Panama Real Estate FAQs

Q1: Is it safe for foreigners to buy property in Panama?
A1: Absolutely. Buying property in Panama is very safe. There are over a dozen laws in Panama established specifically for protecting foreign investments, not to mention that private property in Panama is protected by the constitution of the Republic of Panama. Thousands of foreigners own property in Panama, and brokers process Panama real estate transactions for foreigners every day without a problem.

Q2: Is it legal for foreigners to buy property in Panama?
A2: Yes, it is legal for foreigners to own titled property in Panama in their personal names, although normally it is recommended that clients hold all property in the name of a Panamanian corporation for asset protection and tax reasons. Panama possession rights property, however, should always be held in the name of a Panamanian corporation, where the foreign person is the shareholder (or a Panama private interest foundation or trust can be appointed as the shareholder in place of the foreign person) of the corporation.

Q3: What are the procedures to buy real estate in Panama?
A3: The first step is to find a Panama property you like, and negotiate the price and terms of the sale with the seller (or Panama real estate broker).

• Second, you should seek a qualified attorney in Panama to handle the due diligence and title search on the property, putting your Panamanian attorney in contact with the seller (or real estate broker) to gather copies of the property title documents and survey (if available).




• Third, have your attorney prepare a Promise to Buy/Sell Contract to lock in the property sale and secure the terms agreed upon (a deposit of 10% is usually required by the seller upon signing the promise to buy/sell contract), plus this gives you time to do the due diligence and get your funds into the escrow account.
• Fourth, once the attorney has confirmed the property title is clean, then the final closing is scheduled, where the buyer/seller sign the final Buy/Sell Contract.
  
• Fifth, 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 buyers name).
• Sixth, the Buy/Sell Contract is registered at the Public Registry where they transfer the property title ownership from the previous owner to the new owner.

Q4: What advantage is there to putting a property in the name of a corporation, instead of putting the property in my personal name?
A4: By putting the property in the name of a corporation; (1) the corporate veil protects the property from any attacks from creditors or frivolous lawsuits against your personal name, (2) when you go to sell the property, you can simply sell the corporations shares, saving you a 2% property title transfer tax, and possible Capital Gains Taxes, (3) when you go to sell the property, the buyer benefits because the buy/sell contract does not have to be publicly registered, saving the buyer closing costs, and (4) when you go to sell the property, the buyer benefits from lower property taxes (or possibly no property tax if the registered value is below $30,000), because the registered value does not reflect the actual purchase price.

Q5: Is it safe to buy a Panamanian corporation’s shares which hold title to property in Panama?
A5: As long as a proper due diligence investigation is done on the corporation and a proper title search is done on the property that the corporation holds, then it is generally safe to buy property this way in Panama. It is important to hire qualified attorneys to handle the due diligence, and put the proper clauses in the Buy/Sell Contract of Shares of the corporation, such as;
(1) a clause that guarantees the buyer that the corporation does not have any pending debt or liability other than that established in the contract and indemnifies the buyer from any such liability,

(2) a clause that makes the seller responsible for any liability for previous actions of the corporation and/or it’s directors, and

(3) a clause that guarantees the buyer that the purchase is for 100% of the corporations shares as well as for 100% of the property title number xxx (with the description of the property), which is duly owned by the corporation, whose shares are owned by (the seller).

Q6: Are there any government taxes or fees for transferring Panama property titles from the sellers name to the buyers name?
A6: Yes. The Panamanian government charges a 2% property title transfer tax. The 2% is based on the registered value (the value established in the registered deed of sale). In addition, there are other fees charged by the Public Notary and the Public Registry which total in the range of $200 to $300 for registering a buy/sell contract for the sale of real estate in Panama.

Q7: Who normally pays for the property title transfer tax in Panama, the buyer or the seller?
A7: 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.

Q8: Who normally pays for the closing costs on Panama real estate transactions, the buyer or the seller?
A8: Generally, each party pays for 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, so it really depends on the particular negotiation between buyer and seller.

Q9: What are the average closing costs for Panama property transactions?
A9: The closing costs vary depending on the particular transaction. For example, if the property is held in the sellers personal name, and the buyer is transferring the property title to a Panamanian corporation (most recommended), then the closing costs would include; (1) the legal property transaction fee of US$600 (includes; title search, buy/sell contract, closing, & property title transfer service), (2) public registry title transfer fees of approx. US$200 to US$300, and (3) incorporation fee of US$1000 to setup the Panama corporation. However, if the property is held by a Panama corporation already, and the buyer is purchasing the shares of the corporation, then the transaction is relatively simple because there is no registration of title transfer, meaning that there is 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$600) and (2) change of directors / resident agent of the corporation (approx. $350).

