So you’re looking to purchase a property in Panama. Let’s assume you’re looking for a condo and you may be an investor, an end user, or a mix of both. That’s the beautiful thing about real estate here – there are so many diverse buyers and specific motivators for buying property in Panama. Some people come to Panama and buy property for part-time use and then keep it rented.
Others move here and buy property to live in full time, and some buy property solely for investment purposes and enjoy coming down every now and then to keep an eye on it.
Before you even begin to think about what to buy, it’s important to think about why you’re buying it. You will want to reflect on how you’ll use your prospective property because that will largely determine the next steps. Once you’ve nailed down your plans for property use, here are the following big decisions you’ll need to make.
Panama City is chock full of different neighborhoods, each with a distinct feel as well as pros and cons. For example, some neighborhoods such as Marbella are very centrally located but tend to have older buildings without many of the new amenities of trendier developments. This is a good option, though, if you don’t need all the bells and whistles because fewer social areas mean lower homeowners’ association payments.
If, however, you do want the top of the line when it comes to a new condo, areas like Balboa Avenue and Punta Pacifica feature many buildings that were constructed in the last decade or so. With rooftop pools, private terraces, and even tennis courts, these neighborhoods will cost more, but offer lots in the way of perks.
And then there are plenty of areas that fall in between these two examples. What’s crucial to decide is how important a newer unit in a fancier building is to you. If you can’t see yourself taking advantage of the amenities of a new building, you might be better off spending your money on a larger but older condo where you can get a better price per square meter.
Finally, if you plan to live in the unit you buy, living close to work or school is something that largely determines ideal locations. Commute times in Panama can be difficult and are a very important factor in deciding where to live. Make sure you pay attention to how traffic moves at certain times a day so you don’t get stuck with an apartment that doubles your commute time to work.
Apart from deciding where your new home will be, you’ll need to figure out how to finance it. And this means talking to the bank. On average, most banks will loan 60-70 percent of the value of your prospective home. However, if you’re a foreigner without any banking history, you might only get 50 percent. This is one area where it’s worth shopping around and talking to a few different banks.
Most loans are granted with 6-7 percent interest, a rate that’s climbed a bit over the past few years. Panama has what’s called the FECI, which is essentially a premium on interest rates for non-resident investors or even resident investors and for second home purchases. For all of these types of purchases, usually the banks will charge the FECI rate.
Find a Broker (A Good One)
Once you’ve made the aforementioned decisions, it’s time to find a broker. Again, you’ll want to be in a position to give your broker some indication of why and where you want to buy. Additionally, one of the first questions a good broker will likely ask you is about your budget.
It’s important to come to the conversation with a good idea about what your ideal budget is as well as the maximum you’d be willing to pay for the perfect property.
There are plenty of brokers out there, some more trustworthy and experienced than others. Make sure to shop around, read reviews online, ask for references, and do your due diligence before signing on with the first broker you meet. Your broker will be your ally and advisor through this process, so it’s important to find someone you know you can trust.
Viewing Properties When Buying Property in Panama
Now that all of the hard decisions are out of the way, you’re ready for the fun part – viewing properties. You can search listings freely yourself, but it’s always a good idea to run the listings by your broker so that he or she can set up the appointments, as it’s a great way to save you time.
It’s also important to go through your broker to make appointments because sometimes what you see online isn’t always what’s actually on the market. Oftentimes brokers will pull some tricks and maybe leave a property published, although it’s been sold.
Other brokers might underprice a property with the assumption that they are working with a buyer directly versus having another agent inquiring on behalf of a buyer.
They might intentionally not inform their sellers about the need to include real estate tax in that price, making the price look lower than it actually is. Luckily, a good broker will know the questions to ask to make sure the price is accurate.
You can vet properties on your own, but it might get complicated and cause some confusion when you show up to the appointment with your broker. If you enquire about properties on your own, it’s a good idea to let them know you’re working with a broker so there are no misconceptions or issues that will inevitably arise.
