Panama is a country with population of 3.7 million divided into ten provinces, each of which is further divided into districts and corregimientos. Additionally, there are five comarcas, or special indigenous areas, for Panama’s aboriginal tribes. The main cities are Panama City, the capital located in the Province of Panama, where most of the commercial activities of the country take place, Colon City located in the Province of Colon, home to the Colon Free Zone, and David, capital city of the Province of Chiriqui, where a significant part of the country’s agriculture, cattle and farming activities are carried out.

While the country’s breath-taking beaches, 1,800 islands and islets and vast rainforest are still considered off the beaten track and ripe for exploration, the capital, Panama City, is a vibrant, diverse city of over 880,000 people. With a low cost of living, low crime rate and good quality healthcare, it offers a very high standard of living. This mix of urban energy and laid back beach life has made Panama a popular tourist destination which attracted 2.3 million visitors in 2014 – an increase of nearly 5% on 2013.

Panama has the second largest and fastest growing economy in Central America, and also boasts the largest per capita consumption in Central America. Revenue from the Panama Canal tolls continues to be a significant portion of Panama’s GDP, although commerce, banking, financial services and tourism are major and increasingly growing sectors.

Retirees especially are flocking to this country, likely because of its attractive retiree benefits. Panama has one of the easiest residency programs in the world with which to obtain permanent residency. This is especially true if you’re a retiree. Gaining permanent residency in Panama as a retiree requires very little, the greatest hurdle being to prove that you have a guaranteed monthly income of just U.S.$600 if you’re single, which Social Security will more than cover. You also get a whole host of other benefits, such as discounts on airfare, medical bills, and groceries. This makes it incredibly attractive to retire to Panama.

The documents when buying Panama real estate are:

Letter of Intent – This must be signed by both parties. Upon signing, the buyer will put down a good faith deposit and the real estate agent for the seller will take the property off the market for an agreed upon amount of days. The Letter of Intent is backed up by another important document when buying real estate in Panama:

Promise to Purchase – This document lays out all of the terms of the real estate deal. This includes such details as the purchase prices, deposit amount, and any penalties for non-compliance.

*Note: These two documents are not necessary, but they are usually used. They work as good indicators that both parties understand the terms of the sale and are both committed to it.

Promissory Note (Promesa de Compra y Venta) – Must be in Spanish to be legal. Can also be written in English, but again, the Spanish is required. This document is similar to the Promise to Purchase but is much more formal, both in a legal sense as well as in the aspects of the sale that it lays out.

The Promissory note states:

  • The parties to the sale
  • What is included in the sale
  • A description of the property
  • The time frame on deposits and final balance payments
  • Penalties for non-compliance
  • Any other details pertinent to the sale

Upon signing the promissory note, a down payment will be made. This is typically 10% of the purchase price, but can be different depending on the circumstances outlined in the promissory note. This down payment will go to the seller, and is typically used to pay the attorney who drafted the promissory note, as well as pay the 5% transfer/capital gains fees.

After this, several other documents must be gathered by the seller. These documents include the deed(s) for the property as well as statements of good faith, which show that there are no outstanding taxes or other bills associated with the property (such as money owed to the water company). During this time, the buyer should do a physical inspection of the property, to ensure that it meets all of the specifications outlined in the sale.

Irrevocable Letter of Credit – This is a document that the buyer must provide to the seller. It is essentially an escrow letter. The seller may cash this at the buyer’s bank, once the property has been transferred in the public registry.

Buy Sell Agreement – After all of the above documents have been gathered, and the processes completed, the Promissory Note is converted into a Buy/Sell Agreement, which is then signed by both parties in front of a public notary and inscribed in the public registry. The property is then registered and the ownership of said property is changed from the seller to the buyer. The seller may cash the buyer’s Irrevocable Letter of Credit at this time.

Once everything is squared away, the closing costs will typically be around 1-2%, aside from the transfer tax, which is 5%.

The whole process can take as little as 30 days, but usually it will only be this quick if the property is being sold by way of selling shares of a corporation that owns the property. This expedites the process, as the property isn’t what’s being sold, but rather the shares of the corporation which owns the property. The owner of the property remains the same: the corporation.

The process can take as long as 90 days on a typical basis. It could potentially take even longer, as there is always the possibility of unforeseen external factors influencing the process. In general, however, a 90-day cap on closing time can be expected.

Buying Panama real estate can be an excellent way to diversify one’s assets. International diversification is key to a successful and strong portfolio. In addition, for anyone interested in moving to Panama or retiring to Panama, buying real estate in Panama will be a crucial part of this process.