retire in panama | Panama Relocation Tours

July 28, 2017 By Jackie Lange Leave a Comment

Avoid Unscrupulous Real Estate Agents in Panama

I’ve been a real estate investor for more than 20 years and have bought and sold hundreds of properties so I know real estate. But in Panama the whole process of buying and selling are completely different.

You should know that only a Panamanian can be a licensed real estate agent or broker. Foreigners can sell real estate but are considered a “consultant” or associate. A foreigner cannot prepare any contracts or other paperwork for the purchase or sale of real estate.

Any foreigner who is working in Panama or selling real estate is required to have a work permit. If you’re working with an expat (foreigner) to buy or sell real estate, you should ask to see their work permit to verify that they are working legally. An owner can sell their own real estate without having a work permit… unless they have made a business out of buying and selling real estate then they need a work permit.

If a foreigner is advertising that they have a “real estate agency” in Panama, it’s an illegal operation. Chances are they do not have a work permit either. It is better to work with companies and sales people are work legally in Panama and avoid those who are not.

Neither the Panamanians nor the foreigners who sell real estate or help you buy real estate are obligated to a fiduciary responsibility. A 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.

Some agents, but certainly not all, will put their commission above your best interest. (see the examples below) That’s why it is important to always have your OWN attorney do a title search and create the purchase contract. Your attorney can also give you advice about what is needed to successfully buy real estate in Panama. Unfortunately, many real estate sales people 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
♦ 5% capital gains tax (on full sales price) even if a corporation
♦ Review the survey to verify what you are buying
♦ 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 make sure that 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.

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 3-5% 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 or the real estate sales person’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 for right of possession properties.

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 sales person 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 property. Because it is not titled, you are taking the risks 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 the money you invested. It rarely happens but it does happen.

Right of possession 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 $10,000s of $100,000s 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 ownership of the property. Get your attorney to review the survey to verify what you are buying. Buyer beware of right of possession property.

Not all right of possession 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.

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 which 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 the tax exoneration only applies to the 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.

A right of possession property has no property taxes currently. That’s a plus. But the 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 is customary to not take title to a property in your own name. Instead, you would take title in the name of a corporation or a foundation. There are several reasons this is done including, hiding who the shareholders are for asset protection but also for estate planning. 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 capital gains taxes when the property is sold, you could get stuck with the bill later.

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. But there is also a $350 to $450 annual renewal fee to keep the corporation alive. Plus all corporations are required to file a tax return in Panama which can cost $250 each. If you’re a US citizen, you will also have to report the “offshore corporation” to the IRS. If you take title in your own name, you can avoid these additional costs.

When you set up your corporation, do not let your attorney be the President or any other officer of the corporation. They will charge extra fees each year to do this. I know one person who’s attorney, acting as President of the corporation, put several properties that he did not own up as collateral for a $3,000,000 loan. This was only discovered when the owner was selling the property and the mortgage popped up. The person who actually owned the properties did not authorize the attorney do use the properties as collateral to get a multi-million dollar loan. Yes, there are unscrupulous lawyers in Panama, and every country, too.

Easy to Buy, Not So Easy To Sell

If a property is priced right it will usually sell within 30-60 days. 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 $150,000 sell faster. Anything priced over $500,000 could take two or three 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 price. 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.

What If You Die

An important thing to take in to consideration when buying properties in Panama is what happens if you die. Your Panama Will can spell out who will get the property. (Yes, you need a Will in Panama too) If your heirs do not live in Panama it will be a major hassle for them to liquidate your estate in Panama. Your Will should make recommendations on who to use to sell the property otherwise your heirs could get taken advantage of by unscrupulous real estate agents.

Depending on our age, it may make more sense to just rent the whole time you live in Panama.

Good Reasons to Buy

If you are in good health and plan to live in Panama for more than five years, it may make more sense to buy a house if you can pay cash. Then you won’t need to worry about your rent going up.

If you find your dream home and it is priced well below market, it may make more sense to buy instead of renting.

You may want to buy rental properties. There is always a need for more rentals. But you should understand that rents are extremely low in Panama compared to North America or Europe. A typical house worth $125,000 in Panama will only rent for $700 a month – furnished and all bills paid. So your ROI may not be as good as you could get with other investments. You will need to buy way below market for this to make sense. Good property managers are hard to find so it is best to only buy rentals if you plan to live in Panama full time.

