Buying Property in Panama

Find out what to expect from the property purchase process in Panama, with information on financing options and the costs involved...

How to Purchase Property in Panama

Buying real estate in Panama can be one of the best decisions/investments you’ll ever make, but that doesn’t mean it’s a walk in the park. Panama, like any other country, has its own unique policies, regulations, procedures, and practices when it comes to real estate transactions. These intricacies can often leave many feeling intimidated, insecure, and doubtful, and in worst case scenarios, cause mishaps, complications, wasted time, and wasted money. 

With this article, we hope to leave you informed as to how to successfully acquire property in Panama and enjoy all that this incredible tropical country has to offer
Types of Property

The first thing to be learned, is that there are two types of property ownership in Panama. Though both are legal manners of owning real estate, there are several differences between the two, and each have their advantages and disadvantages.

Right of Possession:  ROP property is quite common throughout all the provinces of Panama and is most prevalent along the coastlines and on the islands. 

ROP properties are a safe and legal investment if you are well educated on the purchase process, including but not limited to, due diligence prior to purchase, legal purchase procedure, and post-purchase legal procedures and requirements. 

Unlike titled properties, ROP properties do not have unique ID numbers. Instead, ROP properties are handled at a Municipal level, and involve a variety of paperwork and documentation which must be meticulously maintained by the owner as record and proof of ownership.

While ROP property may sound like a lot of effort, it’s quite simple once understood, and even offers a few interesting advantages.

Other notable Characteristics include:

  • ROP property does NOT incur annual property taxes.
  • ROP property is taxed at a municipal level, at only 2%. 
  • ROP property is more easily segregated, and the process is relatively quick, if done properly.
  • ROP property cannot be used as a security or collateral to acquire bank loans within Panama.
  • ROP property is often significantly cheaper to purchase than titled property.
  • ROP property should be properly fenced and always maintained. 
  • ROP property, if left vacant, can pose risks to the owner, as ROP can be lost to another individual or entity if said individual or entity occupies the property for enough time without being removed.

Titled Property:  Titled properties are plentiful throughout Panama, including on coastlines and islands, and are often considered by many to be the “more secure” type of real estate investment in the country. 

Though titled property purchases often require less due diligence, it is still important to be well versed on the process of acquisition and transfer of ownership to avoid delays, complications, or excess expenses. 

Unlike ROP properties, titled properties are each given an identification number, often referred to as the “title number” or “finca number”. These IDs, along with documentation or information of the property’s location, owner, and history (transfers of ownership, etc.) are digitally registered with the government on a national level, permanently maintained, and accessed on demand by visiting the Public Registry, or the official website of the Public Registry. 

While this makes ownership of titled property very safe and relatively effortless, there are a handful of other characteristics of titled property which can be considered both advantages and disadvantages. 

Other Notable Characteristics include:

  • Titled property incurs an annual property tax, based upon the registered value of the property.
  • Titled property incurs a 5% tax upon sale.
  • Titled property often requires more time and expense for segregation (e.g. Carving a plot out of a larger plot, or separating one large parcel into 5 smaller parcels to be sold, etc.)
  • Titled property can be used as a security and collateral to acquire bank loans within Panama.
  • Titled property allows for easier procedures of development or construction, especially if Environmental Impact Studies are required.
  • Leaving your titled property vacant, undeveloped, or unmaintained usually does not pose any risk to your ownership rights. 
  • Titled property is often more expensive to purchase than ROP, due to the value added by the title.

Legal Counsel 

One of the crucial elements of purchasing property in Panama is legal counsel and services, or in other words, the attorney(s) you use to assist you with completion of the transaction. 

With a knowledgeable, experienced, well-chosen attorney or legal team, property acquisition in Panama can be relatively simple. 

With the wrong attorney or legal team however, a process that should be simple can become complicated, resulting in excess delays, expenses, complications, or failure to complete the transaction. Unfortunately, many attorneys within Panama will advertise themselves as being well experienced in real estate transactions, but the truth is that only a portion are.

One benefit of utilizing a good real estate brokerage or quality independent realtor to acquire your property, is access to the legal team of the brokerage or realtor, as any reputable brokerage or realtor will have a legal team (or at least a primary attorney) that handles all their business. Access to experienced legal counsel in these scenarios can make all the difference and even be the deciding factor between a failed transaction and a successful one.

Should you choose to acquire property independently of a realtor or brokerage, and source your own legal counsel, it is recommended to utilize a firm or attorney which offers bilingual services, maintains a physical office (ideally with staff and assistants), and can show you a successful history of acquisitions and transactions of real estate. 

