Buying a Property in Panama –
Buying a property in Panama is very similar to the US, and Canada, with a few exceptions. Once you choose the property and have an agreement on a sale price, next, is to follow the process below for buying a property in Panama:
- First, the buyers pays a 1% of the purchase price to reserve the property for 15 days. of course, this is applicable towards the down payment. Indeed, this deposit is an act of good faith from the buyer showing his/her serious intentions to move forward with the purchase of the property. Also, the seller can engage their attorney to prepare the purchase-sale contract. Moreover, this reservation period gives the buyer the opportunity to inspect and revisit the property. Indeed, we can recommend home inspectors for sure. Moreover, the buyer can also engage their attorney to do the title search. Very important, if there is something wrong with the property that represents a big issue, or if the title search shows situations of concern, the buyer may ask for the reservation deposit back. Moreover, the reservation agreement should also include the general terms and conditions agreed upon.
- Second, 9% or 14% down-payment is typical, however, it depends on the negotiations. It is payable at signing of the purchase-sale contract, within 15 business days from the issuance of the purchase sales contract which is prepared by the Seller´s attorney, usually, within 3 to 5 days after the reservation deposit is paid. At this point, all terms written in the purchase-sale contract are agreed upon by the buyer and the seller. Unlike in the United States, Canada, and other countries, the reservation deposit and down payment are paid directly to the seller. There are a couple of good reasons. First, escrow service is not typical in Panama. Second and prior to transferring the title of a property to a new owner, the seller must pay the government transfer fee taxes, capital gain taxes as well as property taxes. Also, realtor’s fees and legal fees.
- Third, the 90% or 85% balance (whichever the case) is guaranteed by a promissory letter of payment from a local bank. Usually, the buyer delivers this letter to the Seller prior to the payment of transfer fees and capital gain taxes. Generally, within 7 to 15 business days after the signing of the contract. The closing, at which point the deed of the title is signed, takes place within 30 to 60 days, from the signing of the purchase-sale contract. However, if there is a mortgage on either side, the closing may be take up to 90 days. Finally, once the Deed of Title is registered, the seller collects the money for the balance. Nevertheless, the seller has to present the promissory letter of payment to the bank in order to collect the check for the Balance.
The buyer is responsible for their own legal fees. This fees can vary between 1% and 2% depending on the amount of the transaction as well as the structure and complexity. Also, the buyer is in charge of the registration of the deed of title which cost is 0.03% or US$3.00 for every $1,000.00 of the value of the property.
Generally, the property is delivered to the new owner upon delivery of the check to the seller for the balance. Nevertheless, some concessions can be granted if previously agreed.
Very important, you don´t need a bank account in order to purchase a property in Panama. Indeed, all payments can be done via wire transfer to your attorney´s escrow account and distributed according to terms in the contract. Moreover, as a cash buyer, you don´t need to be a resident. Also, any foreigner can own titled property in Panama.
If you need financing, banks in Panama finance 70% up to 20 years or up to 75 years old. However, the rates are not as low as in the US or Canada, it varies between 5.5%-7%. Likewise, most banks require you to open a bank account as well as being a resident of Panama
- First of all, an assessment of the property
- Fire Insurance for 100% of the value
of the improvements on the property
- Also, a life Insurance for the amount of the
- Legal expenses and registration of
Documents you need to provide:
- Proof of income (work letter, proof of social security or private retirement fund)
- The last two income tax statements. If self-employed, then the last tax return of the business
- Also, 2 bank references from your home country
- Credit report from your home country
- Verification of personal assets (shares certificates, bonds, properties, bank statements)
- Copy of passport, also, an additional identification card
- Copy of the purchase-sale contract
Contact us for more information regarding buying a property in Panama. We have more than 15 years of experience selling real estate in Panama and are happy to advise you on this process.