Real estate purchases & transfers
If you intend to relocate or retire to Panama, you may be considering purchasing real estate (offices, condos, a house, or a lot) in Panama City, Bocas del Toro or somewhere else in the interior in which to live. Gray & Co. regularly reviews real estate sale & purchase contracts, and we are happy to assist you with the documentation which is required. Please note, of course, that we are not real estate agents and although we can refer you to agents that can help you, we do prefer that you make this decision based entirely on what you are looking for. In this way, we can ensure that we do not run into a conflict of interest.
Buying real estate is often a large investment. The contracts signed are legally binding documents, and we advise clients to ensure that they have read and understood all documents completely before signing. While a good real estate agent can help you through all the steps of buying the office, condo or home, they cannot provide you with legal advice. You need to insist that the sale & purchases closes only when you are completely satisfied that all of your questions have been answered. Keep asking until you get a good explanation that you can understand, and that will still make sense if you are later trying to sell the property. It is much easier to fix a problem before you have purchased than it is after you have made a written commitment which you cannot get out of. You should also remember that the real estate agent gets paid only when the sale closes.
Be wary if you are told, "trust me," or that you don't need to know about something you have asked about. This includes (sometimes) recommendations that you use the seller's attorney, in order to keep the legal costs down. Sometimes this is a legitimate offer; however, it is not recommendable in most cases. If the contract is in Spanish and you do not speak Spanish, have it translated independently (although this may cost you up to $20.00 per page, it's a worthwhile investment to have made).
If you are thinking of purchasing property in Bocas del Toro, you need to be particularly careful that you understand what you are purchasing. There is titled property, but there are also concessions and rights of possession (squatter's rights). If you are transferred rights of possession on an island property, you should be aware that it is not possible to get title to this land. The Panamanian Constitution has made it impossible to get title for such lands. However, this may or may not be a decisive issue in your decision to settle in Panama.
We therefore suggest to clients the following tips, which may help you through the selection and decision process:
It is possible here in Panama to sign a "Promise to Purchase", which may be a preliminary contract between the buyer and the seller which is signed to give the purchaser time to work out financing before committing to the purchase. It also can be used where the seller has certain commitments or conditions which must be met before they are able to purchase the property. The Promise to Purchase is a good instrument to use to list the "contingencies" under which you can be released from the obligation to purchase if your questions are not fully resolved. The wording of this contract, however, will be very important.
Title insurance - it is possible to get title insurance in Panama, although this is not a common practice. What is common practice here (given the number of banks involved in financing the purchase of real estate and homes) is to have your bank issue an "irrevocable promise to pay" which is contingent on receiving from the seller proper title to the property. What usually happens here is that the buyer opens a bank account (or gets a mortgage), and then formally requests that the bank issue the "irrevocable" promise to pay the Seller. The Seller is then given, at the closing, the bank's letter and this is considered to be an appropriate form of payment. Once the title has been successfully transferred to the Buyer, the bank then pays the seller. If you are not getting a mortgage, then you will need to pay the bank for this service. The costs vary from bank to bank. I have found that the least expensive is HSBC (but you should check this before proceeding).
For more information regarding purchasing real estate in Panama, please send an email.
See also the Real Estate Resources; Real Estate Tax Exemptions; Real Estate Purchase Checklist; Concession Application requirements, Real Estate Donations, Due Diligence and Due Diligence Checklist. Translation of Law 2 (2006): Which regulates the concessions for tourism investment and the sale of island property for tourism development ends and other provisions
For an interesting article about why others are moving to Panama see: Why we're here: An American couple talks about their move to Panama.
You might also check out www.3americascorp.com. Gray & Co. is not affiliated with 3 Americas, but we do refer clients to them as well as receive client referrals from them.
Last modified 08-May-2009 12:07 -0400
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