Buying A House In Panama: Everything You Need To Know

Panama is a vibrant country with gorgeous landscapes, fascinating culture, and a promising real estate market. Expats from around the world flock to this Latin American country for a change of pace, exposure to a new culture, and to purchase homes at more accessible price points. Buying a house in Panama is relatively straightforward, but there are pitfalls to avoid.

Read on to discover the steps you should take to acquire a beautiful piece of real estate in the Central American nation.

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Can Foreigners Buy A House In Panama?

Yes! There are few restrictions to buying real estate in Panama, making it attractive to investors and expats alike. 

Foreigners don’t have to have a visa or residency in order to buy a house in Panama. They do not even have to reside in the country. However, according to The Latinvestor, obtaining residency status is necessary if you plan to generate income with it, need a local bank account, or want local financing. 

Non-residents will incur extra legal fees compared to residents, but foreigners enjoy the same rights as Panamanians when it comes to buying land, with one restriction. Land within 10 kilometers of a land or sea border, and land located on an island cannot be purchased outright by non-Panamanians. Instead, you must apply for rights of possession (rather like a decades-long lease).

The ideal purchase is one in which you are granted “fee simple” ownership and therefore own the land outright.

How To Get Residency In Panama

Panama has many different visa and residency options favorable to expats. A few to consider include the Pensionado Visa, the Friendly Nations Visa, and the Red Carpet Investment Visa.

Migration laws can change rapidly, and each visa or residency route has different eligibility requirements, benefits, drawbacks, and processes. If you wish to reside in Panama, we recommend speaking with an immigration lawyer.

Step-By-Step Guide To Buying A House In Panama

1. Employ a Real Estate Lawyer or Agent

The first step to buying a house in Panaya is to get help from an experienced real estate agent or real estate lawyer. Ideally, ones who specialize in Panama real estate for foreigners. Forums and Facebook groups are good places to ask for recommendations.

Here’s what to look for in a good agent:

• Holds a certificate of professional competence (Idoneidad)
• Knows which properties on the market are best for you
• Can explain the pros and cons of each property
• Helps you through negotiations and ensures you get the best possible deal.

Here’s what to look for in a good real estate lawyer:

• Holds a certificate of professional competence (Idoneidad)
• Has a good reputation
• Is not affiliated with the seller
• Offers a quote up-front for their services
• Will help you with tasks such as searching for the title, researching properties, reviewing and requesting sales contract changes, assisting you in setting up payment, such as an escrow account, obtaining English translations of the documents you need, and registering the title.

2. Find the Right Property

Your real estate agent will assist you in finding the ideal property in Panama. However, you can also look at online listings.

It’s always a good idea to visit the property in person.

3. Complete Due Diligence

Once you’ve found a property you like, it’s time to complete due diligence. This step will help you avoid common pitfalls that occur when buying a house in Panama.

Confirm the Title via the Finca Number

First, it’s crucial to make sure the property you want to buy has a clean title, is properly registered, and that the seller is registered as the owner. Checking the title (via its unique Finca number) will reveal mortgages, liens, and restrictions that may be in place.

If there are issues, you should either delay purchasing until these problems are addressed or choose a different property instead.

Ensure there is a Survey

If the land has never been surveyed, you should have a licensed surveyor complete one before purchasing the property. Ensure the dimensions of the property are correct, and that there are survey markers at each corner. Walk the property to familiarize yourself with it and make sure all of the survey markers are in place.

Right of Possession vs Fee Simple vs Ejido Land.

The best kind of ​​real estate Panama has to offer is “fee simple” where you own the property outright. However, some properties are sold under the “Right of Possession.” These properties are often cheaper but don’t have a formal title. Buying one of these properties is risky because your ownership and rights may shaky or can be contested.

Right of Possession properties are most often found on islands and coasts.

Ejido land is land that the government has granted to people or communities in rural areas or small towns. This land may be attractive to foreign buyers, but the process of getting the land privatized and titled can be difficult, time-consuming, and have uncertain results.

