The following is general information on purchasing real estate in Panama. The different categories of land make it imperative to engage professionals for more detailed information. Real estate laws on the mainland can be quite different than those on islands, coastal areas, and areas near national borders.
Before handing over any money, make sure you consult with a professional and do a proper due diligence investigation over the property. It is important to understand the rules and process your property transaction correctly.
• The first step is to find a Panama real estate you like, and negotiate the price and terms of the sale with the seller (or Panama real estate broker).
• Second, in contact with the seller or real estate broker putting your Panamanian attorney to gather copies of the property title documents and survey (if available), to handle the due diligence and title search on the property you should seek a qualified attorney in Panama.
• Third, to secure the terms agreed upon (a deposit of 10% is usually required by the seller upon signing the promise to buy/sell contract) and lock in the property sale, have your attorney prepare a Promise to Buy/Sell Contract. This also gives you time to get your funds into the escrow account and do the due diligence.
• Fourth, once the attorney has confirmed the property title is clean, and then the final closing is scheduled, where the buyer/seller signs 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, at the Public Registry where from the previous owner to the new owner they transfer the property title ownership the Buy/Sell Contract is registered.
Advantages by putting the property in the name of a corporation
• The corporate veil protects the property from any attacks from creditors or frivolous lawsuits against your personal name.
• 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.
• 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.
• When you go to sell the property, the buyer of homes for sale in panama 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.
The “Preferential Interest Law”
There is a law called the “preferential interest law”, which offers special low interest rates, under the following conditions:
o The buyer must be a first time buyer
o The property being purchased must be newly constructed
o The unit must be for residential purposes
o The amount being financed must be in the range of US$25,000 to US$62,500, after the down payment
o The financing cannot be more than 95% of the appraised value
o The property must be titled
o The loan must not exceed a 15 year term. This is regulated under Law No. 50 (October 27, 1999) which partially amended Law No. 28 (June 20, 1995) and Cabinet Decree No. 44 (1990) stipulates that the benefits to the lending institutions are as follows:
• 4% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, which is established by the Superintendent of Banks, will be awarded if the loan value is for more than $25,000.00 but less than $62,500.00.
• 5% discount (also a tax credit to the financial institution) off the maximum fixed interest rate, will be applicable if the loan is for less than $25,000.00.