How to buy a property in Panama

Step 1: Research and Budget

• Set your budget: Define a budget based on your possibility and the actual market. Add ten per cent of additional costs to that which include legal fees, renovation costs, etc.
• Location preferences: Find out about the different neighbourhoods in Panama City. Consider factors such as proximity to work, amenities, security and rent/resale value.
• Property type: Decide on the type of home you want, such as a villa, penthouse or traditional apartment.

Step 2: Legal and Financial Considerations

• Hire a real estate lawyer: It's essential to hire a local lawyer specializing in real estate transactions to minimize risks and receive the right assistance during the process. Lawyers will help you with writing and reviewing documents to ensure a smooth transaction. The cost of a lawyer for this kind of process can range between $1.500 and $3.000. The most important law firm with real estate expertise are: Alcogal, Quijano, Arifa, Fabrega Molino. Gala
• Open a Panamanian bank account: You'll need a local bank account to handle the financial transactions related to your real estate purchase. Many banks in Panama offer services in English. See the related article for more info: Bank Account in Panama
• Financing options: Decide on paying cash or securing a mortgage for the house. Local banks offer various financial options. To get a mortgage you will need proof of your stable income, your lawyer can help you with that.

Step 3: Property Search

• Real estate agent: Enlist the help of a reputable real estate agent who knows the local market well. They can help you to find houses that meet your criteria and accompany you on property viewings. See a list of real estate agencies here
• View properties: View the apartments you're interested in on-site. Pay attention to the condition, view, furnishings and possible renovation costs.

Step 4: Property annual costs

Before acquiring a new property, consider all the costs that you should account for:

• Property Tax (Impuesto de Inmuebles): This tax, based on the property's value, is paid annually. The tax rate varies according to the assessed property value and location, usually ranging from 0.3% to 1% of the property's registered value. It should be paid to the municipality where the property is located. For more details, check our Tax article here (link to our TAX article).
• Land Tax (Impuesto sobre la Tierra): Every property is also subject to Land Tax, which varies depending on factors such as size and location of the land. Like the Property Tax, it is paid annually to the municipality where the land is situated.
• Tax Exoneration: New buildings and apartments are eligible for a 20-year Property Tax exoneration starting from the year of construction. Consult your lawyer and real estate agent to determine the remaining exoneration period for the building and evaluate the costs.
• Condominium Fees: Investigate the monthly maintenance charges for the apartment, as these can significantly vary. Be aware that additional fees may apply for major restorations (e.g., swimming pool, gym, exterior painting). Consult your real estate agent for more information to assess the building's condition.
• Company Cost: In Panama, properties are often owned by a company or a trust, which can offer asset protection. Decide whether to acquire the apartment as a natural person, a legal entity, or simply acquire the company owning the property. If choosing the latter, thoroughly investigate the existing company with your lawyer before transferring the shares to your name.

Finally, consider the costs of approximately $2,000 to open a company in Panama and around $1,200 for annual maintenance.

Step 5: Due Diligence

• Property rights: Check, through your lawyer, the legal status of the property and ownership.
• Ask for the “Avaluo”: Check in the Avaluo all the property essential information. Consider that the Avaluo is mandatory in case you are asking for a mortgage. In the AVALUO you can find the standard market value “Valor de Mercado” and the market value in case of fast sale “Valor de Venta Forzosa”, a low estimation of the previous one.
• Property valuation: Conduct a deep property valuation, based on the registered value, and the actual market situation. See if there is a good and profitable opportunity to sell or rent the apartment in the future. If you will choose to buy the apartment for renting it under Airbnb take into account that for the Panama law the minimum rental period is 45 days!
• Negotiate the price: As soon as you have found a good apartment, talk to the seller with the help of your estate agent and negotiate the purchase price. The price of the ads is normally slightly higher than the real value.

Step 6: Pre-Purchase Agreement

• Draft a pre-purchase agreement: Your lawyer is going to assist you in dealing with a legitimately binding purchase agreement that establishes the terms of the sale, such as the payment schedule. The down payment refers to the initial deposit, of 10-20% usually, which is required to acquire the property by default. Try to keep the down payment at 10%, risk less capital in case of any problem.

Step 7: Closing Process

• Write the final contract: Your attorney will help you draft a final purchase agreement that sets out the terms of the sale, this will be a publicly accessible document.
• Transfer of Title: Finally, the title will be transferred by name to the public register and you'll receive the keys to the apartment.
• Closing costs: Be ready to pay different fees assigned to closing, such as lawyer expenses, real estate transfer taxes and vehicle registration costs. Your attorney can give you a breakdown of these costs.

Step 8: Post-Purchase

• Utilities and services: Transfer the utility accounts by transferring them to you from the last tenant, and add whatever services you need, including internet and cable.
• Condominium association: If applicable, always be familiar with the condominium rules and fees, and ensure that your monthly dues get paid on time.
• Public register: Ensure that the public register is updated with all your information.

Sources & Foot Notes

[1] Alcogal - Panama Real Estate Lawyers
[2] Quijano & Associates - Legal Services
[3] Arias, Fábrega & Fábrega - Real Estate and Hospitality
[4] Faber & Morgan (FMM) - Real Estate Services
[5] Dirección General de Ingresos (DGI) - Real Estate Tax Information
[6] GlobalBanks - Largest Banks in Panama