Corregimientos Zoning or Horizontal Property Regime

Zoning in Panama is different than in other countries. Here, the country is divided into administrative subdivisions known as “corregimientos,” much like a neighborhood or borough. Each one has unique zoning laws and regulations. It’s important to be aware of them because they dictate what you can do with your property, and what is prohibited. Work with a local lawyer and an architect or town planner familiar with the local zoning laws to discover what restrictions are in effect in your area.

Similarly, condominiums and multi-unit buildings have laws dictating how the properties are managed, how common areas are administered, and what rights and obligations the unit owners have. It’s crucial to fully understand these laws before buying real estate. These laws are called the “Horizontal Property Regime” (Régimen de Propiedad Horizontal).

Water Rights

Land ownership in Panama doesn’t always come with water usage rights (derechos de agua). These rights determine whether you are allowed to use underground water, rivers, and lakes. These rights are especially important for rural and coastal properties.

Work with a local attorney specialized in land and environmental law to secure water rights from the Ministry of Agricultural Development (MIDA) and the National Environmental Authority (ANAM).

Property Tax Pitfalls

Be sure you understand your obligations for real estate taxes. Taxes in Panama are calculated based on the registered value (which could be different from its market value). If the property is re-evaluated (during a process called bienes raices retasa), your tax obligations may increase. Property tax rates vary depending on whether it is your primary or secondary residence or an investment property.

Some property owners enjoy lower property taxes under a system called Family Patrimony (“Patrimonio Familiar”). If you buy this property, the tax benefit will not necessarily transfer to you.

4. Negotiate a Price

Now that you’ve completed due diligence, it’s time to negotiate a price. In Panama, relationships and respect are highly valued so it’s important to create a personal connection with the seller. Show an interest in them, their family, and their culture to develop rapport.

Panamanians also value transparency. Do your best to communicate your intentions, what you expect, and what terms you’re seeking during the sale. During negotiations, keep things friendly and respectful, maintain a pleasant expression, and avoid acting confrontational.

5. Enter a Purchase Agreement

Now it’s time to enter a purchase agreement. This exciting part of the process involves signing a purchase agreement, also known as a promise to buy.

The promise to buy contract should include the agreed-upon price, the deadline for transferring the title, and any other stipulations, such as a penalty if either party backs out and a promise to complete a new survey of the land if it has been ten years or more since its last survey. Once you’ve signed this document, it is time to pay the downpayment (usually 10%).

Next, you’ll schedule the closing. At closing, you and the seller will sign one additional form: the purchase and sale contract.

6. Transfer the Title

Congrats, you’re almost there! Now it’s time for the property title transfer. You’ll also need to pay the title transfer taxes. Your lawyer can assist with this step.

7. Pay For The Property

Many people opt to use an escrow account to buy a house in Panama. However, you can also pay in cash in front of the Notary, with a certified check or money order, or by giving the money to your lawyer and having him/her distribute the funds (but only if you are certain of their honesty).

8. Register your Purchase in the Public Registry

Last but not least, it’s time to get your registered title deed. You or your agent will need to register the sale at the public registry in Panama City, David, or wherever is closest. After ten days, you’ll receive a signed and stamped property title.

Renting In Panama

Even if you plan to buy a house in Panama, it’s a good idea to rent in the area you’re interested in for at least six months beforehand. That way you can ensure it’s a good fit for you and your family. You’ll get on-the-ground knowledge of the area’s infrastructure, amenities, safety, and community.

Rental contracts are typically for one year.

Usually, the best rental deals are found word-of-mouth and in Spanish ads, rather than those targeting foreigners. Places to look for listings include Facebook Marketplace, Realtor.com, Panama Craigslist, and Encuentra 24.

Frequently Asked Questions: Buying a House in Panama

Conclusion: Buying A House in Panama

Buying a house in Panama is a fairly straightforward process. It begins with employing a real estate agent to help you find a great property.

Once you’ve discovered the home of your dreams, it’s time to complete due diligence to ensure there aren’t any problems with the title, water rights, or any unexpected restrictions or taxes.

Next, you’ll negotiate a price, enter a purchase agreement, transfer the title, pay for the property, and register your purchase. Congrats! You’re now a homeowner in Panama!