Buying real estate in Panama

The first thing to consider when buying real estate in Panama or any other country is that the rules are probably not the same as they are ‘back home’. This should not necessarily scare you, but it should serve as a warning to make yourself aware of local customs, practices and pitfalls.

In Panama, for example, it is easy to ‘buy’ land from someone who has no right to that land. You don’t have to be an ex-pat to fall into that trap. I heard of 12 families who bought land, built homes, and were then held to ransom by the true landowner. They had to pay again, and through the nose, or lose their homes. It is essential that you be represented by reputable professionals fully experienced in buying real estate in Panama. Trying to save a few hundred dollars in fees is false economy. A real estate agent can help with the buying, but cannot help with the complex legal stuff.

Tips for your success

Here are some tips for successfully buying real estate in Panama.

• Any contract you sign is legally binding. If it is in Spanish (and it probably will be), have it translated independently and professionally. The $20-or-so per page is cheap insurance.
• Don’t use the buyer’s attorney, even though it might save you a few dollars.
• Understand what you are buying, particularly in Bocas del Toro. Not all land is titled, especially here. Some is held under concession and some under rights of possession (translation: squatter’s rights). Rights of possession on an island property can be transferred, but you can never get title to this land.
• Make sure you have complete and satisfactory answers to all your questions. Take nothing on trust when buying real estate in Panama. Sign nothing until you are satisfied with all the information.
• Have contingencies built into a contract so you can get out of a deal and get your deposit back if you do not get proper answers.
• Get all explanations and promises in writing when buying real estate in Panama or anywhere else. If there is unwillingness to provide this, find out why.
• Before you even consider buying real estate in Panama, prepare a list of your requirements: how much space, how much land, whether ocean or cooler mountain property, do you want a garden, how close to shopping, to an airport, medical facilities, climate, trees, type of road access. Be careful of low-lying river basin property. Check for history of flooding in heavy rains. In Panama, you can have a custom-made climate: want cooler temperatures? Simply locate at a higher elevation.
• Make another list of questions to ask once you find a property for which you might be interested in making an offer. . Top of the list: is the land titled, or can you get title to it? (Lack of title may not rule it out as a good buy, just know the rules and make sure you are comfortable with them.) Apart from the legal questions you may have, most of the others will be the same sorts of questions you might ask when buying property in your native country.
• If you want an Internet connection, find out what is available in the area you are considering. High-speed cable service is available in many places, or Bell South offers a wireless service that requires an additional card slotted into your computer. Dial-up connection is available anywhere that telephone service is available – and that’s most places.
• Visit local medical facilities if you have serious health concerns. See what’s available in an emergency. Find out about emergency transfer to a major hospital, if that becomes necessary. How is it done and how long does it take? There are excellent private and public hospitals in Panama City, but some of the ones in smaller communities (if they are available at all) can be quite primitive by North American standards. However, in my own experience, the care is professional. Health care budgets, on the other hand, are a mess.
• Spend a few dollars on a reputable home inspector.

As in North America, you can sign a preliminary contract, known as a Promise to Purchase, to give yourself time to arrange financing. This type of contract can also be used when the seller has certain conditions to be met before you are willing to close the deal. List contingencies here under which you can back out of the purchase unless all your conditions are fully met. You should have legal advice in preparing a Promise to Purchase. Mistakes can be too costly.

Title insurance

Title insurance is available when buying real estate in Panama. . An Irrevocable Promise to Pay, issued by the bank doing the financing, is a common instrument here. Payment to the seller is contingent on receiving proper title to the property.

You must formally ask your bank for this when arranging a mortgage. It’s like a letter of credit with strings. This document is delivered to the seller at closing, instead of cash. It promises to pay the seller once proper title has been delivered to the buyer.

If you’re paying cash

If, like many ex-pats, you plan to pay cash, your bank will provide the same service for a fee. Check fees with several banks, but I have heard that HSBC is competitive.

An ex-pat buying real estate in Panama has exactly the same rights and protections as a native Panamanian. Rules are in place to protect both buyers and sellers, but they are different in this country (as there are in any country), and you need to be aware of all the differences when buying real estate in Panama.

Among other things, you should check whether a corporation would be useful in your circumstances.