Smart move – Be safe

Real estate brokers streamline transactions

By: Manoj Chatlani, Senior Attorney and Steven Rich, Marketing Manager
Panama Offshore Legal Services

Years of experience with real estate transactions in Panama have taught us to beware of clients who go directly to property owners to "make a better deal". Some of our clients thought they were getting a "better deal" until they realized that it was the worst thing they could ever do. Misunderstandings and confusion occur in the "simplest" transactions because in Panama it is not easy to "just define the price and that’s it".

A property transaction in Panama involves a lot of negotiation and the interests of both parties must be protected by a proper definition of all terms and conditions involved in the deal. This is why we recommend to always use a licensed real estate broker.

It is very important that your licensed broker be capable and experienced in the type of property you are interested in purchasing. There are various kinds of properties with each type requiring specific knowledge and involving different procedures. For example:

• Pre-construction condo vs. existing condo,
• City house vs. gated community house,
• Farm/land vs. empty lot,
• Hotel vs. commercial building,
• Title vs. rights of possession vs. concession properties,
• Commercial office space vs. apartments

Only a professional broker can know all the required terms to negotiate, define and transmit the "agreed" terms to your lawyer to prepare the respective contract. In Panama, lawyers do not negotiate the required terms. Lawyers perform due diligences, draft contracts and coordinate signatures and closings. It is very important that your broker clarify with both parties all terms required in a transaction in order to avoid misunderstandings, for example:

• It is very important to clarify which party pays the taxes to the government (which should be the seller). There have been cases of sellers forgetting to calculate the taxes to include in the selling price to arrive at the net amount that they expect to receive. When they realize that they have to pay the taxes because this was not clarified at the beginning, problems occur with sales price adjustments during the transaction;
• It is essential that the land or lot be measured and boundaries be verified and updated. This avoids misunderstandings regarding the land area being sold;
• It should be established that the closing must take place with payment through a "promise to pay letter" from a licensed bank in Panama. This is the best way to secure a transaction and protect both parties;
• The buyer should be informed of the different methods and options to purchase land in Panama. There are different benefits and advantages. For example, you can buy through a corporation (making the corporation the property owner) and gain lots of benefits such as anonymity, security, flexibility, and most importantly limited personal liability. Alternatively, buy in your personal name that allows qualifying for a specific immigration visa/residency program (depending on the purchase price).

So remember, if you are planning to sell or buy a property in Panama, make sure you have a competent licensed real estate broker to guide you from beginning until end of your transaction.

In the next edition, we will present a number of tips for buying and/or selling property in Panama.