Buying property in Panama

Here’s a guide to buying a property in Panama, no matter if you are a local or a foreigner. UPDATED 2023!

Are you interested in buying property in Panama? If so, this article will help you! No matter if you are a local or a foreigner who wants to buy a property in Panama, you will find this article useful. Up next, we will share our insights on moving and investing in Panama, along with some expert tips for when will be your time to buy property in Panama. Let’s see what you need to know about buying real estate in Panama!

What types of property can you find in Panama?

Title

Titled property in Panama closely resembles the guidelines of fee-simple titles in the United States. It is the most commonly used type of property in Panama, and it involves specific procedures that one needs to follow:

• A promise to buy a contract, which involves a down payment offered at the moment you sign the pledge to purchase a property so that the property will not be sold to other parties until you close the final agreement. Keep in mind that this initial contract can be submitted and registered at the Public Registry but it is not mandatory.
• A title search, meaning that you need to hire a real estate lawyer in Panama so that he verifies the Public Registry to look for the truthfulness of the title, seller and to make sure there are not any unknown debts or liens on the property. When the property is a land, this professional will check the cadastral survey map and boundaries of the land.
• In order to sell, after the owner receives the initial down payment, the following documents are needed to submit the deed at the Public Registry: Certificate of sale taxes and gains capital taxes paid, certificate of good standing for the property tax, the final purchase and sell agreement signed by a local lawyer, certificate of good standing or statement of no balance due to the water and garbage disposal company and the homeowner’s association (if applicable).
• Both parties sign a purchase and sale contract, which is then submitted at the Public Registry, along with the total amount the buyer has to pay whether if its cash or through a mortgage loan. While escrow is not a regulated activity in Panama, some companies, primarily legal firms, offer escrow services. Alternatively, a Letter of Guarantee issued by a local bank can be used for the final payment, or a check for the final payment can be placed in the custody of a notary until the property deed is officially registered.
• A title transfer or deed represents the final stage of purchasing a property in Panama, where the property ownership is transferred to the buyer and registered in the Public Registry.

Usually the buyer has to take care of the cost of preparing and submitting the deed containing the title transfer at the Public Registry.

Right of possession

A right of possession applies to a property owned by the government and used by a resident or organization in Panama to make improvements to the land. In most cases, this is offered with straightforward certification documents provided by mayors, sheriffs, or government organizations. Foreigners can buy a right of possession property, obtaining the certification upon purchasing the property from the previous owner. The steps you need to follow include:

• Signing a promise to purchase a contract and offering a down payment as a guarantee.
• Compelling to the due diligence investigation, which might include checking of certification of rights of possession, surveying, inspection, and permitting verification.
• Signing the buy-sell contract, as this type of property cannot be registered at the Public Registry, make sure you use a notary to authenticate the contract and its signatures. 
• Upon signing the buy-sell contract along with the total amount the buyer has to pay, the buyer obtains the ownership through the Certification of the ROP.

Concession

Concession property is similar to a land lease arrangement and usually involves government-owned property where the state allows an individual or organization to use the property for specific purposes, such as real estate development or a hotel. Typically, this title is offered in Panama for up to 20 years, with the possibility of renewal, or up to 40 years based on the type of property. This title is guaranteed through a specific contract agreement, which exposes the buyer to minimal risks.

Why you need a real estate agent?

Now that you know the main types of property in Panama, you most likely ask yourself about whether or not you need the help of a real estate agent. And to tell you the truth, no matter in which country you are, working with a professional in this field to help you can get you access to plenty of advantages. Here are the reasons why you need a real estate agent when buying a property in Panama, include: 

• A real estate agent has knowledge of the market and its values, providing you with valuable insights about neighborhoods, price ranges, building or communities reputability, and the latest additions to the market.
• A real estate agent will listen to your needs and expectations, ensuring they present the best property for your situation.
• The agent will intermediate and negotiate the selling on your behalf.
• Working with a professional real estate agent reduces the risk of deception or purchasing the wrong property, as they will conduct due diligence on the property.
• You can visit and analyze several properties with ease, as the real estate agent takes care of organizing the process for you.
• You won’t miss out on the best property deals in Panama.
• Real estate agent services are free for the buyer.

Why is it important to contact a qualified attorney?

In addition to a real estate agent, you will need the services of a real estate attorney in Panama. There are several reasons why involving such a professional is crucial when buying a property in Panama, including:

• The attorney will draft, analyze, and verify any documents that you need to sign, ensuring the protection of your best interests.
• The attorney is knowledgeable about real estate laws and regulations.
• The attorney will have the ability to spot hidden issues with the seller, property, or documents.
• The attorney can act as an intermediary between you and the seller. 

Can foreigners buy a property in Panama?

Yes! For several years now, Panama has legally allowed foreigners to own titled property in their name. Still, real estate lawyers will highly recommend for their clients to retain all property in the name of a Panamanian organization so that the asset is more protected. 

What about fees, taxes, and real estate commissions?

Property in Panama will have the following taxes depending on the sale price or the last registered sale prices, whatever is higher:

• Sales Tax or Title Transfer Tax: 2% of the sales price or the highest registered sale price.
• Capital Gains Tax: 3% of the sales price, or the seller can choose to pay 10% of the gain.
• Only titled properties are subject to property taxes in Panama.
• Property valued at less than $30,000 are exempt from property taxes and primary residence properties are exempt for the first $120,000. To know more about the new law of property tax in Panama, read this article!
• For tax purposes, properties are typically valued at their sales price, unless the property has previously been sold for a higher price, in which case the higher value would be the taxable value.
• The real estate commissions are established based on the property, real estate agent services, and similar other factors but the standard in Panama is 5%, paid by the seller. 

What is the buying procedure of real estate in Panama?

1. The first step is to verify the title with the assitance of your real estate agent and real estate lawyer. After this, you should request a survey or appraisal of the property done by a licensed professional. This will provide you in-depth information about the property in Panama that you are considering to buy.
2. The third step involves signing an agreement, typically consisting of two contracts: a promise to purchase contract and a purchase and sale contract. Upon signing the promise to purchase contract, a down payment is usually required. The seller will use this payment to cover expenses such as taxes, documentation gathering costs, and legal fees.
3. Next, you will need to complete the payment for the property using one of the following methods: cash, a mortgage loan, a money order from the Panama Bank, an escrow company or through a cashier’s check deposited in the custody of a notary until the deed is registered.
4. Submit your purchase to the public registry and get the purchase and sale contract registered, this will be the deed.

So, now you have the essential information about real estate in Panama. To ensure the best experience, always engage the services of a real estate attorney and a real estate agent for the best purchasing experience.