Q10: How long does it normally take to register a property title transfer in the Public Registry of Panama?
A10: In some cases, it can be done within 2 business days, if we pay extra for quick expediting. However, in normal circumstances, it takes from 1 to 3 weeks, depending on the volume of transactions at the Public Registry.

Q11: How long does it normally take, from start to finish, to purchase property in Panama?
A11: The time frame from start to finish is normally about 6 weeks, however, it really depends on a variety of factors which are dependent initially on the buyer and the seller, the negotiation between buyer and seller, and subsequently dependent on the attorneys and the public registry.

(1) The buyer and seller to agree on the price and terms (time frame can vary depending on the negotiation),

(2) seller provides our firm with all the due diligence documentation on the property title so we can do the title investigation (time frame depends on the seller),

(3) attorneys do initial title search & draft the promise to buy/sell contract (time frame is approx. 1 day assuming we have all the required information from buyer and seller),

(4) buyer and seller review the promise to buy/sell contract and agree to set a date to sign (time frame varies depending on the buyer and sellers),

(5) buyer sends payment for down payment and legal fees to escrow (time frame depends on the method funds were sent),

(6) buyer and seller sign promise to buy/sell contract and down payment is paid to seller from escrow,

(7) final title search is completed (time frame is approx. 5 days),

(8) buyer sends final payment to escrow (time frame depends on the method funds were sent),

(9) attorneys draft final buy/sell contract (time frame is 1 day),

(10) closing takes place and buyer/seller sign final buy/sell contract (time frame is 1 day),

(11) contract is registered at the Public Registry for title transfer procedure to begin (time frame ranges from 2 to 30 days, depending on the Public Registry’s volume),

(12) attorneys receive deed from Public Registry, draft official English translations, and prepare final documents to send to buyer (time frame is approx. 5 business days).

I hope this list of FAQs sheds some light on the process. For newcommer, it can be an intimidating process. I know from firsthand experience. I can assure you, if you have confidence in the people you chose to work with, the process can be exciting and enjoyable.

Panama in the Spotlight

For the past decade, or so, the hottest tourism attraction in Central America has been the beautiful country of Costa Rica, and rightfully so. After all, it was Costa Rica that started the concept of "Eco-tourism", and has successfully captured the imagination (and money) of adventure travelers from around the globe. Ask the average person about Central America, and Costa Rica likely will be their first thought. An effective marketing slogan (PuraVida) and images of tranquil beaches, erupting volcanoes, toucans, monkeys and bikini clad models is almost too much to resist. What else could you ask for in a vacation in the tropics? Consequently, the booming tourism industry in Costa Rica has brought with it, real estate prices that rival Maui.

We've all heard about a friend of a friend who moved to Costa Rica years ago, bought some cheap land, and now owns a hotel, dive shop or vacation home. This friend of a friend now spends their semi-retirement days surfing or discovering previously unknown species of flora in the rain forest. It's the lure of this elusive lifestyle that haunts the minds of millions of cubicle dwellers across the corporate landscape. I guess I should only speak for myself. By the time I arrived in Costa Rica, pursuing my dream lifestyle, real estate bargains had been replaced by a multitude of shifty agents and brokers with questionable ethic standards. Although there has been significant appreciation since then, I took a pass because I couldn't shake the feeling of being the proverbial babe in the woods.

Today, people familiar with Costa Rica talk about the, less than positive, changes that have taken place over the years. Petty crime is out of control, as less fortunate locals find naive tourist easy pickings. Development has run amok, ruining the tranquil scenery that attracted people in the first place. High prices for hotels and restaurants destroyed the concept of a budget vacation in the tropics. In a sense Costa Rica has been a victim of its own success. It's still a beautiful destination, but lately, the people I've met who have travelled to Costa Rica, do so by organized tours in a comfortable motor coach. Hardly, the Costa Rica that invented "adventure travel".

A study in contrast, Panama has a completely different story to tell. Although, next door to Costa Rica, Panama receives a fraction of the tourism business that Costa Rica depends upon. This is mainly due to a practically embryonic tourism industry, which until recently focused on cruise ships passing through the canal. Oh yes, The Canal. The primary subject conjured by mention of the entire country. Just as Costa Rica invokes eco-tourism, Panama invokes... shipping. Hardly a sexy draw unless you're Aristotle Onassis or an heir to Sam Walton. Let's face it, Pura Vida has a better ring to it than The greatest short cut on Earth. It's this lack of mass marketing know how that has kept masses of surfers and hippies interested in other parts of Central America. Let's not forget the brutal dictatorship and money laundering factor that has long since been squelched, but images die hard without a loud multi-million dollar PR campaign.