If you’d like to build a green house so you can grow your own vegetables, it may be necessary to buy.

Some towns in Panama have more “upside potential” than others. These towns are usually more run down and have fewer expats so they are priced lower than other areas. Their is a chance — a risky chance – that the town will improve and more expats will move in which could – could – cause the property prices to go up. It certainly won’t happen fast though. You should plan on at least five to ten years for prices to go up. Keep in mind that if you need to sell quickly, you may not be able to sell for what you paid for the property. It takes much longer to sell in these type areas. You could lose money speculating on an upside potential.

Some other things you should take in to consideration 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 will need to determine where the closest grocery store is located and if they have the times 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.

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 will have a very hard time selling later.

Because there is not a good MLS system in Panama, it is very difficult to determine value. You should not rely on what the real estate sales person or the seller tells you: instead, you should do your own due diligence.

Rent First!

I highly recommend that you rent for at least 6 to 12 months before you even think about 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 6-12 months that you rent, 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 sales people to stay away from. You may hear about a hot deal before it is listed with a real estate agent.

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 sales people 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 sales people.

If a real estate sales person 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.

Getting a mortgage is more difficult in Panama but it can be done. You’ll need at least 20-30% down. And you’ll be required to get a life insurance policy for the amount of the loan and name the bank as the beneficiary so they get their money one way or the other. Most loans will require payment in full by the time you turn 70 years old. Some builders offer short term (5 year) seller financing.

There are a lot of really great real estate agents and sales people in Panama. You’ll meet some of them during a Panama Relocation Tour. But there are also some unscrupulous real estate sales people in Panama too.

Here are a few examples of unscrupulous expat (foreigner) real estate sales person activities:

Case #1: David (not his real name) was caught selling the same property to three different people and collecting a non-refundable deposit from each. He also managed properties and was caught telling the 0ut-of-town owners that the tenant did not pay but actually put the rent in his pocket.

Case #2: An auction company signed a contract to sell a large property as an absolute auction which means the property would be sold to the highest bidder regardless of price. But the auction failed to do much marketing and had no directional signs to even find the property. They brought in their own buyers who got a $2,000,000 property for $750,000.

Case #3: A couple came on my Panama Relocation Tour. The husband was in his 80s and had to use oxygen. They decided to move to Panama and despite my warnings to rent for at least 6-12 months (or forever), they got hooked up with an expat who convinced them that they should buy instead. The property was way off the beaten path and not near a hospital. The expat sales person convinced the buyers that the house was priced $200,000 below market even though it was not. She told the buyers that the sellers were motivated and the house only needed cosmetic repairs. Because the buyers were working with an expat, they thought they could trust her. The expat sales person did not recommend a property inspection or any other due diligence. She just wanted the sale to happen as fast as possible so she could get her $15,000 commission.

The sales person should have said, because of your health conditions, it would be better to buy a property closer to a hospital or at least closer to fast ambulance service. But no…. this sales person was only looking out for her own interest and commission.

After the sale, the buyers found out there was severe drainage problems and a leaking roof in addition to many other problems. The house needs extensive repairs, not cosmetic repairs.

No one should convince an 80 year old person who needs to use oxygen to buy a house out in the middle of no place. It’s just wrong.

Sadly, a few weeks after the buyers moved in to the house the husband had a medical emergency. It took a long time to get him to a hospital and he died.

This could have all been avoided if the expat real estate sales person were more concerned with the buyer’s best interest instead of her own.

It may sound like the wild wild west when it comes to buying real estate in Panama. It is certainly different. The unscrupulous problems mentioned could happen anywhere!

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. It is especially important to be “at” the property if it is right of possession. If someone else moves in while you are gone, you could have a hard time getting them out because the right to the property is who is in possession.

NOTE: Panama Relocation Tours does not sell real estate. During a tour we will show you several rental properties just so you can get a general idea of what you get for your money in different areas and different price points.

June 23, 2017 By Jackie Lange Leave a Comment

What’s The Customer Service Like in Panama?

You may have heard that customer service is not so good in Panama. I’ve actually had great experience with customer service. But, it’s because I read a lot about Latin culture to know what to expect and not expect. Some examples, if you go to a restaurant they usually will not bring your check until you ask for it. If you’re in a department store, a sales clerk will follow you around. He/she is not watching you to see if you’re going to steal anything; they are actually waiting for you to ask for help so they can come over to assist you. They just do things a little differently in Panama.

