Buying Real Estate In Panama

I recommend renting for at least six to twelve months before you consider buying. This gives you time to make sure you like living in Panama and that you like the area you think you want to live in. A year will give you time to learn the market and know the “right” price to pay. 

I’ve been a real estate investor since 1992 and have bought and sold hundreds of properties, so I know real estate.  I’ve also bought and sold real estate in Panama.   In Panama, the whole process of buying and selling is completely different.

Most foreigners selling real estate in Panama do not have a work permit, let alone a license. Just because a foreigner has a license to sell real estate in Panama does not mean they are trustworthy.  Foreigners who sell real estate without a license are considered “consultants” or associates.  A foreigner cannot be a “licensed” real estate agent until they have been working with a broker for several years and then take a test, in Spanish, to get a license.  Most foreigners who sell real estate are not licensed real estate agents.

WHO CAN YOU TRUST?

There are many trustworthy Panamanian real estate agents. By the way, Panamanians do not need a work permit to work in Panama. Only foreigners need a work permit.

Most expat real estate agents or salespeople have absolutely no previous experience with real estate.  Yet, they want to help you make the most expensive investment of your life so they can make a commission.    Buyer beware!

In many ways, Panama is like the wild wild west regarding real estate. 

Neither the Panamanians nor the foreigners who sell real estate or help you buy/lease real estate are obligated to fiduciary responsibility in Panama. Fiduciary responsibility means that they will put your interest above their own.  It’s not required in Panama though some honest real estate agents/consultants do put your interest first and foremost.  Others will say and do anything to get the sale and their commission.  You would not believe the stories I’ve heard!

Some agents, but certainly not all, will put their commission above your best interest.  That’s why it is important always to have your OWN attorney do a title search and create the purchase contract.  Your attorney can also advise you on what is needed to buy real estate in Panama successfully. Unfortunately, many real estate salespeople will not tell you that:

• You should always get the property inspected
• You should get the septic and water systems inspected
• You should verify that there is a Certificate of Occupancy filed
• You should verify that all taxes have been paid (even if in a corporation)
• Be aware of the pros, cons, and dangers of Right of Possession property
• 3% capital gains tax (on full sales price) even if a corporation
• 2% transfer tax (on full sales price) even if a corporation
• Review the survey to verify what you are buying or get a new one
• If there is a tax exemption, it needs to be transferred to you
• The best way to take title for your situation

Your attorney will ensure your interest is protected before any contracts are signed, money changes hands, or title is transferred.  Most likely, all contracts and other documents will be in Spanish.  Unless you are fluent in Spanish it is especially important to get YOUR attorney to create or at least review, all documents.  Do not trust what someone other than your attorney says the documents say. You can request that the contracts be in Spanish and English.

Real Estate Closing

Closings are handled in a completely different way in Panama.  There are no title companies or escrow offices. 

It is customary to give the seller 5-10% down when the contract is signed (it’s not held in escrow) so it is imperative that your attorney is involved before any money changes hands.  Your attorney should not be the same attorney as the seller’s attorney and certainly not the real estate salesperson’s attorney. 

You need to have an attorney who represents you and your interest.  Your attorney will prepare the closing documents, then you and the seller will go to a notary to sign everything.   Your attorney will record the documents once everything is notarized.  There are slight variations in closings for right of possession properties.

In Panama, it is customary and advised that your attorney creates the purchase contract and all closing documents.  For titled properties, there is always a FINCA number. Once your attorney has the FINCA number, they can do a quick title search to verify that the person selling you the property is really the owner and find out of there is a mortgage or any back taxes. The seller had a survey so a lot of information needed for the contract was on the survey – like how much land I got with the house.

There are no title companies or escrow offices in Panama. Instead, you close at an official Notary.

But before you can close a titled property, the seller needs to show a receipt that the 2% transfer tax and the 3% capital gains tax have been paid. 

But before you can pay the taxes, it is necessary to get a statement from the DGI (taxing authority) about how much you owe based on the sales price.  To get that statement, the DGI needs a NIT number (tax identification number) for the property.

For closing, you will go to an official notary office. Normally the seller and the buyer go at the same time. It’s customary that the buyer will deliver a certified bank check to the notary for the final purchase price. But the seller will not receive the funds until the title to the property is registered which could take a week or more. Typically, the buyer does not get possession to the property until the seller has received the sales proceeds.

Read about this Real Estate Closing from Hell!

Titled Versus Right of Possession Property

Not all property in Panama is titled.  If you are considering buying a property, you should ask the seller or the real estate salesperson for the FINCA (farm) number.  With the Finca number, your attorney can do a title search to verify that the person selling you the property is really the owner(s), can determine if there is a mortgage, the balance of the mortgage, if the payments are current, and if all taxes have been paid.

If the seller cannot supply you with a Finca number, it is probably a “right of possession” property, meaning there is no title.  These properties are usually priced much less than titled properties.  Because it is not titled, you are taking the risk that someone could come along later claiming that the property has been in their family for years.  At that point, you lose your home and all your invested money.  It rarely happens but it does happen.

