Guest blog post from renowned Real Estate and Immigration Lawyer, Mr. Marcos Kraemer, founder and president of Kraemer & Kraemer in Panama City
Investors and expats frequently seek clarity about the process to purchase property in Panama. Acquiring property abroad, whether to relocate or to generate income, involves a higher level of risk that everyone wants to reduce.
This process is not complicated. In fact, you will find it to be similar to your experience in North America or Europe in most cases. Let me walk you through the most common steps to purchase your dream retirement home or your wealth-preserving property in Panama.
Step 1. Choose the right team, and the right property
This should be obvious. After all, nobody wants to be left holding the wrong property at the end of the day. Choices often are emotional and it helps to have a team of professionals to help you avoid that.
You will find the property purchase process to be a more pleasant experience if you work with the right realtor from day 1. PanamaKeys or my office will be glad to connect you with proven agents who will work for YOUR interests. There are many high-quality investment opportunities available at PanamaKeys. Take a look!
I cannot stress enough the importance of working with the right team. Yes, you can do this entire process by yourself. It comes with the risk of getting gringoed, as locals refer to those cases where foreigners are sold a pig in a poke.
Working with the right real estate team gives you mitigation against this risk. They are more likely know the locale, the property, and its history.
When looking for the right team don’t just settle for what you’re first told. Be incisive, and ask open-ended questions to asses the true experience a realtor brings to the table. How many deals has he closed in the area? What went right? What would he do different? Is he willing to give you references?
A trustworthy realtor will sit down with you and talk you through real, verifiable stories that they’ve experienced in the area, both the good and the bad. This is what PanamaKeys and Kraemer & Kraemer have to offer.
Step 2. Titled property vs. Right of Possession
When choosing the right property to purchase in Panama, it is important to determine whether the property is actually Titled or in Right of Possession (ROP) status. The terms of your deal may change substantially in each case, as well as the ownership status upon process completion – as explained on Step 6.
Purchasing titled property is straight forward. This is the equivalent of purchasing property in North America or Europe. Titled properties usually will have clear boundaries, and ownership is recorded in a public registry, requiring only a simple title transfer from seller to buyer.
Purchasing right of possession (ROP) property involves more hurdles, but ROP opportunities are usually found at a significant discounted value. This is because the property is NOT titled in Panama’s public registry. Therefore, the buyer must gain full evidence of the seller’s ROP claim. This protects the buyer from third parties who may contest his ownership rights in the future, whether in local municipalities or in courts.
The most straightforward method to protect your ROP investment is to title the property in the Public Registry, but this could be a lengthy and costly process. In my opinion, you should NOT disregard ROP properties. Kraemer & Kraemer has extensive experience with ROP cases, and will provide you the right legal advice to protect your investment.
Step 3. Negotiating the deal
Once you choose the right property, and understand the property status, the time comes to negotiate the purchase! Is this something you want to do by yourself, or would you prefer the assistance of a seasoned realtor and legal counsel?
Having dealt with buyers and sellers from all over the world, I speak with authority when I tell you that each deal is different. A successful closing depends on multiple variables. For instance, think of overcoming cultural differences, mortgage considerations, segregations, financing conditions, verifications, multiple sellers, options to purchase, or sale of heirs’ rights.
Choosing the right team also gives you access to relevant comparables, to social and economic circumstances to benefit your negotiation, to seasoned local inspectors, and to financing opportunities that you could otherwise miss. All more reasons to bring the right people onboard with you.
Negotiations usually conclude with a deposit agreed by both parties. The seller might keep this deposit if the buyer backs off for no reason. Likewise, the deposit might return to the buyer if due diligence reveals something hidden about the property.
Get the details of your negotiation in writing whenever possible! This will save you headaches and finger-pointing in the future.
Step 4. The due diligence
Most sellers are very transparent about the conditions of a property and its legal status here in Panama. There is still that 1% of cases where you find dishonest sellers. Save yourself from falling in to that 1% bucket of victims and hire an attorney.
Unlike North America, there is no title insurance in Panama. However, an experienced real estate attorney will be able to verify any hidden affairs related to the property you want to acquire.
In the case of titled property, it’s customary to check for pending mortgages or court cases. For ROP transactions, it’s also important to gather and verify the ROP evidence from the seller, on top of checking for pending court cases.
Don’t forget a proper inspection, especially if your creditor demands one or if you plan to renovate and flip the property. Who should you trust and how much should you pay? Use your realtor or attorney for references, or contact PanamaKeys to get you the right resource.
Step 5. Structuring the payment
It is standard to pay earnest money to secure the deal (as mentioned in Step 3), and then a downpayment of 10% when signing the contract. This enables the seller to process all sales tax forms and payments upon the proper percentages of the purchase price in which the closing is done.
Once this process is completed, the buyer proceeds to cancel the outstanding balance.
Certified checks and wire transfers (local or international) are accepted forms of payment. There are many Real Estate agents and attorneys, such as Kraemer & Kraemer, who offer escrow services for the Buyer’s peace of mind.
You might wonder about Panamanian financing opportunities for foreigners. There are options to consider: most require a 30% down payment, bank reference letters from your home country, and proof of income. Consider also that many sellers are willing to finance the buyer provided credit conditions. Check out the listings in PanamaKeys for owner-financed opportunities.
Step 6. The Closing
Once both buyer and seller are ready to close the deal, the Deed is signed before a local public notary. In Panama, notaries are publicly assigned positions but managed privately. Only attorneys can be named notaries, who will serve as witness to the validity of documents and transactions.
Once signed, the Deed will be filed in Panama’s Public Registry. Consequently, the property title will be transferred to the Buyer’s name.
In the case of ROP properties, a Deed will also be issued, but cannot be registered in the Public Registry. This will be the sole proof of purchase for an ROP buyer, which will be added to the file with evidence of ownership from the seller.
Congratulations! You are now the proud owner of a piece of land in one of the most popular destinations for expats and investors! Welcome, and enjoy all of the natural beauty and wonder that Panama has to offer.
Do you have questions? We can help with answers!
Regardless of where you are in deciding whether or not to purchase property in Panama, Kraemer & Kraemer and PanamaKeys are here to help. Contact us should you have any questions, and we will be happy to assess your case and provide the right recommendations to move forward.
Did you find this article useful? Please share it with your family and friends!