So, you’re considering buying property in Panama. Let’s assume you’re in the market for a condo, and you could be an investor, an end user, or perhaps a blend of both. The beauty of Panama’s real estate market lies in its diversity – there are numerous types of buyers with various motivations for purchasing property here. Some individuals come to Panama and buy property for part-time use, opting to rent it out when they’re not around. Others relocate permanently and purchase homes to live in full-time. There are also those who invest purely for financial gain, visiting occasionally to check on their investment. Before diving into what to buy, it’s crucial to understand why you’re buying. Reflecting on how you intend to use the property will significantly influence your next steps. Once you have a clear vision for your property’s purpose, you can move on to making these important decisions.
Choosing The Right Neighborhood
Panama City has a variety of neighborhoods, each with its own advantages. Take Casco Viejo, for example. Known for its historic charm and active nightlife, this area is ideal for those who enjoy a lively social scene and colonial architecture. However, older buildings here might lack the modern amenities of newer developments, which can mean lower homeowners’ association (HOA) fees if you don’t need the extras.
If you’re looking for modern amenities, neighborhoods like Costa del Este and Santa Maria are good options. These areas feature newer buildings with perks like rooftop pools, private terraces, and tennis courts. While properties in these neighborhoods can be more expensive, the added benefits can make them worth the higher price.
Areas like the much sought-after business hub Punta Paitilla and El Cangrejo offer a mix of old and new. It’s important to decide how much you value the amenities of a new building. If they’re not a priority for you, a larger unit in an older building might be a better deal.
If you plan to live in the property, consider how close it is to work or school. Panama’s traffic can be tough, so commute times are important. Pay attention to traffic patterns at different times of the day to avoid a long commute.
By focusing on neighborhoods that match your lifestyle and needs, you’ll be in a better position to find the right property in Panama City.
Securing Financing For Your Purchase
In addition to choosing your ideal location, you need to decide how to finance your property. This involves discussions with banks. Typically, most banks offer loans covering 60-70 percent of your property’s value. However, if you lack a banking history in Panama, you might only secure 50 percent. Therefore, it’s wise to explore various banks to find the best option.
Loan interest rates in Panama generally range from 6-7 percent, having increased slightly in recent years. Additionally, Panama imposes the FECI, an extra charge on interest rates for non-resident and resident investors, as well as for second home purchases. Banks typically apply this FECI rate to these types of transactions.
Choosing Your Broker (A Good One)
After making key decisions about your purchase, the next step is finding a reliable broker. You should be ready to discuss your reasons for buying and preferred locations with your broker. One of the initial questions a good broker will ask is about your budget, so come prepared with an ideal budget and a maximum limit for the perfect property.
There are many brokers available, varying in trustworthiness and experience. It’s essential to do thorough research: read online reviews, ask for references, and compare multiple brokers before making a choice. Your broker will be your guide throughout this process, so finding someone trustworthy is crucial.
Viewing The Properties
With major decisions made, you’re ready for the enjoyable part—viewing properties. You can browse listings independently, but it’s beneficial to have your broker set up appointments, saving you time.
Using your broker to arrange viewings is also advisable because online listings might not always reflect current availability. Some brokers keep sold properties listed, and others might underprice properties, excluding real estate tax to make the price appear lower. A knowledgeable broker will ask the right questions to ensure accurate pricing.
If you choose to inquire about properties on your own, inform them that you’re working with a broker to prevent any misunderstandings.
Essential Considerations
Enter the property viewing process with a clear idea of your ‘non-negotiables’ and ‘nice-to-have’ features. With this in mind, pay attention to additional factors to help narrow down your choices.
Consider future developments around your prospective property. New constructions nearby could affect your view and make selling or renting more difficult.
Also, note the number of elevators in the building. A low elevator-to-condo ratio can indicate inconvenient waits and may signal cost-cutting measures during construction. Poor quality construction can lead to higher future maintenance costs, so keep some cash reserved for unexpected repairs.
Asking the Right Questions
When viewing properties, it’s important to ask questions to gauge the investment’s value.
- How long has the property been on the market?
- What information is available about the seller?
- Have there been any other offers?
- Has the property been rented out before?
- Are there any known construction issues?
Engage with neighbors if you encounter them. They can provide valuable insights about living in the building, noise levels, maintenance frequency, and overall satisfaction.
Steps Before Making an Offer
Before making an offer, gather information about the homeowners’ association. Understand the fees, any upcoming special assessments, and recent maintenance projects. Frequent and costly maintenance projects can indicate poor management, particularly concerning for investment properties.
High association fees or frequent cost-sharing requests can reduce your investment returns due to unexpected expenses.
Hiring an Excellent Lawyer
Securing a proficient lawyer is crucial, even if you’re buying directly from the seller without an agent. A good lawyer mitigates risks and simplifies the real estate transaction.
A competent lawyer should respond to emails promptly and thoroughly. Effective communication is essential. Referrals from trusted sources are valuable, but ensure the referred lawyer has experience in real estate transactions rather than just immigration law.
Beware of being delegated to a less experienced junior partner if referred to a firm.
Handling the Payment
While cash can be useful, it’s not always the best option. Many buyers in Panama opt for wire transfers with bank-issued letters of payment. Alternatives include notaries, cashier’s checks, or manager’s checks, which might be cheaper if you lack a local bank.
During payment negotiations, ensure the seller includes all costs to avoid tax surprises. Once negotiations are finalized, confirm the inventory list is referenced in the offer and acceptance.
The official sale contract may take over a week to prepare due to the lack of standard contracts in Panama. Typically, buyers put down 10 percent of the sale price, with the remainder due in 30 to 60 days via an irrevocable letter of payment.
Buyers generally incur closing costs of about 1 ¼ percent of the sale price, plus any bank fees associated with a mortgage.
While buying property can be complex, the investment opportunities and beautiful properties in Panama make the process worthwhile. With a qualified broker, clear criteria, and a realistic budget, you can navigate the buying process smoothly.
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