You will also want to clarify what type of real estate this attorney or firm has dealt with in the past, as it can be quite different purchasing a ranch in the mountains, or a beachfront plot of land on an island, as compared to purchasing a home or condominium in one of Panama’s cities. 

Lastly, be sure to receive an estimate (on paper or via email) regarding your expected expenses for the acquisition, and fees that will be charged by the firm or attorney. 

Financing Real Estate in Panama

Financing real estate investments in Panama as a foreigner is usually not possible, unless you have already been living in Panama for a period of time and meet a variety of the following requirments: banking history within Panama, residency, employment (or self-employment), along with a few other stipulations certain banks may require. For the majority of foreigners looking to retire, invest, or for any reason buy real estate within the country of Panama, the most common scenarios involve paying cash for your purchase (in the form of a secure wire transfer via an escrow account), acquiring a loan in your home country which may be used for purposes abroad, or working out a form of financing directly with the seller.

Seller financing is quite common and can involve a payment timeline as short as a few months, up to a number of years (especially for larger purchases). Though working out an agreement with the seller to finance your purchase over a period of time may sound attractive and allow you to purchase sooner, or acquire a larger, or a more expensive property, it is very important to remember that terms of seller-financing lean more in favour of the seller than the buyer. If you agree to make a down payment of $50,000 USD and pay $10,000 a month for 6 months to acquire the property, it is not uncommon to be held to a clause which states if you are unable to make any of these subsequent monthly payments you will forfeit the property (defaulting) as well as a majority of the money you have paid towards thus property thus far, if not all of it.  

For this reason, it is very important to take your time when arranging seller financing for your real estate investment in Panama, and ideally you want to be working with an experienced real estate agent or brokerage to help you navigate these types of situations and arrange for you the best possible terms and conditions, which have the least involved risk for you as the buyer.

Property prices here are often a fraction of what you are used to paying in your home country, so the best possible scenario is one in which you have saved up the funds necessary to offer the seller a cash purchase, involving a down payment and subsequent final payment all within relatively short time. Not only will this limit risk to you as the buyer, but it will also work in your favour when making offers and negotiating with sellers, for achieving the best possibles prices. 

Purchase Procedure of ROP Property

If you find yourself falling in love with an ROP property in Panama, you should complete the following steps to achieve a successful and secure acquisition. 

- Plenty of due diligence. This includes, but is not limited to, verifying the surveys and ownership certification documents of the property, and investigating the history of the property dating back at least 10 years. You will want to get your feet on the ground and confirm that the property is as shown on the survey, and does not have any boundary issues, encroachments, undisclosed easements, or unlawful occupancies. Ideally the property should be fenced so there is no confusion as to where the property lines are.
- If desired, due diligence can be taken one step further by visiting the Municipality, presenting the seller’s documentation of ownership, and confirming that there are no claims or issues with the property, and that the Municipality currently recognizes the seller as the rightful owner.
- If needed, have an updated survey performed, and an up-to-date ownership certification acquired from the local municipality, which can be solicited by the property owner.
- Testimonials by community residents, adjacent landowners, and family of the seller all certifying the seller as the rightful owner of the property, and declaring to have no issues with the sale of the property or property lines are completed prior to moving forward.
- If due diligence finds that all necessary elements seem to be in order, and testimonial declarations are complete, a Promise to Purchase (if planning to make a down payment, and subsequent payment(s)) or Bill of Sale contract is drawn up by an attorney.
- Expect to make your down payment the day the Promise to Purchase contract is signed, and your final payment the day the Bill of Sale is signed. We recommend making any payments via a certified bank check and utilizing an escrow or intermediary account as opposed to sending the money directly to the bank account of the seller.
- Upon signature of Bill of Sale, or completion of final payment (if making multiple payments) the seller must report to the Municipality that he/she has sold the property and pay the necessary taxes (2%). 
- The buyer must have a survey of the property printed out in the buyer’s (new owner) name. 
- The buyer (or buyer’s attorney) now must visit the Municipality of the district in which the property was purchased, and present the Bill of Sale contract, along with all other paperwork and documentation including: Receipt of Payment signed by Seller, Certification of Ownership of Seller, Receipt for Payment of 2% Municipal tax paid by seller, Original survey in the name of the seller, and a newly printed survey in the name of the buyer.
- The Municipality will register the transaction as complete and emit a new Certification of Ownership in name of the buyer, which usually has a small fee attached to it anywhere between $5-25 USD depending on the district. 
- All documentation and paperwork from the acquisition (including the new Certification of Ownership provided by Municipality) must be scanned and maintained both digitally as well as physically in paper form. 
- Be sure to have the property properly fenced if it is not already, and if you will not immediately be occupying the property yourself, be sure to find a local resident in the area to do the caretaking on a regular basis (upkeep of fencing, cutting of grass, landscaping, etc)
- Optional: Have a small structure such as a traditional “rancho” built on your property if you do not plan to build or develop it in the near future. This lends legitimacy to your Right of Possession of the property, showing that you are indeed occupying and utilizing the property, even if you are not yet living there.

