The real estate market in Panama City is all over the charts. The "low end" is the most healthy part, with buyers, sellers, and inventory in a progressive balance. By "low end" I mean the local neighborhoods where the prices are $150,000 and less. The middle market is also hanging in there. It is not uncommon for an apartment worth $200,000 to command an 8% return on rental income. The "high end" market is where the problems are right now. There is a lot of inventory. For some reason builders keep building commerical and residential skyrises that take years to sell.
I am going to focus on one part of the problem that nobody else wants to talk about in the Panama real estate market: illiquidity. What I am about to report is not a one-time unique situation that I got unlucky with. This is common business and beaurocratic practice in Panama.
It is not uncommon for a seller to take over a year to sell. Don´t expect your real estate agent to be truthful about this, especially in Panama, where it is part of the culture to never say no and lie rather than give bad news. Agents get paid to sell the dream, remember?
I got lucky. I sold my apartment in Paitilla in about 3 months. I accepted $35,000 less than an offer that was made a year earlier but I could not sell it because my stubborn tenant refused to move out early on the lease, despite the law that says both tenant and landlord can give a 30-day notice regardless of the lease terms.
In addition to the time it could take to sell your property, be aware that the process in Panama is not like the US. It is, for lack of a better word, dysfunctional. The buyer and I signed the contract on June 10, 2013. He is a cash buyer. Because the property was in a Panama corp name, the lawyers we hired had to do that are called "updates" to the registry. We were told that this takes about two months. On August 11th I asked my lawyer and the buyer´s lawyer if the "update" is done. Long story short it took another few weeks for this particular "first" update. So now, we are ready to close, right? Wrong. There had to be another "update" at the tax department - DGI. After the "update" to DGI was done, DGI told my lawyer that the taxes owed were much more than we had estimated. About $7,000 more! My lawyer assured he would get this fixed. He even had to bribe one of the beaurocrats there to speed up the process because he threatened that it could take "weeks" longer. In Latin America, "weeks" means months. Long story short, it took another two months anyway to get the final "updated" tax amounts for both the transfer tax and the capital gains taxes, both of which must be paid before closing of the sale and transfer of deed. It is now the end of October, and my attorney said he finally has the tax situation settled. Now all we need are two "paz y salvos" from the condominium administrator saying I, the seller have paid all bills current and another that says the administrator has paid the IDAAN water bill, which is included in my association fees. Long story short, my attorney tells me that another dysfunctional Panamanian beaurocrat refuses to allow the sale because the association is one month late on the water bill. So even though they have the first paz y salvo that says I, the seller have paid my part of the bill, the sale can´t go through until the building pays its bill.
At best, this sale closes next week or sometime in November. I think. At best, that is about 5 months. I got lucky because the buyer paid me in full about two months ago. A normal buyer would have had plenty of good reasons during this delay to cancel the contract. Now, he is a cash buyer. Could you imagine if he needed financing and had to jump through the numerous loopholes that banks require? My honest real estate agents tell me it is not uncommon for a closing to take more than six months! So in addition to the fact that your house may sit on a market flooded with inventory and not enough buyers for more than a year, once it sells you can realistically wait 5 or 6 months to close.
Conclusion: Panama City real estate is dangerously illiquid right now.
UPDATE: As of today, November 18, this deal still has not closed. My lawyer doesn't even bother to call me to explain why. I guess this must be "business as usual" in Panama.
It is not uncommon for a seller to take over a year to sell. Don´t expect your real estate agent to be truthful about this, especially in Panama, where it is part of the culture to never say no and lie rather than give bad news. Agents get paid to sell the dream, remember?
I got lucky. I sold my apartment in Paitilla in about 3 months. I accepted $35,000 less than an offer that was made a year earlier but I could not sell it because my stubborn tenant refused to move out early on the lease, despite the law that says both tenant and landlord can give a 30-day notice regardless of the lease terms.
In addition to the time it could take to sell your property, be aware that the process in Panama is not like the US. It is, for lack of a better word, dysfunctional. The buyer and I signed the contract on June 10, 2013. He is a cash buyer. Because the property was in a Panama corp name, the lawyers we hired had to do that are called "updates" to the registry. We were told that this takes about two months. On August 11th I asked my lawyer and the buyer´s lawyer if the "update" is done. Long story short it took another few weeks for this particular "first" update. So now, we are ready to close, right? Wrong. There had to be another "update" at the tax department - DGI. After the "update" to DGI was done, DGI told my lawyer that the taxes owed were much more than we had estimated. About $7,000 more! My lawyer assured he would get this fixed. He even had to bribe one of the beaurocrats there to speed up the process because he threatened that it could take "weeks" longer. In Latin America, "weeks" means months. Long story short, it took another two months anyway to get the final "updated" tax amounts for both the transfer tax and the capital gains taxes, both of which must be paid before closing of the sale and transfer of deed. It is now the end of October, and my attorney said he finally has the tax situation settled. Now all we need are two "paz y salvos" from the condominium administrator saying I, the seller have paid all bills current and another that says the administrator has paid the IDAAN water bill, which is included in my association fees. Long story short, my attorney tells me that another dysfunctional Panamanian beaurocrat refuses to allow the sale because the association is one month late on the water bill. So even though they have the first paz y salvo that says I, the seller have paid my part of the bill, the sale can´t go through until the building pays its bill.
At best, this sale closes next week or sometime in November. I think. At best, that is about 5 months. I got lucky because the buyer paid me in full about two months ago. A normal buyer would have had plenty of good reasons during this delay to cancel the contract. Now, he is a cash buyer. Could you imagine if he needed financing and had to jump through the numerous loopholes that banks require? My honest real estate agents tell me it is not uncommon for a closing to take more than six months! So in addition to the fact that your house may sit on a market flooded with inventory and not enough buyers for more than a year, once it sells you can realistically wait 5 or 6 months to close.
Conclusion: Panama City real estate is dangerously illiquid right now.
UPDATE: As of today, November 18, this deal still has not closed. My lawyer doesn't even bother to call me to explain why. I guess this must be "business as usual" in Panama.
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