There has been a campaign in Panama, but it's been subdued and focused. Operating under the radar because it's target demographic has been highly focused on basically two niches. Business and Retirees. Panama has very attractive programs that open its doors to low key folks who have a steady form of income. Primarily, mature folks less likely to be raving on the beaches at 4am.

The other demographic is the international businessman and woman. Once thought of as an offshore tax haven, attractive to shady characters, Panama has a bustling banking industry rivaling Switzerland and Hong Kong for its variety services and privacy laws. As a result some of the worlds most stable banks do business in Panama. These days, that's a big draw.

So, now let's look at the demographic most likely to find Panama attractive, today. Unless you've been living on the moon, you might have heard of a little group known as baby boomers. Over 100 million strong in the US alone, they make up the single largest demographic with any money, and they're thinking about packing it up and calling it a career. With the world economy as it is, I'm sure this thought is weighing heavy on the collective brain.

Let's say one percent of 100 million, have the means, and decide to retire in a stable little country with a strong economic outlook, good infrastructure and quality health care. That's one million people. Let's say ten percent of that population choose Panama as their new home. And why not, it's still close to the US (2.5 hours from Miami), and ranked as the number one retirement destination globally year after year. That's 100 thousand people, the population of a decent sized town.

How will Panama, a country of less than three million people absorb 100 thousand newcomers? My guess is that Panama will continue the current open arms policy...up to a certain point. Then, the powers that be will gradually raise the price of admission, as the government begins to cap immigration. For now, the door is still open, and there exist some very attractive visa programs. (which I will write about later) But, if a stampede ensues, you can bet these programs will be altered and discontinued. My advice is to book a flight to Panama to take a look around. Do your due diligence, if you like what you see, buy some property before it goes Costa Rica. In a country this small, with this much to offer, with conditions as they are, it's better to act now than regret later.

If you would like more information on locating some of the last areas in Panama with low prices, contact Esteban through email: info@mypanamaranch.com

Wandering Historic Casco Viejo

If you're like me, and have a photography fetish for very old dilapidated architecture, you'll simply be in heaven when wandering the streets of Panama's old town. No visit to Panama City is complete without a trip to the historic district known as Casco Viejo. This area of the city is jam packed with history. You can feel it oozing from the numerous four century old buildings and cobblestone streets. Long neglected, the area became a notorious slum for what seems a century. Once UNESCO inscribed this area as a World Heritage Site, someone had the bright idea of creating a massive restoration project. As a result, Casco Viejo is currently caught in a funky time warp. The distant past, the recent past, the present, and the future of Panama co-exist in this remarkable location. The restoration projects are plentiful, and provide a glimpse of the future of the area. Swank restaurants,
boutique hotels, gift shops and art galleries pepper the cityscape, lending an upscale urban chic vibe among a vast poor local residential area, that for generations have called this barrio home. Walking down any one of what seems an infinite number of narrow streets, I'm treated to a voyeur's delight. The huge arched front doorways are left open, as local residence go about their daily lives, oblivious to (or just ignoring?) the many camera toting tourist.


The french and Spanish colonial style is characteristic of the area, and photo ops are abundant. I am particularly fond of the massive abandoned architecture completely gutted out at least a century ago. Ferns and vines climb walls and fill staircases. Whole rooms, once grand parlors or cathedrals, now reclaimed by vegetation. The flora now call these buildings home. This can only be viewed from the street, through an elaborate cast iron gate. It's actually the coolest urban landscaping motif I've ever seen. It seemingly exists as an unplanned byproduct of decades, if not centuries, of neglect. One of the many dichotomies I contemplate asIwander these streets.






As long as the investment money continues to flow, and the restoration projects continue onward, Casco Viejo is shaping up to be one of the hippest urban neighborhoods on the planet. It took only a few hours hoofing around these cobble-stones alleyways for me to fall in love with this section of Panama City. Prices here have skyrocketed in recent years, due to heavy speculation. It appears there are more buyers willing to hold or flip property, rather that get their hands dirty and make something out of that three century old ruin. Kudos to the visionaries who scale the scafolding to restore 30 ft. arched door ways, recreate 17th century tile work and install modern plumbing. Future travelers will owe a debt of gratitude to these folks for creating a world class destination.

On the other hand, the poor being displaced from the massive gentrification are likely far less grateful. One can only hope, the investment taking place here opens enough opportunities for the people of these barrios to thrive allong with the sawnky clubs, fine dining, and art galleries. It's the energy of the local culture that contribute greatly to the charm of Casco Viejo. Remove too much of it, and the place runs the risk of becoming a contrived tourist trap. It's a fine balance that I hope can be achieved.