n the past 5-10 years, Panama has proven to be the hottest, high-return real estate market in the world. Whether you want a waterfront, high-rise condo in Panama City, a Caribbean beach lot, your own island or a mountain home in Chiriqui Province, OBR has the right options and prices for you. Once you have chosen your dream property, we can help you finalize and secure the best mortgage at the best rates as well.

Now allow us to present you the important basics for buying property in Panama.

Panama Property Ownership

Foreigners can own property in Panama with few restrictions. Currently ownership can be conveyed in two ways: title and rights of possession, “Derechos Posesorios”. Titled property is treated very similar to U.S. real estate law with proper deeds that are recorded in the public registry or "Registro Público". Rights of possession is authorized by the agriculture department and also recorded. Most of the land purchased on Panamanian islands is by right of possession, with the exception of land in townships. The most important difference in the two forms of ownership is that possession property cannot be mortgaged.

Constitutionally the government cannot take possession of private property without following a condemnation process similar to the U.S.; the owner must be compensated for land and improvements at fair market value. Regarding waterfront property, by law all beaches are public hence all beach-front properties must provided a right of way, starting from the highest tide line to the property line. (The distance may vary). The technical aspects of property ownership, and your best options regarding it, are best discussed with a qualified Panamanian lawyer.

Procedures for Buying/Selling Titled Panama Property

To buy your property properly, you should seek a qualified attorney in Panama (OBR gives you this service) to handle the Due Diligence and title search on the property, which includes contacting the seller (or real estate broker) to obtain authorized copies of the property’s title documents and land survey (if available).

Your attorney then prepares a written Contract to Buy/Sell to finalize details of the property sale and to secure the terms agreed upon (a deposit of 10% is usually required by the seller upon signing the promise to Buy/Sell Contract). At this point, you finalize your Due Diligence and place your funds into a special escrow account. Once your attorney has confirmed the property title is legal and free of liens or other restrictions, the final closing is scheduled and the buyer/seller signs the final Buy/Sell Contract.

Upon closing, payment is made to the seller, broker, and attorney from escrow (in some cases, buyers/sellers agree that payment is made after the public deed of the property is transferred and registered into the buyer’s name). Finally, the Buy/Sell Contract is registered at the Public Registry where the ownership of the property is officially transferred.

Common Questions and Answers

Q: Who normally pays for the property title transfer tax in Panama, the buyer or the seller?

A: It is standard practice in Panama for the seller to pay for the title transfer tax, however, in some cases, depending on the negotiation between the buyer and seller, the seller may insist that the buyer pay the title transfer taxes.

Q: Who normally pays for the closing costs on Panama real-estate transactions, the buyer or the seller?

A: Generally, each party pays their own closing costs. For example, the seller pays his/her attorney to review the Buy/Sell Contract, and the buyer pays his/her attorney for drafting the Buy/Sell Contract, doing the title search, title transfer, and escrow services. However, in some cases, buyers and sellers negotiate special terms whereby the buyer or the seller pays all closing costs.

Q: What are the average closing costs for Panama property transactions?

A: The closing costs vary depending on the particular transaction. For example, if the property is held in the seller’s personal name, and the buyer is transferring the property title to a Panamanian corporation (recommended), then the closing costs would include: (1) the legal property transaction fee of US$1200 (includes title search, Buy/Sell Contract, closing and property title transfer service); (2) Public Registry title transfer fees of approximately US$250 to US$350; (3) escrow fees from 0.5% to 1% of the transaction amount (these vary depending on amount of transaction); and (4) incorporation fee of US$875 (OBR’s price) + tax to setup your Panama corporation (if desired).

If the property is already held by a Panama corporation, and the buyer is purchasing the shares of the corporation, then the transaction is relatively simple since there is no registration of title transfer, no title transfer tax, and no public registry title transfer fees. In this case, the closing costs would include: (1) the legal property transaction fee (includes; title search, purchase of shares contract, and closing for US$1200); (2) change of directors/resident agent of the corporation (approximately $350); and (3) escrow fees from 0.5% to 1% of the transaction amount (this varies depending on the amount of transaction).

Q: How long does it normally take to register a property title transfer in the Public Registry of Panama?

A: In some cases, it can be done within 2 business days, if express-expediting fees are paid. Under normal circumstances, it takes from 1 to 3 weeks, depending on the volume of transactions at the Public Registry.

Q: Are escrow companies normally used in Panama for property transactions?

A: Escrow services are relatively new to Panama, so Panamanians are not very familiar with the term "escrow". However, escrow is quickly becoming a standard for real-estate transactions nationwide since more and more Panamanian realtors are selling to foreigners who are accustomed to using escrow companies in property transactions.

Q: Do purchase contracts for Panama real estate transactions need to be in Spanish, in order for them to be legally enforceable in Panama?

A: No. The law does not require a Buy/Sell Contract to be in Spanish to be legally enforceable. However, if there is ever a dispute over the transaction in a Panamanian court of law, the court will require that the contract be translated into Spanish by an official (licensed) translator.

Q: If I am a US citizen, can I use my IRA or 401K money to buy property in Panama?

A: Yes. There are several financial companies in the U.S., who offer retirement account services that facilitate movement of your IRA or 401K funds into self-directed retirement accounts. In this way, you can then invest in property anywhere in the world. (We can supply you with a list of these financial providers upon request.)

Some Panama Real Estate Building Considerations

Environmental impact studies may be required in some instances, but there are currently no zoning laws or building restrictions in the islands. Building permits are required and are obtained locally. Permits to build over the water require a concession from Panama’s maritime authority.

To learn more about your Panama Real Estate, contact us today.