Right of possession (ROP) property can be titled but the process takes about 5 years about costs about $6,000 to $100,000.  I know some people who have been trying to get their property titled for 10 years with no success.  I also know people who lost tens of $1,000s of dollars buying right of possession property.  And I know people who have purchased right of possession property with no problems.  If you do buy right of possession property, you still need to get your attorney to review all the documents that the seller has to claim their property ownership. Get your attorney to review the survey to verify what you are buying.  Buyers beware of right of possession property.

Not all right of possession (ROP) property can be built on.  If you plan to build, verify that you can get a building permit before you give anyone any money. If there is a current building on the property, verify that it is legal and can stay.

Do not believe real estate agents who tell you all the paperwork is ready to get an ROP property titled. The paperwork might not be ready, it’s a lengthy process, and it could cost tens of thousands of dollars to get an ROP property titled. It’s better to buy titled property or write a contract that says you will buy the ROP property after the seller gets the property titled.

If you buy titled property, you can avoid any right of possession problems because there is a clear and recorded chain of title.

TAX EXONERATION = NO PROPERTY TAXES

In 2008 the government stimulated the real estate industry by promising a 20-year tax exoneration for properties that were built prior to January 1, 2012.  This tax exoneration, which only applies to titled property,  can be transferred from one owner to the next.  But you should be aware that tax exoneration only applies to improvements or construction.  You will still need to pay taxes on the land.

The tax exoneration rules changed in 2012.  You still get a break on property taxes for houses or condos built after 2012 but not a 20-year tax exemption.  Depending on the price, the tax exoneration could be for 15 years to as little as 5 years.

Right of possession properties currently pays zero property taxes.  That’s a plus.  But the Panamanian government is talking about requiring all right of possession property owners to title their property which could cost $6,000 to $100,000 depending on the size of the property.

HOW TO TAKE TITLE

In Panama, it was not customary to take title to a property in your own name.  Instead, you would take title in the name of a corporation or a private interest foundation.  There are several reasons this is done, including asset protection and estate planning.  If set up properly, you can avoid probate.

The advantages of taking the title in a corporation all changed in November 2021 when Panama passed law 254 which required extensive annual reporting for corporations. Besides the annual renewal fees ($300) for the corporation and the annual registered agent fees (about $150), you’ll need to hire a CPA to file financial records for the corporation. Most CPAs charge about $300-$500 for this. Plus, you’ll need to send this all to your attorney each year, along with an affidavit and other documents. I recently did this and it cost $750 and three hours of my time for one corporation. Remember, you need to pay these fees every year.

Some agents will tell you that you do not have to pay capital gains taxes if you just buy the shares of the corporation instead of the real estate.  This is not accurate.  If the seller does not pay the 5% taxes when selling the property, you could get stuck with the bill later. If you do buy a corporation and the only asset is real estate, it is better to either take the title in your name or set up a new corporation.

There are pros and cons to taking title in a corporation.  The biggest “pros” are asset protection and estate planning.   You could avoid probate too.  The biggest “cons” are the upfront cost in setting up a corporation which can be $1,000 to $1500 depending on which attorney you are working with.  There is also a $300 annual renewal fee to keep the corporation alive, annual registered agent fees, plus the cost of the annual reporting. If you’re a US citizen, you will have to report the “offshore corporation” to the IRS too.  If you take title in your own name, you can avoid these additional costs.

EASY TO BUY, NOT SO EASY TO SELL

If a property is priced right it will usually sell within six months  But because there is no way to know what the right sales price is,  most properties are not priced right.  You cannot go by what other people are asking for their property.  Generally, houses priced under $300,000 sell faster.  Anything priced over $300,000 could take much longer to sell.  Properties priced over $500,000 could many years to sell.  Some houses have been on the market and priced too high for more than 5 years – yet the sellers refuse to lower their prices.  It’s crazy!

Some sellers try to justify their sales price based on replacement cost but that is not an accurate way to price properties in Panama because building costs vary considerably.

THINGS YOU SHOULD CONSIDER BEFORE BUYING IN PANAMA

If you have health problems you need to know where the closest medical facility is located and how long it will take to get there.  It may be better to rent instead of buying.

You must determine where the closest grocery store is located and if they have the items you need.

If you travel a lot, you’ll want to be close to an airport.

You may not be able to get fast internet or any internet or cable tv service in some areas. Yet other areas have fiber optics, and you can get 100-600mbps internet speed.

You’re not just buying a house, you’re buying a neighborhood, so it’s important that the surrounding houses are of equal or greater value to yours, or you could have a really hard time selling later.

Always investigate the crime situation any area you are considering buying in.  Most areas in Panama have very little crime.  But some areas have seen an uptick in crime.