Chuck Kent came on my tour several years ago. He wrote me today to share a customer service experience he had. I knew you’d enjoy reading about it so I got permission to share.

Chuck wrote, Please share, without sharing, I would not be here today. Your Tour and your Group of Associates have helped us immensely. As you already know I am not easily impressed but I must say you have done a very impressive job with and through Panama Relocation Tours. Thank you.

I want to add some positive feed back on service in Panama.

I had a problem with water pooling close to the road. The City admitted it was their problem and they would fix it. That was last year. So after we purchased the house, we had too transfer the billing to our name. While there we asked when they would be around to fix the water leak. Well don’t they show up early the next day with a work crew. They dug down and found a broken sewer pipe. Not surprising seeing the house was built in 1939. (see 360 view of the house below)

They worked on trying to clear the house line to the main line at the street, after about 4 hours they approached me and said the damage was not worth fixing. I could make due until they hook up the new sewer lines just installed through out the City or I they could connect me the next day.

Remember I am responsible for the line from the house to the main line on the street. I am thinking in thousands of dollars. They told me I could have it done privately or I can pay them too do it. I thought about it for one second and decided they should do it. This way any problems are their responsibility. I don’t have too deal with them blaming my contractor if something goes wrong. I asked them for a quote. I fixed my self a stiff drink in preparation for the news.

1 Backhoe
1 Backhoe Operator
1 Backhoe Manager
1 Chainsaw and Operator.
3 Labours
1 Supervisor
1 Manager
5 hours labour to complete.
$250.00.

I had too supply the the hardware.

4 inch pipe approx 60 feet and all the couplings.

$63.00 with tax. I ask for my Jubilado Discount for household goods and got it.

I am now hooked too the new sewer system. 1 less chore to do later.

Happy campers in Puerto Armuelles
Chuck & Mary

See a 360 view of the house Chuck and Mary purchased in Puerto Armuelles which is on the far western side of Panama, close to the Costa Rica border.

SEE VIEW HERE

Chuck says, “ It is 1260 Sq Foot raised Tropical Style, 2 Bedroom, 2 Bathrooms. Lower section is open air to help with air circulation and cooling. We have Air Conditioners but have not needed to use them. We sit on 2 one acre lots, with approximately 25 to 30 mature Fruit Trees. I can’t say how much we paid for this, but let’s put it this way I couldn’t put a down payment on the condo we live in, in Toronto for the price of this Property.”

Puerto has a population of about 25,000 and has some of the best beaches in Panama. It has a hospital, grocery stores, and some restaurants. It’s also one of the most affordable beach towns in Panama.

Previously, Chiquita Banana was in full operation there but they left in early 2000 over labor disputes. Since then, Puerto has gone in to disrepair. It’s a very Panamanian town. There are very few expats.

Recently, Del Monte signed a 10 year agreement to start up banana operations in the Puerto area again and they have committed to spending $100 million dollars in Puerto Armuelles over the next ten years. So, things are looking up for Puerto!

After the Panama Relocation Tours we make arrangements for those who are interested to meet with people who live in Puerto who know the area very well. There are a lot of hidden gems that very few people even know about there. We’ll show you where they are!

Join us for a Panama Relocation Tour to learn about many other hidden gems throughout Panama!

See this video that some tourist took of a drive through Puerto Armuelles

June 19, 2017 By Jackie Lange Leave a Comment

9 Tips for Driving in a Foreign Country

Reprinted with permission from Billy and Akaisha Kaderli of www.RetireEarlyLifestyle.com Commentary in blue about driving in Panama added by Jackie Lange of Panama Relocation Tours

Most people in the U.S. and Canada own their own cars. Wherever we want to go, whether it’s to the grocery store or the next town, we simply jump into our cars and start driving. There’s no second thought about traffic rules, which side of the road to drive on, the language of the land or whether the car is in working order.

Generally, mass transport options are scarce for everyday getting around (unless you live in a city with a subway or airtram) and the use of taxis for transport can add up.

The situation is different in a foreign country. Taxis are cheap, and there are other transport choices like tuk tuks, local buses or bicycle driven taxis. Uber is available and very affordable in Panama City. You can even request an English speaking Uber driver.

Still, even with the abundance of affordable selections for getting around, some still prefer to rent a vehicle.

If this is your choice, below you will find nine useful tips for driving in a foreign country.

