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The General Process of Buying Real Estate in Panama

Published: 2005-08-03 Send Print

Once you've decided on your dream property, it is highly recommended that a title search be completed to ensure that the property in question has clear title, free of any liens or liabilities. This step is usually included in closing costs which vary from attorney to attorney, but are generally within range of 1.5 - 3 percent of the sales price of the property.

The first formal step of closing on a property is in the form of a Promesa de Compra y Venta, which translated means Promise to Buy and Sell. Along with this agreement a down payment is made to the seller. The down payment can vary from sale to sale, but is typically 10% of the value of the property.

Also included in the Buy Sell Agreement are any stipulations agreed upon by the Buyer and Seller. These stipulations may include such details as the amount of time needed by the buyer or seller to close on the property, as well as certain improvements to the property.

The Promise to Buy Sell Agreement is a legally binding document that basically formalizes that the Seller promises to sell the property and the Buyer promises to buy the property, and should either party decide to back out of the transaction at this point there are certain consequences to be had.

Should the buyer back out they will lose their deposit, and should the seller back out they must return the deposit, plus an equal amount. In other words, if the seller received a down payment of 10%, they would be required by law to return the 10%, plus another 10% as a penalty. If for whatever reason they could not come up with the 20% total, the buyer has the right to take legal action and have the property sequestered by the courts. At this point the seller would be forced to either oblige with the 20% penalty, or live up to what was stated in the original Promise to Buy Sell Agreement .

In many parts of the world, money is held in escrow to secure a property before actually paying the seller for it, and though the word "escrow" does not actually exist as a legal term in Panama, there are various attorneys who provide such a service locally. It should be stressed, however, that the down payment to the seller is a very important step in the process of securing real estate in Panama. Without having received any down payment, the seller has no legal obligation to hold a property before the actual close is made, and at any point can either change his mind, or opt for a better deal that may happen along, without any consequence.

In other words, if the seller received 0 down on a property and a better deal came along before the close takes place, by law they would be required to return the down payment of 0 plus an equal amount of 0, which totals 0.

Once the Promise to Buy and Sell Agreement is signed, and initial down payment made, the Seller must comply with a few obligations necessary to complete the transfer of the property from the seller to the buyer. These obligations include paying a 2% transfer fee, as well as obtaining several paz y salvos, or certificates of good standing, which indicate that the property taxes are paid up to date, as well as any liens on the property, including water bills, have or will be paid off.

The property transfer process generally takes about 30 days, but can vary depending on the complexity of the real estate transaction as well as any stipulations outlined in the Promise to Buy Sell Contract.

Once the deed is signed over, the rest of the payment on the property is due. The new deed is generally released from the public registry within a period of 10 business days.

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