Requesting a title search is the first step in buying panama real estate. It’s is not mandatory but it is highly recommended to ensure that the property you want has clear title, and is free of any liens or liabilities. The cost for the title search is usually comprised in the legal fees between 1 and 3 percent of the total price of the property. It’s worth to mention that these fees may vary depending on the attorney.
Next is the Promise to Buy/Sell Agreement (Promesa de Compra y Venta) and it is the first formal step of closing on a property. In addition to this agreement, a down payment needs to be made to the seller. This down payment may be different with every sale, but in most cases it will be 10% of the negotiated price of the property.
There are different stipulations that can be agreed by the Buyer and Seller as part of the Buy Sell Agreement. For example, the amount of time it will take the seller or buyer to close on the property.
This is a legally binding document formalizing that the Seller has agreed to sell the property and the Buyer has agreed to buy the property. The Seller or the Buyer could face consequences if either party decide to back out of the transaction.
If the buyer were to back out of the agreement they will lose their deposit, and if the seller backs they would have to return the deposit, plus an equal amount as part of the agreement. For the seller this means that if they received a 5% deposit they would be required by law to return that 5%, plus an additional 5% as a penalty.
It is very important to point out that the down payment is a very important step in the process of buying panama real estate. If a down payment isn’t made, the seller has no legal obligation to hold a property before the actual close is made and may take a better deal if it comes along or not sell the property at all. Although the word escrow is not a used term in Panama, you can find various attorneys that will provide you with this service. This is the equivalent of holding money in escrow to allow you to secure the property before paying the seller.
In this case, if the seller didn’t receive any down payments on a property and a better deal came along before the close takes place, by law they would be required to return a total of 0 since there wasn’t any down payment made.
Once the Promise to Buy and Sell Agreement is signed, and initial down payment made, the Seller must comply with a few obligations necessary to complete the transfer of the property from the seller to the buyer. These obligations include:
1. Paying 2% of the transfer tax in accordance to the negotiated sales price.
2. Payment for the capital gains, which represents 3% of the negotiated sales price.
3. Last but not least several paz y salvos, or certificates of good standing must be obtained. These include:
* Paz y Salvo for Property Taxes
* Paz y Salvo from IDAAN (water bill) Instituto de Acueductos y Alcantarillados Nacionales
* If the property to be sold is part of a building or community that requires a maintenance fee, a letter of good standing needs to be provided confirming that all these fees are up to date
The time needed to transfer the property in Panama may take up to 30 days, but may vary depending on factors such as the complexity of the transaction and also the stipulations outlined in the Promise to Buy Sell Contract.
After meeting all the requirements to transfer the property, the Promise to Buy Sell agreement status is changed to a Buy Sell Contract, which is then signed and inscribed in the public registry of Panama. The new deed usually gets approved and released from the public registry within a period of 10 business days.
Want to find out more about panama real estate, then visit Lucia Haines’s site on how to choose the best properties in Panama and the benefits that panama retirement can offer to you.
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