Monday Morning Musings on Real Estate

*This blog expresses personal opinions and observations.  I am in no means an expert in real estate purchases or real estate laws in Panama.

Yesterday we were off down the peninsula towards the coast to Los Destiladeros.   Los Destiladeros is a little community of higher end homes and condos on the other side of Limon.  It is what we Norte Americanos would call an exclusive beach community.  It’s private and secluded with remarkable ocean and mountain views and most of the people who have homes not full timers.  Our favorite little swimming spot is down at the end of the track at Puerto Escondido.   There are a few homes still being built outside the “exclusive” zone and there are a couple of really nice B & B’s and restaurants there.

From my observations the people who have homes in the “exclusive” section pay astronomical home owner’s fees and aren’t getting full value for their dollars spent.  There are million dollar views, but let’s face it the view is free.  In my opinion it is likely that the developer of the project saw the money train coming and is taking advantage of it. It seems that many owners have decided that it’s time to take a walk or use the homes as rental properties.  I have never heard of home owners or condo fees being so high…well maybe in New York City for a penthouse in the sky.  In a country where the average wage ranges from $1.22 to $2.36 an hour it seems difficult to prove spending $300.00 to almost $1,000.00 per month on HOA fees. Most of the owners are non-Spanish speaking people who bought when they had deeper pockets and are now stuck.  Some are walking away, some are trying to sell and some are making waves and not earning friends by doing so.  Like I said, I’m merely observing.

I mentioned in a earlier post about some of the development going on around here.  Often times we’ve witnessed people coming to our area with a bright shiny glow, excited about owning a beautiful lot.  They come to Panama in dry season, buy a lot (sometimes from a drawing) and get excited about building their home on it.  I call this “buying with your heart instead of your head”.  They’ve researched on the internet, decided via their research to pigeon-hole themselves into one area based on their research, and if the price was right, the financing terms were good, or the down payment fit the budget they bought.

Tip #1: Use the internet to learn as much as possible about the different areas where you might want to live in Panama.  Do you want to live near the beach, in the city or in the mountains?  If you have school age children do you really want to be in a community full of ex-pat retirees?  Can you live with being five or six hours from the big shopping mall, movie theatre, or international airport or must you have action all around you?    What type of property do you want? There are many options to choose from.

Be aware that Panama has no MLS system.  I’ve mentioned before that the same property can be listed for different prices by different agents.  And not all people calling themselves real estate agents really are.  Some properties are posted on the internet even though they are already sold, some websites may not be entirely correct or updated.  Look at the asking prices of similar types of properties in the same area.  Negotiate the price and don’t pay real estate commission as a buyer.  It is the seller’s responsibility and should not be more than 3-5% of the sale price.  The seller will also pay “stamp duty” or what we call land transfer tax which is about 2% unless the property is held in a corporation.

Tip #2: Visit Panama and come with your brain engaged.  Don’t leave your common sense at home and don’t rush into anything.  Don’t fall for the fancy websites promising everything and the moon if you only buy now at the great pre-sale price. Some developers will even pay for some of your stay and pick you up at the airport.  If you want to take advantage of that, fine but don’t fall for the “Slick Willy” sales pitch.  Talk to the locals and other ex-pats and get to know the area. If you don’t speak Spanish your best bet is to try to find information through others that have moved to the area. Don’t take the word of the first person you meet, some ex-pats are more dangerous than the developers.  Ask several people’s opinions and advice if you can.

Look at many properties within your budget and compare them.  You’ll soon get to know what is reasonable and what is not.  Some vendors are not in a rush to sell and will ask a ridiculous price just to see if they can find someone with deep enough pockets to buy it.  You should also know what type of property you want, raw land, land with services already brought in, a re-sale home etc.  Narrowing down what you want to one or two areas will save you time and heartache.

I have a philosophy that if something is meant to be,  it will happen.  When we came here the first time we looked at several properties in our chosen area.  We also scouted around in other areas of the country just to make sure that we weren’t missing out on anything. We also drove most of the little country back roads in our chosen area.  I fell in love with at least two properties and if we hadn’t been balancing each other out and had our brains engaged we might have put an offer on at least one of those houses.  The house we eventually bought was just a pile of concrete blocks at the time and if we had bought the house I wanted we would have paid more and had to do a butt load of renovation work.  Now we feel waiting it out was one of the best things for us to have done.

