real estate Archives | Panama Relocation Tours

In Panama, some things are done in a different way than you are familiar with. A good example are real estate sales and rental listings. In Panama, it’s common to see the same house listed at several different prices with different agents. Sometimes the “spread” can be as much as $100,000 difference for the same house!

In North America, most houses for sale are listed as an exclusive listing. This means that one real estate office as the exclusive right to market the property. If that same office finds a buyer, they will typically make about a 6% commission. If an agent from a different office produces a qualified buyer, the “listing” agent will usually agree to split the 6% commission. In North America, a real estate agent has a fiduciary responsibility to the seller/buyer so all the dealings for the transaction are revealed “on top of the table.”

There are some exclusive listings in Panama too. But most listings are NOT exclusive. Instead, the seller has agreed to pay a commission to whoever produces a qualified buyer. This is why you will see the same house listed with several different office and at different prices. A typical commission in Panama is 5-6% of the sales price.

But sometimes, the seller has told the agent(s) that they need to NET a certain amount at closing and anything the agent can sell it for over that amount will be there profit. This is called a net listing. Net listings are illegal in most of North America, but it is business as usual in Panama. Here’s an example:

Joe and Mary need to walk away with $150,000 on the sale of their property. Real estate agent Sue advertises it for $220,000 – with room for negotiations, she’s hoping it will sell for $200,000 so she can walk away with a $50,000 commission versus the $12,000 commission she would have earned at 6%.

Maybe $200,000 is the right price for the house. But perhaps $150,000 is the right price. It’s hard to know in Panama because there is not a reliable MLS system to show comps of recent sales in the area. We do have an MLS system but most agents don’t use it and that’s why it’s not reliable.

Last year, I had breakfast with the broker for a local real estate office. He was bragging about how me made $600,000 profit on a NET listing near Boquete.

HOW WIDESPREAD IS THE PROBLEM? [Read more…]

Since the mid-1990s I’ve been buying and selling real estate as an investor. So, I’m no stranger to real estate closings.

Jackie Lange Real Estate — This is the house I bought

In Panama, I’ve purchased several properties and the closings all went very smoothly. That all changed this month when I wrote a contract to buy a house for cash and close in a few weeks. Sounds simple enough – right?

Not so fast! TIP = This is Panama

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.

The property I am buying was all clear, so my attorney prepared the purchase contract. The seller and I both signed and I paid him earnest money directly.

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 has been paid. Since the Seller works, I hired my Panama CPA to take care of the payment of the taxes. He got a notarized letter from the seller authorizing him to pay the taxes.

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. Apparently, this property, which was purchased more than 30 years ago, did not have a NIT number so my CPA had to apply for one.

After 7 days, my CPA finally gets the NIT number and presents it to the DGI. One of the delays was a Panama holiday in the middle of the process. There are a LOT of Panama holidays and the whole country shuts down to party.

Finally, the taxes got paid.

With the receipts for taxes paid, my attorney could prepare the closing documents then send to me by courier to Boquete the next day.

The documents were supposed to arrive at Uno Express by 10am. But they did not arrive until almost noon.

With closing documents in hand, I drove 30 minutes to David to meet the seller to sign everything at the Primary Notary. When I arrived, the seller is there with his Mom, Dad and sister for the “big event”. A friend met us there too because we planned to go out to lunch after closing.

The whole closing process should take about 30 minutes. Remember, I’ve done this many times before and it was always quick and easy.

But not this time.

A 20-something kid who works at the Notary comes out to tell us that because the closing documents were prepared by an attorney in Panama City, he needed to see an authorization (email is ok) from a Notary in Panama City that the documents could be signed in David. This has never happened before!

I call my attorney in Panama City who tried to talk some sense in to the kid to no avail. So, my attorney goes to the Notary’s office by her only to find out he is out to lunch at 2pm and they don’t know when, or if, he will be back that day. (It’s Friday so maybe he decided to take off early).

My attorney suggests that we go to Notary #2 in David. Luckily, it is only 5 minutes away. We, all 6 of us, arrive only to find out that the Notary #2 has already gone home for the day.

So, we, all 6 of us, drive to Notary #3 in David.

I’m following the seller and trying to keep up with him. I turned left on a road that I thought was a one-way road only to find it is a two-way road. Yikes! I cut in front of a taxi (they cut in front of me many times). But, this time, there is a cop right behind the taxi. He pulls me over to give me a lecture in Spanish about safe driving. Luckily, I did not get a ticket.

Finally, we all arrive at Notary #3. The documents are signed and a fingerprint next to the signature. Then we wait and wait for all the stamps. You cannot have any kind of an official document in Panama without a lot of stamps all over it.

I felt so bad that the seller and his whole family had to wait so long and had to drive all over town to get this closed, so I gave them $100 to go out to dinner.

My friend and I went to TGIF for a margaritas and dinner.

What an ordeal!

Finally, I bought a great property which I plan to fix up then resell to hopefully make a nice profit. The house is on a really big lot which I may subdivide so I can build another house on the other lot.

Lessons learned on this one – I should have let my attorney in Panama City take care of getting the taxes paid. Getting just about anything done in Panama requires going to an office in Panama City. Trying to get a NIT number, or anything else, from anywhere but Panama City causes unnecessary delays and frustration.

Beware of NET Listings in Panama

The Real Estate Closing From Hell