Purchase Cost Panama / Real Estate Closing Costs
Index of Headlines
- Introduction
- Example Calculation of a $300,000 Purchase
- Notary and Registry Fees
- Lawyer’s Fees
- Additional Considerations
- Taxes
- Real Estate Commission
- Conclusion
Purchase Cost Explaint
Due to numerous client inquiries about “purchase cost Panama” and “closing cost” for real estate, we have compiled this comprehensive guide to help potential buyers understand the various expenses involved in purchasing property in Panama. Panama has become a prime destination for international real estate investors and retirees seeking a tropical paradise with modern amenities. The country’s welcoming attitude towards foreign buyers and its diverse property options make it an attractive market. Whether you’re interested in a bustling city apartment, a tranquil highland retreat, or a beachfront haven, Panama offers properties to suit every preference and budget.
Example Calculation of a $300,000 Purchase
To provide a clearer picture, here is an example calculation for a $300,000 property purchase in Panama. Let’s assume the property has appreciated by $30,000 over the years.
| Cost Item |
Buyer |
Seller |
|---|---|---|
| Property Price | $300,000 | – |
| Notary Fees | $500 to $1,000 | – |
| Registry Fees | $3,000 (1% of property value) |
– |
| Express Service (optional) | $250 | – |
| Lawyer’s Fees | $9,000 to $30,000 (3% to 10%) |
– |
| Escrow Services | $1,000 (variable) | – |
| Miscellaneous Costs | $500 (translation) |
– |
| Corporation Setup Costs | $1,000 to $2,000 (initial) | – |
| Corporation Maintenance Fees | $300 to $500 (annual) | – |
| Capital Gains Tax | – | 3% of $30,000 (gain) = $900 |
| Transfer Tax | – | 2% of property value = $6,000 |
| Real Estate Commission | – | 5% of property value = $15,000 |
Total Estimated Costs:
- Buyer: $15,550 to $37,750 (including initial corporation setup)
- Seller: $21,000 (here only transfer tax, and commission)
Notary and Registry Fees
Notary Fees
These are generally fixed fees for the notarization of documents and can vary depending on the complexity of the transaction. For a standard real estate purchase, notary fees can be around $500 to $1,000.
Registry Fees
The Public Registry charges fees for the registration of the property deed. These fees are typically 1% of the property value, with a minimum amount that can be around $250.
Express Service (optional)
There is also an option for an express service, which costs about $250 and ensures the deed is recorded within 24-48 hours.
Legal Fees
Legal Representation
Lawyer’s fees for real estate transactions in Panama typically range from 3% to 10% of the property’s sale price. This percentage includes the drafting and review of contracts, due diligence, and representation during the closing process.
Due Diligence
Lawyers conduct thorough due diligence to ensure the property is free of liens or encumbrances, which is crucial for a secure transaction. The cost for due diligence can be included in the overall legal fees or charged separately, depending on the firm and the complexity of the investigation.
Additional Considerations
Corporation as Owner
Using a corporation to hold property can offer benefits such as easier transfer of ownership and potential tax advantages. The setup costs for a corporation typically include legal fees, registration fees, and annual maintenance fees. Setting up a corporation in Panama can cost between $1,000 and $2,000 initially, with annual maintenance fees ranging from $300 to $500.
Escrow Services
To ensure a secure transaction, it’s advisable to use escrow services, which may incur additional fees. These services hold the purchase funds and disburse them only when all terms of the sale are met.
Miscellaneous Costs
There may be other miscellaneous costs such as translation fees if the buyer does not speak Spanish, as all legal documents must be in Spanish. Certified translation services can add to the overall cost.
Taxes
There are taxes due upon sale, including a 3% capital gains tax and a 2% transfer tax based on the sales price or cadastral value, whichever is higher. These taxes apply only to the seller.
Real Estate Commission
The commission for real estate transactions in Panama is generally 5% of the sale price, paid by the seller. In certain cases, such as remote or special properties, a higher commission may be charged to cover additional expenses.
Conclusion
Investing in Panama’s real estate market can be a rewarding venture, offering a blend of luxury, comfort, and tropical beauty at competitive prices. With proper guidance and understanding of the purchasing process, buyers can navigate the market to find their ideal property in this Central American gem.
About the author: Lic. Karen Dorcy is a registered Panamanian lawyer with more than 15 years’ experience in real estate and business law.
Disclaimer
The costs and processes outlined here are based on typical scenarios and may vary. It is advisable to consult with local professionals and conduct thorough research to understand the specific costs and legal requirements for your situation.