What to Look for When Buying Property in Panama
It’s a good idea to go into the property viewing process with a general idea of what your ‘non-negotiables’ are as well as what are your ‘nice-to-have’ features. Once you have a general idea of what you’re looking for, there are other considerations to pay attention to that will help you narrow down your options.
Think about the future developments around your prospective new home. Maybe there will be another building going up right next to you that’s exactly like yours. That could make things difficult to sell or rent or could end up blocking the view you love so much.
Another great thing to pay attention to is how many elevators a building has. Think about the ratio of elevators to condos in the building. If there are few elevators to a lot of condos, that’s something worth noting.
Not only is that inconvenient, but it also gives a sense of what you can’t see such as the quality of the construction behind the walls. Why? Skimping on the number of elevators is a sign that a developer may have cut some corners in order to save money.
If, in fact, the limited number of elevators is an indicator of poor quality construction, this will likely mean future maintenance payments. What’s important to know about Panama is that buildings generally do not accrue large homeowners’ association balances.
This means that when larger maintenance issues or repair needs do come up, you can expect those things to come out of your pocket. It’s a good idea to keep a little bit of cash on hand when it comes time to do things like paint, resurface the tiles of the pool, or general unexpected maintenance.
Ask the Right Questions
When you look at properties, it’s important to know what sort of questions to ask to get a good sense of how wise an investment a given home might be.
How long has the property been for sale? What do we know about the seller? Have there been any other offers? Has the property ever been rented out? Are you aware of any construction deficiencies?
It’s also a good idea to talk to the neighbors when you see them. What have you got to lose? Even if your broker is quiet on an elevator, engage with other residents. Ask how they like living in the building, what the noise is like, how often they have maintenance issues, etc. After all, no one knows a building as well as the people who actually live there.
Before Making an Offer When Buying Property in Panama
Right before making an offer, get a sense of the homeowners’ association. Find out what people are paying, and if there’s any big special assessment. Find out what maintenance projects they’ve completed recently so you can get an idea of what they’re going to be doing in the future.
Frequent and expensive property maintenance projects could be a big red flag if the building is not being administered well, especially if it’s an investment property. High homeowners’ association fees or regular requests that owners share the costs of a larger project mean your yields will diminish due to unexpected costs.
Get a Great Lawyer When Buying Property in Panama
You need a great lawyer even if you buy directly from the seller not using an agent. A lawyer takes much of the risk and hassle out of a real estate transaction.
How do you know your lawyer is good? First and foremost, they answer emails promptly and thoroughly. You want to be sure you have a lawyer who is an exceptional communicator and doesn’t leave you hanging. If you ask your lawyer three questions in one email, he or she should answer all three.
It also never hurts to get a lawyer by way of referral. If someone you trust recommends a given lawyer, that’s the best indicator that the lawyer will also be trustworthy.
That said, a recommendation of a given firm is not worth nearly as much. Oftentimes when you get connected with a law firm via a referral you get connected with a partner and then delegated to a junior partner who may not have the same experience.
Regardless of how you find your lawyer, make sure he or she has experience in participating in real estate transactions versus experience as an immigration attorney.
Cash is useful, but not necessarily king. Many buyers in Panama don’t end up using a mortgage. Many buyers will pay up front with a wire transfer using a letter of payment from the bank. You can also use a notary, cashier’s check, or a manager’s check. Sometimes that is cheaper if you don’t have a local bank.
When negotiating the payment, make sure the seller includes all of the costs so that there won’t be any surprises on taxes. Once the final negotiation is done, make sure you have a list of the inventory and that it is referenced in the offer and acceptance.
The official sale contract might take a week or more to be ready because there are really no standard contracts in Panama. Typically, the buyer will put down 10 percent of the sale price with the remainder due in 30 to 60 days in the form of an irrevocable letter of payment.
Your closing costs as a buyer will generally be about 1 ¼ percent of the sale price plus any bank fees that you might have as a function of your mortgage.
Yes, property buying is certainly a complicated process here, as anywhere. But given the great investment opportunities and wonderful homes on the market that could soon be yours, it’s a process that is entirely worth it.