Citizens of Panama as well as foreign buyers of real estate in Panama have the same title and property rights guaranteed by the Panama constitution. Similarly, Panamanian laws and real estate practices mimic those in the U.S. Laws and practices differ however.
Panama does not use an escrow company to transfer title, but all papers must be notarized and handled by a Panamanian attorney to prevent any errors or fraud.
When purchasing land the sales contract is written so that the buyer provides seller with a deposit, then two options are commonly available in lieu of the escrow service we know:
Option 1: buyer exchanges a cashier’s check in the amount owed for the land title when the title is signed in the notary.
Option 2: buyer purchases a letter of promise to pay, wherein the buyer deposits the money with the buyer’s lender or bank. This promissory letter binds the buyer’s bank to pay the seller when presented with the title after it has been registered with the Public Registry.
Real estate transactions of titled land in Panama are usually done in two steps:
Step 1 – Compraventa (or Promise to purchase and sell):
The Promise to Purchase and Sell (Compraventa) is a contract between the buyer and seller wherein the buyer agrees to buy and the seller agrees to sell contingent upon each party meeting their obligations in the contract. The Compraventa prevents the seller from accepting other bids and allows the buyer to secure financing as well as review the legal status of the property, (often referred to as due diligence in the U.S.). Also, the Compraventa gives the seller time to produce the necessary documents such as the map of the
parcel in the case of land to be segregated from a larger parcel; registering that map with Catastro and generally putting the property in the conditions specified by the Compraventa.
Step 2 – Escritura: When the compraventa is complete, the purchase is finalized in the form of a public deed (Escritura) which is signed and filed by a Notary and then registered at the Public Registry of Panama, at which time the buyer becomes the happy new owner.