner is the sole shareholder of the corporation. If they don’t match, this is a big red flag! This should be done even before negotiating a price.
  2. The land size is as advertised (you may want to actually get a survey later, especially if only the original survey was done because older surveys are known to be inaccurate).
  3. There are no liens on the title (except perhaps a mortgage that is covered in the purchase price) and no other encumbrances, especially tax bills which will block the sale of the property.
  4. The property is titled, not a “possession rights” property, which can later invalidate your ownership.
  5. The property is zoned correctly for your intended use, and there are no unexpected limitations.
  6. There are no outstanding utility bills.
Title Check Service

If the land is in an indigenous reserve, walk away. No sales contract will make it yours for sure, and the land is untitled.
If the land is owned by a corporation, you will want to buy the shares of the corporation instead, and much of this process will be different.

Essential Step to Buy a House in Panama: Make a Promise to Buy/Sell Contract

This is like a sales contract, but the official form does not cover as many contingencies as a sales contract in the United States. The more limited contract form must be filed at the public registry. One way to be more covered is to create a more complete contract that references the publicly filed one.
This will also be the point where a deposit is paid to the seller, usually 10%. The amount can be negotiated. This is another place where buying a house in Panama is different than in the United States, where a deposit opens an escrow account, and the money is kept in an account overseen by a neutral third party, the escrow agency. In Panama the deposit is paid directly to the seller, and there is no requirement he keeps the funds segregated. The deposit is usually used to pay the transfer tax and capital gains tax, so the seller usually needs this money to make the sale move forward.

House Agreement to Buy a House in Panama
The standard form of the promise contract is that the buyer forfeits his deposit if he backs out. Be sure the seller faces an equal penalty if he backs out.
If the purchase is for land, specify the price in dollars per square meter, rather than a total price.
Make sure you are able to back out without penalty if any defects are found in the title, survey, or in the buildings, and resolution to the defects cannot be agreed on.
If you are using financing, you may want to reserve the right to adjust the price down based on the bank’s appraisal.

Do Final Title Checks

Title insurance to buy a house in Panama is impractically expensive for most people. Therefore you should have a lawyer or real estate agent who can demonstrate to you that they can exhaustively check the title to make sure you will own it free and clear, and that no liens have been placed on the property in between the promise to buy contract and the final sales contract. Your property may depend on how well they check. There’s no rule against hiring more than one attorney to check the title, just to make sure.
This is also where you might want to get the land surveyed, if a recent survey has not been done. Older surveys in Panama are not known to be accurate. You can also double check that the neighbors have the same understanding of the boundaries of the land. Make sure you have all the easements you need to access your property, for driveways and utilities. Just because there is an existing driveway, doesn’t mean it has the legal right to be there.
You will also need to obtain certificates of good standing for utilities, maintenance fees, property taxes, or corporate tax (if the property is held in a corporation).
After you buy a house in Panama, The DGI (Panama’s IRS) collects property taxes, but NEVER sends bills out. It is the responsibility of the property owner to just send payments. If an owner is negligent or just late, there can easily be an unexpected pile of penalties waiting to give a big surprise when it comes time to sell. If those go unnoticed, you the new owner will be liable.

Get the Building(s) Inspected

Panama building standards are good, but often not to the high standards you may be accustomed to in your home country. It will pay to know what you’re getting into, what you might want fixed before the purchase, or what you may want to run from! Just like in your home country, inspections are an important part of buying a house in Panama.

House Inspection Service

Enter Final Purchase Contract to Finally Buy a House in Panama

After all the checking has been done, make the final purchase contract. The contract is signed in the presence of a notary, and is filed at the Panama public registry. The final purchase contract should include:
  • The basics of purchase price, deposit credit, and title transfer details
  • An indemnification clause in the event that hidden defects in the property are discovered.
Real Estate Contract to Buy a House in Panama
  • A dispute arbitration clause. It’s very risky and difficult to obtain justice in Panama courts, especially as a foreigner, so 3rd party arbitration in the event of a dispute may save a lot of trouble.
The final contract here acts as a public deed. You must be physically present at the notary to sign, with your passport or Panama cédula. If you want to execute a purchase without being present, you can assign an attorney or trusted person with power of attorney to sign on your behalf.

Put the Purchase Funds in Escrow

Never pay the seller directly to buy the house in Panama. At this point in the process, you have to pay for the property, but it’s not actually yours yet until you have the title in hand. Therefore some form of escrow will be required. Attorneys can act as escrow agents, as well as banks and escrow companies. Escrow Key to Buy a House in Panama Escrow companies usually charge anywhere between .5% and 1% of the sales price. If you use a bank, they will probably handle it as an irrevocable letter of payment. You deposit the purchase money into an account, and they issue a letter, stating they have the money and will release it when you the purchaser receive the title.

Record the Purchase

The final sales contract / deed will have to be signed at a government notary, and then recorded in the public registry. If filed in Panama City, this can get done in 10 days, often more. For an additional fee of about $250, you can have it done in 2 business days.

Title Deed to Buy a House in Panama

You then must file a copy of the deed with the tax records department.
At this point, the property is legally yours, and the escrow company will release the funds to complete the process of buying a house in Panama.

Congratulations! Now you are a home owner in Panama!

Have More Questions About Buying a House in Panama?

If you have any questions, we’d be happy to help you, whether you’re ready to buy or not. Please contact us anytime!

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