Use the "Holy Trinity" To Cover Your Ass When Buying Real Estate in Panama
Wednesday, November 18 2009 @ 08:28 AM EST
Contributed by: Don Winner
Jam Packed With Smart Questions: Congratulations, Patrice. You've asked a whole string of very intelligent questions, to the point that I decided to "lift" your article from the Americans in Panama Yahoo! group and turn it into a full fledged FAQ article. Everyone should know the answers to your smart questions. In short, there are three things you should do to protect yourself when buying property in Panama - which I call the "Holy Trinity" - hire a buyer's agent, hire your own lawyer, and get a bank mortgage even if you don't need a loan. Allow me to explain... (more)
Hire A "Buyer's Agent" There are several things you can do to keep from getting ripped off in Panama when purchasing real estate. One of those things would be to hire a "buyer's agent." The standard real estate commission in Panama is 5% of the sales price. Of course, every real estate agent in Panama want's the full commission - they don't want to have to split the commission with another agent so they tend to resist this idea. However, tell them to "pound sand" and insist on having your buyer's agent involved in the deal. Here's how the math works out. If an apartment sells for $250,000 then the full commission is $12,500 dollars which is not a bad payday. However, if you come wandering into the market with no local knowledge and a fat checkbook, you should know that property owners expect the real estate agents to push, promote, and eventually sell their properties (above and before all of the other properties they represent.) So, there's the opportunity for the real estate agent to "neglect to mention" some of the downsides of any particular property. The real estate agents are supposed to be neutral middle-men who just facilitate the buy/sell process whoever they also have a responsibility to accurately represent the property. So, if you contact a "buyer's agent" up front - and specifically make sure you tell that person you expect them to first and foremost protect YOUR interests, then that person will work hard for you because they already know they are going to get paid something at least, whenever you eventually decided to buy. Just be sure to treat you buyer's agent fairly, don't try to "cut them out" or let anyone else cut them out of the deal when it eventually goes down. You typically don't have to pay your buyer's agent anything up front - they get paid whey the sale goes down, and they will get 2.5% of the sales price. The other half of the commission will go to the agent representing the seller. There are several highly reputable real estate agents and companies in Panama, and let me say that all of the companies advertising on Panama-Guide.com are highly reputable - otherwise they simply wouldn't be here. With that having been said, consider contacting Kent Davis from Panama Equity Real Estate via his cell phone at +507 6030-6782 or email email@example.com. Kent tends to specialize as a buyer's agent somewhat, and he will go above and beyond to make sure you don't get screwed over in the process, that you're making a smart purchase for a good price, and he will be able to point out the pros and the cons of any particular property. So, if your buying through one of the other companies that advertise on this site and if you hire Kent to cover your backside, your chances of getting ripped off drop to damn near zero. You're welcome.
Hiring An Attorney: The only time people get royally screwed when buying real estate in Panama is when they put all of their eggs in one basket. Sometimes people make contact with one person, and then that person becomes the "go to" guy for everything. People fail to make the standard "get another opinion" move, even though they are about to make a hugely important purchase decision involving hundreds of thousands of dollars. DO NOT use any lawyer suggested by the real estate agent representing the seller. Hire your own attorney, who is also there to specifically watch over the process, check all of the documents and contracts, and to make sure there is nothing fishy going on. Don't sign anything (and I mean, anything) unless your lawyer has first checked it out. I almost got hammered by a highly disreputable real estate company here in Panama - I was purchasing a property through them only because it was a very good deal. And, right on schedule, they tried to screw me over. I managed to avoid the pain because I had taken my own advice. So, get a lawyer and listen to them carefully. The Panama Relocation Attorneys, with whom I have been working for years, are excellent and highly recommended.
Get A Bank Mortgage: Banks hate to lose money. Even if you have a few gazillion dollars sitting in the bank, and if you can simply write a check for the entire sales price of the apartment or property you intend to buy - don't. If you just lay down 10% or 20% you can obtain a mortgage from a local Panamanian bank for the remainder. The reason for doing this even if you don't need a loan is simple. The bank has well established methods and procedures to make sure they don't get into a position where they might get hurt or lose money. A bank won't approve a bad loan, and they won't allow a purchase to go through it there's a problem with the title, the taxes, or whatever. So, by simply getting a loan you will receive the tangential benefit of their due diligence process, making your purchase even more safe and secure.
Extra Points - Get Title Insurance: You can tack on even more safety and security to your purchase if you buy title insurance. There are all kinds of things that might happen later, and having title insurance will let you sleep well at night, no matter what might happen later on down the road. The LatinAmerica Title Company has recently been approved by the Panamanian Superintendent of Insurance as the only agency authorized to sell title insurance in Panama, and having a policy with them in your back pocket will provide additional peace of mind.
The Holy Trinity: So there you have it. If you follow my "Holy Trinity" advice - hire a buyer's agent, hire your own lawyer, and get a bank loan - it will become exceptionally difficult to the point of being nearly impossible for some unscrupulous seller or bad real estate agent to take advantage of you. You will have too many people watching over your shoulder, checking things out, looking for red flags, and working on your behalf to keep you safe and sound. For extra bonus points you can tack on the title insurance, and then sleep soundly. And if you don't like the "Holy Trinity" reference, then let's just add Title Insurance as the fourth and go with "The Four Horsemen of the Apocalypse" who will strike down anyone who tries to rip you off. It's nice to have powerful friends, no?
Should You Stick Around? To address the second part of your question - "when we do find a property to purchase, is it recommended that we stay in country for duration of the process, or can we initiate it there, return to the US and complete it from here?" Sometimes it can take up to six months or more for a property transfer to work it's way through the system. Once you've made up your mind, paid the down payment, signed a buy/sell contract, and started the purchase process, there's really no need to sit around in Panama to wait for it to happen. Normally you can simply remain in contact with your lawyer and buyer's agent who will oversee the process for you and provide updates as each little "tic" gets placed in the checklist. They can use a courier service to send any documents you might have to sign, and then you can come back down for the final closing process. So no, there's little value in sitting around here to wait for it to happen.
Comments and Suggestions? Am I forgetting anything? Please take advantage of the comments section to tell stories, both good and bad...
Copyright 2009 by Don Winner for Panama-Guide.com. Go ahead and use whatever you like as long as you credit the source. Salud.