Because there is no active MLS system in Panama, it is very difficult to determine value.  You should not rely on what the real estate salesperson or the seller tells you: instead, you should do your own due diligence.  It takes time to learn property values so that’s another reason to wait at least 6-12 months before buying.

FINANCING

Foreigners can get financing from a bank to buy real estate in Panama.  You will need to put down 20-30%.  All banks will require a life insurance policy for at least the mortgage amount naming the bank as the beneficiary. The biggest problem is that banks require most loans to be paid off when you turn 70.   It could take several months to get financing through a bank.

You can avoid these hassles by buying with seller financing.  Some developers offer 5-year seller financing. And many sellers who have been trying to sell their house for a long time will offer seller financing (or you can ask for it) if you pay a 20-30% down payment.  When sellers offer seller financing, you may be able to get 0% interest.   I’ve helped many people from our tours buy houses with seller financing.

Note, if you’re buying real estate to qualify for the new Friendly Nations Visa, effective August 2021, you must either pay cash or get bank financing. Panama will not accept Seller Financing or Developer Financing for this visa.

RENT FIRST!

I highly recommend renting for at least 6-12 months before considering buying anything in Panama. In that time, you can be sure you like the area.  You will have time to keep track of the sales price of homes in the area so you will know the “right” price to pay when you do decide to buy. 

During the 6 months that you’re renting, you will get to know a lot of people and get referrals for good and honest real estate agents and consultants.  You’ll also likely hear about a few salespeople to stay away from.  You may hear about a hot deal before it is listed with a real estate agent.  If you are moving to Panama, it will take about 6 months to get your permanent Pensionado Visa which is another reason to wait 6 months to buy.

SAME HOUSE, THREE PRICES

Speaking of listings… many properties you see for sale do not have an exclusive listing with one agent or company.  Instead, the seller has told all the real estate sales people in town that they will pay a commission to whoever brings a qualified buyer.  With this arrangement, you are likely to see the same property at many different prices on many different real estate websites.

If you are from Canada,  do not assume you can trust real estate salespeople from Canada.  If you are from the USA, do not assume you can trust real estate sales people from the US.  Ditto from Europe, etc.

Panamanians are excellent real estate agents!  There are a lot of really good expat real estate salespeople, but some have a shady reputation.

If a real estate salesperson goes to church, claims to be a Christian, frequents the Panama forums or Panama Facebook groups, it is NOT a sign that they are trustworthy… the could be just trolling for the next sale/commission.   Scammers also frequent forums and Facebook… so be careful.

There are a lot of really great real estate agents and salespeople in Panama. ­­­You’ll meet some of them during a Panama Relocation Tour, and we have recommendations for honest real estate companies and agents n our Online Panama Relocation Guide  It’s best to get a LOT of recommendations from locals before you start working with anyone to buy or rent real estate.

EXAMPLES OF REAL ESTATE FOR SALE IN PANAMA

$105,000 Two bedrooms Two bath gated community next to the Pacific Ocean.
Many community amenities including, pools, clubhouse, lake with paddle boats,
BBQ areas, tennis, golf. Only 5 minutes to Westwind Mall and 40 minutes to
Panama City

Only $245,000 for an oceanfront house. Three bedroom, three bath fully furnished house on two acres oceanfront just east of David.   It also has a casita, which could be rented out for guests.  Amazing beach and views.  It is fully furnished

$259,000 Oceanfront condo. Three bedrooms, Two baths, fully furnished.  Amazing views and ocean breeze.  This is 2 miles to Coronado which has a hospital, many grocery stores, restaurants, and more.  And it’s only one hour to Panama City

$69,000 in the cultural center of Panama, Las Tablas.  Three bedrooms two baths.
Unfurnished.   Fenced yard.  Great neighborhood

$165,000 fully furnished 3 bedroom 2 bath 2 living area mountain home near Boquete. Great investment property or place to live.  Ten minutes to downtown Boquete or 20 minutes to David.
This one SOLD recently!

$199,000 for TWO houses.  The main house is a two bedroom two bath, fully furnished. There is a one bedroom furnished rental casita next door for instant income. This property is 8 minutes to downtown Boquete.

DON’T LEAVE YOUR BRAINS AT THE BORDER!

When you see that gorgeous ocean or mountain view and a house priced much less than you’d pay where you live now, don’t get so excited about the opportunity that you forgot to do the normal due diligence before buying real estate.  Always get the property inspected.   Never sign any documents or give anyone any money until your attorney has had a chance to review everything.

One other word of caution – don’t buy real estate then leave town trusting someone else to get repairs done or to build your house.  You should be present while a house is being built or when repairs are being done.

NOTE:  Panama Relocation Tours does not sell real estate.  During a tour, we will show you several rental properties to help you get a general idea of what you get for your money in different areas and at different price points. We will introduce you to trusted real estate salespeople during the tour. 

Panama Relocation Tours does not accept commissions or “kickbacks” for any real estate sales or rentals or any other service providers we recommend.