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Selling a Property in Panama –

Posted by regionpanamarealty on October 24, 2019

Thinking about selling a property in Panama?. Prior to placing your property on the market, there are several questions you need to ask yourself. Perhaps, ask your attorney or your real estate advisor. If at the moment you don´t have either, let us know, Region Panama is happy to help.

This is what you need to know:

  1. Is my property up to date on the payment of property taxes?
  2. Are the construction and improvements registered?
  3. Is the property tax holiday applied to the construction? If so, until what year?
  4. If the property is under a corporation: Is the corporation active and up to date on yearly fees?
  5. Are the values of my property updated with the different government institutions?
  6. If you live in a gated community or an apartment: Is my property up to date in the payment of HOA?

Having all of the above in good order and current will save you time and money. Also, it helps you determine the costs of the sale of your property in Panama.

Selling a property in Panama is quite simple. If you are working with the right professionals. We have 15 years of experience selling real estate in Panama. There are 3 main steps:

  1. 1% of the purchase price to reserve the property for 15 days. 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. At this point, the seller can engage their attorney to prepare the purchase-sale contract. This reservation period gives the buyer the opportunity to inspect and revisit the property. We can recommend home inspectors. The buyer can also engage their attorney to do the title search. 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. The reservation agreement should also include the general terms and conditions agreed upon. Similar to the following.
  • 9% or 14% down-payment is typical, it will depend 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 should be prepared by the Seller´s attorney within a few days after the reservation deposit is paid. At this point, all terms written in the purchase-sale contract should be 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 reasons. Escrow service is not typical in Panama 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.
  • The 90% or 85% balance (whichever the case) is guaranteed by a promissory letter of payment from a local bank. The buyer delivers this letter to the Seller prior to the payment of transfer fees and capital gain taxes. 7 to 15 business days after the signing of the contract is the standard. The closing, at which point the deed of the title is signed, can take place within 30 to 60 days, from the signing of the purchase-sale contract. If there is a mortgage on either side, the closing may be extended to 90 days. Upon registration of the title, the seller collects the money for the balance. The seller has to present the promissory letter of payment to the bank in order to collect the check for the Balance.

Your cost of sale are the Following:

  1. 2% of the value of the transaction as transfer fees
  2. 3% advance capital gain (based on the value of the transaction or registered value plus yearly increment, whichever is higher)
  3. 5.35% realtors commission (Includes sales tax).
  4. Plan on 1% legal fees, can be more (or less) depending on the amount of the transaction and complexity of the deal
  5. Your total cost of sale normally represents 11.85%.

Property taxes, HOA fees, and corporate fees are other costs you need to keep in mind.

The buyer is in charge of the registration of the deed of title. The cost is 0.03% or US$3.00 for every $1,000.00 of the value of the property.

Below is a list of the document the seller needs to provide prior to closing. The Seller provides these documents once there is a promise to purchase the agreement signed. Also, when the buyer pays the down payment and presents the promise to pay letter from a local bank. The Buyer may ask for 1,2 and 3 prior or at the signing of Contract.

  1. If the property is under a corporation, the seller will provide a resolution from the shareholder authorizing the sale of the property
  2. Certificate of good standing of the corporation or foundation. Make sure your corporation or foundation is active. Also, up to date on yearly fees and registered with the DGI (Direccion General de Ingresos)
  3. Certificate of good standing of Property Taxes
  4. Certificate of good standing from the water department
  5. The Buyer may also ask for the last electric bill paid
  6. If the property is in a gated community or in a tower, a letter of good standing from HOA.
  7. Form 106 – Corresponding to the 2% transfer fee
  8. Form 107 – Corresponding to the 3% advance capital gain fee
  9. Receipt of payments of the 2% transfer fee and 3% advance capital gain
  10. Certificate of receptions of both forms (106 and 107 above)
  11. Minute of purchase Sale endorsed by a suitable attorney in Panama 

Contact us for more information regarding selling 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.

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