Panama Real Estate Negotiating Guide

Introduction – Our Law Firm gets a fair amount of clients who are interested in buying a piece of real estate in Panama. The purchase could involve land, a house, a condo, a bed and breakfast or other property. The principles are always the same. Here is how we explain things to our clients. By the way we do not sell real estate but we do introduce our clients to reputable real estate brokers.

Panama Multiple Listing Service – Well this is an easy subject since there is no Panama MLS or Multiple Listing Service. It does not exist. There are a handful of brokers who might share listings some but this is a far cry from a true MLS service. I know you are wondering how a real estate sale operates without the MLS but please be patient and keep reading.

Exclusive Listings – This is another rare and almost extinct animal that hardly can be found anymore in Panama. Of course this makes the real estate market difficult to say the least in Panama. What the sellers do is give one or more real estate brokers the so to speak non exclusive listing. The seller will often tell the broker that he wants say $150,000 for the property and the broker can keep anything over that figure. Now what we see happening is the potential buyer makes an offer of say $175,000 and now the seller thinks the property is worth more and makes some excuse to not sell it at that price. Please bear in mind there is no written listing agreement thus no breech of contract action is possible. Another nightmare scenario we see is the same property gets listed with two or more brokers. The brokers go ahead and set their price. If we use the same example of the seller wanting $150,000 and the broker being able to keep anything over that we might see one broker selling the property at $175,000 and another selling the exact same property at the same time for $165,000. Once the buyer understands this can happen then he gets thrust into an almost never ending cascade of house hunting to make sure he or she gets the best price. Sooner or later one comes to realize that they need an honest and reputable broker or they may be spending a lot of time looking. A good broker has reliable sellers who will close the sale. A good broker also has good property where he or she has control over the seller.

Document Signing – In a word never ever sign anything in Panama your lawyer has not reviewed. The laws are not what you are used to. Do not do this. Also never hand over any checks or send any wires without letting your lawyer know what is going on FIRST. This most certainly applies to rentals as well, read below for an example.

Panama Lease Rental Agreements – You must use a lawyer. There has to be three copies of the agreement. One for you, one for the owner and one for the housing ministry. The agreement after being signed by all parties must be stamped and filed in the housing ministry and the housing ministry will even hold the one month deposit. See what we mean. This is not like what it is back home. Use a lawyer, please.

Lawyer Negotiations – After you get the price down let us go to work. We can generally improve your deal by attacking terms and conditions of the sale or even the price again directly. We can always find something to negotiate on!

Negotiating on New Panama Condo Developments – This is the hardest negotiation area. Generally one broker has an exclusive on the entire project. This broker will sometimes let other brokers sell the units for a fee split or he may want to keep all the sales for himself. The marketing tactics of these brokers handling the new condo developments with exclusives is generally (not always) to sell them to foreign investors wishing to flip them for a profit. They will tell you about the demand and how they can still get you a unit in this project but you must move fast and so forth. Then you check the real estate magazines in Panama and see that there are all sorts of full page ads for this hot selling property. Gee if something is selling so well why all the ads? These new condo developments directed at the foreign market have what we call little use value. They are priced at $1800 to $3000 a sq. meter and the units are small. Seeing a 140 sq. meter condo with three bedroom and maids quarters is typical. This is small for Panama, like real small. Normally this sort of unit should be at least 200 sq. meters by Panama standards going back 18 months.

Ok back to negotiating. If you are able to get a good deal then it means the units are not selling and that means the units may never get built or maybe they will get built after a series of delays. The best way to buy a newer condo is to wait until the units are completed and then buy one from a seller who realizes things weren’t as good as he thought and then you can get a good deal. There are people paying $300,000 for a new 100 sq. meter apartment. They need like $3000 a month rent to cover this investment with debt service, association fees, water and gas (this the landlord pays in Panama). If someone thinks they can rent out a 100 sq. meter one bedroom apartment for $3000 a month they really do not know the Panama market. One can easily get 350 sq. meters in a real modern apartment with a water view for that money. But if you feel you want a newer condo development just wait until it is completed. This way you don’t have to experience delays while the developer continues to try to sell the units. You also don’t run the risk of the project failing to move ahead and having to get your deposit returned. You will see what you are getting and be able to buy at lower prices than the new units. Remember the brokers who sell the new units will try to sell used units too and make sure they keep the prices as high as they can on the used units with little regard for closed sales. Their bread and butter is getting the new development sold not the used units. They need to keep real estate prices moving upwards constantly to sell their new projects. If people can buy a condo in a one year old project at a lower cost than the new project across the street because the owner is unable to rent it out for anything resembling a reasonable return of their investment, then the new units will start to drop in price and this is the thing these brokers want to avoid. The new condo broker with exclusives on the projects is not where you are likely to get your best deal.

House Negotiating – With a Panama house it is generally easy to drive the price down by creating a list of repairs to bring the house up to your standards. The same would apply to an older condo.

Two Different Price Sales Contracts – Run away if the seller starts with this tactic. He is playing some sort of game and you are running a chance of getting involved in some sort of fraud. Run away.

Clear Title – You must have clear title to the property. Avoid any use rights contracts. These are common in Bocas del Toro and they result in a lot of litigation.

New Condo with Furniture – Be careful. Furniture in Panama is about 20% to 25% of the North American prices. Watch out. Best to get your own furniture so you know what you paid for the real estate and what you paid for the furniture.

New Condo Assignable Rights in Panama – You need to make sure you can assign your rights to buy an as of yet to be built condo to another buyer. This is of course our job but best to be aware of it. If you can not assign or transfer your rights how can you sell or flip an as of yet to be built condo that you do not yet own.

Starting a MLS Service in Panama – Sorry has been tried several times. This is Latin America and not the way they want to do things.

Feel free to contact us for legal assistance with Panama Real Estate.