Your Guide to Buying Panama Real Estate
Buying real estate in Panama is attractive for for people of all ages. Panama is one of the easiest countries to to buy real estate for foreigners from all over the world. Panama real estate offers about every option there is for such a small country – you can live on the Pacific beaches, the Caribbean beaches, in the mountains, as well as big city life in Panama City.
Retirees especially are flocking to this country, likely because of its attractive retiree benefits. Panama has one of the easiest residency programs in the world with which to obtain permanent residency. This is especially true if you’re a retiree. Gaining permanent residency in Panama as a retiree requires very little, the greatest hurdle being to prove that you have a guaranteed monthly income of just U.S.$600 if you’re single, which Social Security will more than cover. You also get a whole host of other benefits, such as discounts on airfare, medical bills, and groceries. This makes it incredibly attractive to retire to Panama.
Combine the ease of residency with the fact that Panama has one of the fastest growing economies in all of the Western Hemisphere, and it’s no wonder why there is so much interest in buying real estate in Panama. Whether you’re interested in buying Panama real estate for a retirement home, a second home, or as an investment, real estate in Panama is a very attractive prospect for many. Foreigners are not barred from buying real estate in Panama, in fact, and they don’t even have to live in the country to do so – which might be the case for other types of investments.
The process for buying Panama real estate is fairly straightforward. Of course, the first step in the process, as with buying real estate in any country, is to get oneself a reliable real estate agent, as well as a reliable attorney. Both of these professionals are crucial in making sure that you obtain what you are looking for, at a good price, and that the real estate is bought in a legal and secure fashion.
Once you have decided on the piece of real estate that you want to buy, there are several documents that must be obtained, and several processes that must be gone through.
The documents when buying Panama real estate are:
Letter of Intent – This must be signed by both parties. Upon signing, the buyer will put down a good faith deposit and the real estate agent for the seller will take the property off the market for an agreed upon amount of days. The Letter of Intent is backed up by another important document when buying real estate in Panama:
Promise to Purchase – This document lays out all of the terms of the real estate deal. This includes such details as the purchase prices, deposit amount, and any penalties for non-compliance.
*Note: These two documents are not necessary, but they are usually used. They work as good indicators that both parties understand the terms of the sale and are both committed to it.
Promissory Note (Promesa de Compra y Venta) – Must be in Spanish to be legal. Can also be written in English, but again, the Spanish is required. This document is similar to the Promise to Purchase but is much more formal, both in a legal sense as well as in the aspects of the sale that it lays out.
The Promissory note states:
- The parties to the sale
- What is included in the sale
- A description of the property
- The time frame on deposits and final balance payments
- Penalties for non-compliance
- Any other details pertinent to the sale
Upon signing the promissory note, a down payment will be made. This is typically 10% of the purchase price, but can be different depending on the circumstances outlined in the promissory note. This down payment will go to the seller, and is typically used to pay the attorney who drafted the promissory note, as well as pay the 5% transfer/capital gains fees.
After this, several other documents must be gathered by the seller. These documents include the deed(s) for the property as well as statements of good faith, which show that there are no outstanding taxes or other bills associated with the property (such as money owed to the water company). During this time, the buyer should do a physical inspection of the property, to ensure that it meets all of the specifications outlined in the sale.
Irrevocable Letter of Credit – This is a document that the buyer must provide to the seller. It is essentially an escrow letter. The seller may cash this at the buyer’s bank, once the property has been transferred in the public registry.
Buy Sell Agreement – After all of the above documents have been gathered, and the processes completed, the Promissory Note is converted into a Buy/Sell Agreement, which is then signed by both parties in front of a public notary and inscribed in the public registry. The property is then registered and the ownership of said property is changed from the seller to the buyer. The seller may cash the buyer’s Irrevocable Letter of Credit at this time.
Once everything is squared away, the closing costs will typically be around 1-2%, aside from the transfer tax, which is 5%.
The whole process can take as little as 30 days, but usually it will only be this quick if the property is being sold by way of selling shares of a corporation that owns the property. This expedites the process, as the property isn’t what’s being sold, but rather the shares of the corporation which owns the property. The owner of the property remains the same: the corporation.
The process can take as long as 90 days on a typical basis. It could potentially take even longer, as there is always the possibility of unforeseen external factors influencing the process. In general, however, a 90-day cap on closing time can be expected.
Buying Panama real estate can be an excellent way to diversify one’s assets. International diversification is key to a successful and strong portfolio. In addition, for anyone interested in moving to Panama or retiring to Panama, buying real estate in Panama will be a crucial part of this process.