Panama Real Estate – Legal Overview

Panama Real Estate Title – Panama real estate does come with clear title. Some areas like Bocas del Toro have use rights instead of clear title to land. This is usually a problem and a buyer needs to exercise extreme caution when use rights are involved. A lot of legal problems arise with use rights and this includes litigation. A lot of Panama real estate is owned by a bearer share corporation. The real estate transfer is done by selling the bearer share corporation and transferring the shares to the new owner. The new owner should also have letters of resignation from the existing nominee directors and replace them and change the resident agent as well. This is to ensure future control and keep affairs private from the people who had the corporation before you. This is a popular legal method of property transfer in Panama. It is prudent to avoid use rights real estate sales. Many sellers of real estate offer a Panama Corporation for free with the purchase of a piece of real estate from them. Be careful. In the subsequent years (starting with year two) we charge $695.00 per year for the annual fees. This includes the three nominee directors, the $300 annual tax and the resident agent. Many of these “free” corporations will have subsequent year fees of $1200 and higher so they are not so free. We have also heard of problems where the buyer does not have the stock certificates of the corporation and this means he really can not control the corporation and the corporate assets without the share certificates.

Anonymous Panama Real Estate – It is a simple matter to own Panama real Estate anonymously. This affords one an opportunity to protect their real estate from potential financial enemies. The title of the real estate is vested in the name of an anonymous Panama bearer share corporation or an anonymous Panama Foundation. You can fund the sale with privacy in any one of a number of ways. One way is to have a Foundation or Corporation fund the sale from its bank account which of course is covered by Panama bank secrecy. You can have the nominee directors or nominee foundation council members sign the documents to acquire the property in the name of the corporation or foundation. Your name would not appear on any documents that would go into any registry. If one looks up the ownership of the property all they would see is that it is owned by an anonymous bearer share corporation or anonymous foundation. They would not be able to tell who owned the corporation or foundation since there is no ownership records required to be filed anywhere. Changes of ownership also do not have to be filed anywhere. People often overlook the asset protection value of having real estate owned anonymously in a booming real estate market like Panama.

Anonymous Panama Real Estate Income Producing Property – The same principles of anonymous Panama real estate ownership applies to income producing property as well. All you need to do is have a property manager take care of the property and collect the rent made out to your anonymous Panama Corporation or anonymous Panama foundation. The funds go into your Panama bank account for the foundation or corporation which is covered by Panama bank secrecy. Since this income would be onshore Panama income there would be a tax liability involved. Of course one could deduct all the ordinary and necessary real estate expenses same as in other countries.

Panama Real Estate Rental Market – The residential rental market in Panama is strong right now. If the house sells for $200,000 the rent is typically $2000 a month, well asking price anyway, for the newer more modern properties. If the property is selling for $360,000 the rental would be $3600 a month. Now we are quoting unfurnished rates. Furniture in Panama is cheap, 25% of North American prices. One can furnish a 2000 square foot apartment for $6000 including washer, dryer, stove, refrigerator with new furniture. This would project a $2000 a month rental unfurnished up to $3000 to $3500 a month in rent. Why? Because the typical Panamanian furnishes their apartment with old furniture including worn spots, stains, etc. When a corporate executive starts looking for an apartment one of the considerations is the furniture his wife and children are going to be sitting on. An executive in the country for a year or two will generally not bother to bring their own furniture with them. One can get a premium for their rental apartment by putting in decent furniture. With the expansion of the Panama Canal there are a lot of high paid executive coming through for a short time.

Panama Real Estate Financing – The banks in Panama will generally do a mortgage loan to a foreigner living here. The lowest down payment we hear about if 20%. The worst possible case would be 40% down payment. The maximum number of years they will go on the mortgage is usually 25 years. They normally will only go 15 years if you are in your fifties. A fully amortized loan over 15 years can mean a large payment. The bank wants you to be able to show them that you have the ability to handle the payments. A large amount of real estate sales are for cash in Panama. No bank here or anywhere in the world is going to grant a real estate loan for a property owned by an anonymous bearer share corporation unless they have full personal guarantees by a credit worthy person. Please let our law firm or an other competent lawyer review any real estate documents including but not limited to mortgage documents.

Panama Real Estate Pricing Legal Issues – Panama has basically two competent real estate appraisal agencies. It is always a good idea to utilize their services before buying. In Panama there is no multiple listing service. To make it worse the sellers rarely ever give the broker a signed exclusive listing. The broker is often not even a licensed broker. The sellers learn what their real estate is worth by giving a broker a price and then waiting to see if the broker brings in any offers. If the offers come in then the seller will often think the price was too low and raise it accordingly. Of course they turn down the offers. The broker or non-broker has no legal recourse since there was no signed listing agreement so the seller can refuse to sell at the agreed upon price and so to speak cause the broker to incur damages in the form of a lost sale due to nothing the broker or buyer did. Such is Panama. Now the seller tries with the same or different brokers at a higher price and keeps playing the same game until there are no more offers and then rolls the price back slowly until they get an offer and then it is time to work the broker over for a lower commission, and so the story goes. It is a jungle out there <smile>.

Panama Legal, S.A. Law Firm Real Estate Buyer Representation – You can certainly retain us to represent you in your real estate acquisition. We can do things like create written agreements binding to the seller with escape clauses for the buyer based on certain variables and conditions. This puts you in control with outs if something negative turns up in the home inspection, title, appraisal, financing, sale of existing home, etc. The seller will not like it, the broker will not like it but we do not care, we represent you. Generally we can find reasons to negotiate better terms for you. In any event always have a competent law firm (hopefully us) review your real estate purchase documents. Our fees are $300 for a direct straightforward real estate contract review. Our hourly bill rate is $150 per hour. Feel free to inquire and ask questions.