Purchase Procedure of Titled Property

If you have found your dream property, and it happens to be Titled, you can expect the following steps to complete a successful and secure acquisition of the property.

- Due diligence with a titled property is a little simpler than ROP, but relatively similar. You want to verify the survey and title of the property, which can be done by soliciting said information from the owner and investigating the property within the Public Registry using the title or “finca” number (done by agent, brokerage, or attorney). This investigation via Public Registry will show you the history of the property, whether the property has any liens, claims, or bank loans attached to it as well as other information including the full name or company name of the rightful owner. 
- Along with a positive report from the Public Registry investigation, you will want to get your feet on the ground and verify that the property is as described, property lines are correct and match the survey, and that there are no undisclosed easements, encroachments, or unlawful occupancies. 
- If you plan to purchase the entire property, a Promise to Purchase or Bill of Sale contract can be drawn up, and payment made in the same way as mentioned above when purchasing ROP property.
- If only a portion of the property is what you plan to purchase, a survey must be completed for the parcel being sold, and the seller must solicit from the government entities a segregation of this parcel you plan to buy. When segregation is complete (this can take up to a few months or more) and your parcel is now recognized as its own independent property with its own title or “finca” number, a Promise to Purchase or Bill of Sale contract can be drawn up and payment made as mentioned above in the procedure of ROP acquisition. 
- Upon closing of the transaction (final payment made), your attorney will need to take all documentation and paperwork of the acquisition to the Public Registry to have the transfer of ownership officially registered. 
- Be sure to have a new survey printed out in your name as the new owner.
- NOTE: If the titled property you plan to purchase has a bank loan attached to it, keep in mind that prior to moving forward, the seller will need to acquire permission and documentation from the bank permitting the sale, and immediately upon receiving payment will need to settle up with the bank, so that the lien against the property is dissolved, allowing for an unencumbered transfer of ownership.

Tropic Lands Real Estate

As you can see, the procedures for purchasing property in Panama can be quite involved and if not performed properly, can lead to complications involving, but not limited to, loss of time and money. 

As a licensed and reputable real estate brokerage in Panama, Tropic Lands Real Estate specializes in handling all these procedures for you, whether you are purchasing ROP or Titled property. Our services include experienced and in-depth due diligence, a very capable and experienced legal team to handle contracts, escrow account provision (transfer your money from anywhere in the world with confidence), creation of Panamanian companies and foundations, post-acquisition coordination, and even residency or visa applications.

We have worked with clients from all over the world and facilitated sales and purchases of several types of properties including: island property, beachfront, mountain region property, large ranches, plantations, homes, as well as hotels and other commercial property. Invest in Panama with peace of mind, knowing you’re in the hands of an informed, experienced, and professional brokerage. 

Note: 10% of all commissions we receive are donated to our foundation Tierra Tropica, to be utilized for environmental conservation and community improvement projects throughout the country. 

Further Recommendations 

Hopefully, this article has left you better informed regarding the procedures and steps for purchasing real estate in the country of Panama. 

Our final recommendations are that you take your time when deciding where, when, and how to invest in property in Panama. Speak to informed and qualified individuals, speak to expats who have already gone through the experience, and if possible, get to Panama and do some traveling throughout the various provinces to find out where your heart and money belongs.

Purchasing property in Panama can be one of the best decisions you’ll ever make, and a straightforward process, but only when the purchase is completed with the proper knowledge, patience, and necessary procedures. Take the extra time and spend the extra money to make sure your investment is made the right way, and into the right property.

Panama is a beautiful country with a plethora of environments including remote villages, quaint beachside towns, luxurious residential developments, big cities, and island archipelagos. The country offers a stable economy, democratic government, and impressive infrastructure, not to mention an extensive list of incentives benefitting expats, investors, and business owners. If you dream of owning property in a country where coconut palms are as plentiful as the beaches they grow on, Panama could be just the right fit for you. If you want to learn more about real estate in Panama, the country’s various regions or provinces, or current opportunities which may be right for you we encourage you to visit our website, reach out to us directly via email, or schedule a phone call. 

Salutations from Panama!

Dustin Conlon
Director & Founder
Tropic Lands Real Estate