Once you've decided on your ideal property, it is highly recommended that a title search be completed to ensure that the property in question has clear title, and is free of any liens or liabilities. This step is usually included in the legal fees which do vary from attorney to attorney, but are generally within range of 1 - 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/Sell Agreement. 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 negociated sales price.
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.
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.
Unless stipulated in the agreement otherwise, if the buyer were to back out of the agreement they will lose their deposit, and if the seller were to back out the agreement they would have to 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 an additional 10% as a penalty.
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:
- payment of the 2% transfer tax which is assessed according to the negotiated sales price
- payment of captial gains. This is 3% of the negotiated sales price.
- Last but not least several paz y salvos, or certificates of good standing must be obtained. These include:
- Paz y Salvo for Property Taxes
- Paz y Salvo from IDAAN (water bill) Instituto de Acueductos y Alcantarillados Nacionales
- If the property being sold is part of a community or apartment building with mainenance fees, a letter of good standing indicating that the maintenance fees are paid to date
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 all the requirments for transfer are met, the Promise to Buy Sell agreement is elevated to a Buy Sell Contract, signed and the inscribed in the public registry. The new deed is generally approved and released from the public registry within a period of 10 business days.