Think twice about renting a car. Hiring a driver is an affordable option in many countries. These personal drivers know where they are going, they know the best sites to visit, and will assure your safety. It is a stress-free option. Many car rental places in Panama will not accept your insurance and force you to buy very expensive insurance.
Become familiar with a rental car by driving it around the parking lot. If you do decide to rent a car in a foreign country, become familiar with the vehicle by driving it around the parking lot. Check that the seat belts are functioning, that the car is equipped with airbags and make sure the brakes and windshield wipers work. Try the headlights to verify they light up, and confirm that the turn signals blink. Check your fluids and fuel levels. Make sure you have Whatsapp on your cell phone and a cell number for the car rental place so you can call them if you have a problem with the car… know that they may not speak English.
Plan your route ahead of time. This is very important. Know where you are going, and what stops you can make along the way. Weather conditions or even a local political protest can interrupt an otherwise easy trip and turn it into a nightmare, so have a secondary location where you could stay the night. Are you going through mountains? Do you want to avoid big cities or go right through them? Have a list of hotel choices in your destination place as well as your possible secondary stop. Always have plenty of water and snacks in the car just in case you are delayed.
Get the latest maps and know the metric system. If you don’t know where you are going, how far it is to get there, or what the speed requirements are you are at a disadvantage. Going too slow or too fast, and not knowing what to expect on the roads ahead can create safety problems. Your car might have a GPS, but if you are going to less populated areas, or off the beaten path, those roads will not be registered in your device. You can’t buy a good map of Panama in Panama. Buy your map from Amazon before you come to Panama.
Read up on the road laws and know the road culture of the country you are in. Stop signs and speed limits can be meaningless in some countries. It behooves you to take this fact seriously. In some countries like Thailand, the one with the larger vehicle pays for the damage, even if it’s not your fault. If a motorcycle driver runs into you, you are liable for the repair of his bike and his medical coverage. Be aware of your surroundings on the road. In Panama, the maximum speed is 100km or 60 miles an hour and it is strictly enforced. There could be police check points anywhere. The police will want to see your passport and driver’s license. They will check the entry stamp in your passport to make sure you have not overstayed your time in country as a tourist – which is a maximum of 90 days if you are driving.
Avoid driving at night. Road cultures differ from country to country, and besides the fact that stop signs and speed limits can be meaningless in some countries, there are drivers who choose to turn their headlights off “to save battery power.” As astonishing as this might seem to you, it is often done, especially in rural areas. If you cannot see the car in front of you or the one behind you, this places your safety in jeopardy. If you are driving through a rural area at night, there can be cattle, donkeys, horses and other animals roaming the roadways. They are harder to see at night, and running into them is a rude surprise. I would add, try to avoid driving in the rain, especially hard rain, because it’s hard to see.
Lack of enforcement and bribery are commonplace in many countries. This may or may not be to your advantage. Especially, if you have an accident with a local driver whose brother is the mayor or police chief! Try to keep your cool in any situation. Demanding, screaming and the flailing of arms will only place you lower on the totem pole of getting anything done in your favor. Don’t assume you have rights. Remember, you are in a foreign country. Move the situation forward with politeness and respect, and take care of your complaints later. If you get a ticket in Panama, you’ll have to go back to that province to pay the ticket. Do not drink and drive, or use your cell phone while driving.
Don’t be afraid to use your horn. Americans are among the most polite drivers in the world, but it gets them in trouble. In many countries, using the car’s horn is a normal function of driving and is a form of communication. Using your horn can be effective in reducing crashes. Always toot your horn when you are passing someone on a road in Panama.
Use public transport as often as possible. Public transport is often very good in foreign countries. Bus, air, ferry or rail passes make traveling from place to place affordable and less stressful than renting a car and having to remember on which side of the road to drive. You won’t have to be responsible for the vehicle’s safety or fret about where the next fuel station is. You can catch a snooze, watch captivating scenery or read a book while being transported to your next location. Public buses are readily available and very affordable in Panama. Uber is available in Panama City.

Relax and enjoy yourself!

Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance, medical tourism and world travel. In 1991, at the age of 38, they challenged the belief systems of everyone they knew and left the conventional working world to travel the globe. Facing unique challenges and living well on less money, Billy and Akaisha have been helping people achieve their own dreams of financial independence by sharing the wealth of information they have collected over the years on their website RetireEarlyLifestyle.com.