Is this your lot?

These two lots come with their own pool.

Tip #3: Find a good Abogado/a that speaks English if you are not fluent in Spanish. It’s better to pay a couple of hundred dollars for the fee he/she will charge to do a title search on property that you may be considering buying than be out thousands.  If they are local they will also be able to tell you how the development is progressing and make sure that the person selling you the property actually owns it.

A good Abogado should also have other resources that you can tap into.  Our Abogado has a list of good, honest “facilitators” that assisted us with finding a used vehicle and registering it and getting our driver’s license etc.  The few extra dollars spent to help us with these things was well worth it.  Keep in mind again that the wages in Panama are low, don’t overpay for services but don’t try and take advantage of your facilitator either.   We find that being grateful for help and treating people with kindness goes a long way.

Tip #4: More than one trip to Panama may be required.  I can’t stress enough again to take your time.  Panama has two seasons, dry and wet.  Try and visit at least once in each season.  Land will look different in wet season it will be green and lush and in dry, brown and dusty.  Figure out where the water goes during wet season and look at where the water will come from during dry season.

Our area of the country has less than normal rain so far this year but there is a slope to our little lot.  Once our fence was up the concrete block at the bottom of it was keeping the water from draining from the yard and we had a swamp after every storm.  Spousal Unit had to put a “gutter” in the back and drainage holes in the bottom.  Again our lot is quite small so think about where the water drains if you’re purchasing a large plot of land or how you will irrigate it during dry season.  Are you on town water or do you have to build a well?  How much will it cost to get connected or to drill?  Again, labor costs are quite inexpensive but it takes time to get things done here.  If you’re handy it helps but if you’re not you’ll be waiting to get things done.

Tip #5: There are a few different ways to buy your property.  You can form a corporation one or two different ways, buy the property in your name, or buy the shares of the corporation of the current property holder.  This saves the 2% transfer tax that is paid when selling property in your name.  We decided we didn’t want to pay the extra fees and taxes to form a corporation and that the transfer tax on our small property would likely be less than what we paid out over time.  If you’re considering making Panama your home full-time you should probably investigate the tax laws of your home country in regards to residency and how they view owning shares in a Panamanian corporation.

There are also properties available that are exempt from property taxes for 20 years.  Property taxes are fairly low in Panama anyway, so you might not be too concerned about it.  We have a 15 year exemption remaining on our property.  We’ve seen what our tax bill would be however, and it is about a quarter of what we paid for our home in Canada.

Tip #6: Getting back to my original thought…make sure you know what you’re getting for any HOA/condo fees that you might have to pay.  Take any of the “extras” that are being planned for a gated development with a grain of salt.  Talk to owners to have already built in the development if you’re planning on building.  Ask them for a brutally honest opinion of the development.  If you’re buying a re-sale home and it’s currently being rented try to talk to the renter.

We looked at one re-sale house the first and second time we visited Panama.  The first time the current renter was not in residence, the second time the new renter was.  We knew there were issues with the house that would need repair but they turned out to be more extensive than we thought.  We also learned that it was illegally connected to town water, as were the four neighbors surrounding the house.

It’s also a good idea to take pictures and keep notes of any property you look at.  It helped us to keep the houses we looked at straight in our heads.  When we looked at some of the pictures we couldn’t believe some of the issues we “saw” that we never noticed with our eyes when we were “looking”.

Summary: It really is buyers beware market in Panama.  Many websites will tell you to rent before you purchase.  Sometimes that is easier said than done.  I know in our area we hear complaints that there is a lack of affordable rentals even in off-peak times.  You really have to have a lot of self-awareness of your wants and needs.  I always say if you come with low or no expectations then you will be pleasantly surprised.  If you come with expectations of finding utopia you will be disappointed.  Do your research, take your time and think with your head.  Nuff said.

About indacampo

You'll find me at blogging about Panama...and other things.
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5 Responses to Monday Morning Musings on Real Estate

  1. Your advice at the very end was great. I hope a lot of future expats read it.

    • indacampo says:

      Thanks! You’re sharing some wonderful experiences also! There’s no need to deter people from the trip but it’s important to be realistic about it.

  2. Jude says:

    thanks for posting your experience and knowldege, thinking of moving from Calgary in year or two..

  3. Pingback: Kill all the lawyers… – mebeinpanama

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