What are the risks of buying property in Panama?

Authored by the expert who managed and guided the team behind the Panama Property Pack

Everything you need to know before buying real estate is included in our Panama Property Pack

Who is the author of this content?

THELATINVESTOR

A team specialized in real estate investing in Latin American countries (Panama, Costa Rica, Mexico, Colombia, etc.).

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Panama. If you'd like to learn more about us, you can check our presentation page.

What are the most common legal or financial issues foreigners face when buying property in Panama?

Foreign buyers in Panama most frequently encounter title fraud, Right of Possession (ROP) land disputes, developer scams, and hidden costs that can result in substantial financial losses.

Title and registry fraud occurs daily in Panama, with incidents involving double sales, forged documents, and boundary disputes being particularly common. Fraudsters create legitimate-looking documents to sell properties they don't own or manipulate registry records to deceive buyers. This type of fraud targets foreigners specifically due to language barriers and their reliance on local intermediaries.

Purchasing ROP land instead of titled property represents one of the highest-risk scenarios for foreign buyers. ROP refers to government-owned land where individuals hold usage rights only, not ownership. When foreigners unknowingly buy ROP land thinking they're acquiring titled property, they risk losing their entire investment since ROP claims are often unresolvable through legal channels. Multiple family members may attempt to sell the same ROP land to different buyers, creating complex disputes.

Pre-construction failures involving developer bankruptcy, hidden fees, or project abandonment endanger 20-100% of investments. Developers may go bankrupt mid-construction, leaving buyers with unfinished properties and no recourse for recovery. Hidden fees that weren't disclosed in initial contracts can add tens of thousands of dollars to the purchase price.

Unlicensed real estate agents frequently overcharge commissions by 30-300% compared to licensed professionals, while hidden costs from unpermitted structures or zoning violations can result in penalties up to $100,000. These costs often surface after the purchase is complete, leaving buyers responsible for expensive corrections or legal compliance.

Is the Panamanian legal system considered reliable and protective for foreign property buyers?

Panama's legal system constitutionally protects private property rights and grants foreigners equal rights to locals, but practical enforcement varies significantly depending on location and circumstances.

The constitution guarantees property protection and the judicial system operates independently from political interference. Foreign buyers enjoy the same legal protections as Panamanian citizens when purchasing real estate, with no discrimination in property ownership rights. Panama's use of the US dollar and territorial tax system further enhance the legal framework's attractiveness to international investors.

However, the system suffers from slow dispute resolution processes that typically take 2-7 years to complete. This lengthy timeline creates opportunities for fraudsters and bad actors to exploit buyers, knowing that legal recourse will be delayed. Inconsistent enforcement is particularly problematic in rural areas and regions like Bocas del Toro, where corruption among local officials has been documented.

Urban transactions in Panama City and other major centers generally receive more reliable legal protection than rural property purchases. The quality of legal services and enforcement mechanisms varies significantly between metropolitan areas and remote regions, with buyers in urban markets experiencing more predictable outcomes.

As of June 2025, Panama is implementing blockchain technology in its Public Registry system to increase transparency and reduce fraud, but the transition is still ongoing and hasn't eliminated existing vulnerabilities.

How easy is it for foreigners to buy property in Panama compared to other Latin American countries?

Panama offers one of the most accessible property purchase processes for foreigners in Latin America, with no residency requirements and straightforward ownership laws.

Foreigners can directly purchase most property types in Panama without establishing residency or obtaining special permits. This accessibility surpasses more restrictive markets like Nicaragua and Guatemala, which impose significant limitations on foreign ownership. Transaction costs in Panama typically range from 3-4% of the property value, compared to 5-7% in North America, making it financially attractive for international buyers.

Panama's process is more accessible than many regional markets but more complex than Costa Rica's streamlined systems. The country doesn't impose foreign-buyer surcharges that are common in other Latin American markets, and the use of US dollars eliminates currency conversion risks that complicate transactions elsewhere in the region.

Key restrictions do apply within 10 kilometers of international borders and along beachfronts, where the first 22 meters from the high-tide mark remain public property. These limitations are clearly defined and easier to navigate than the ambiguous restrictions found in some neighboring countries.

It's something we develop in our Panama property pack.

What are the hidden or less obvious risks that buyers often overlook when investing in Panama real estate?

Foreign buyers frequently overlook adverse possession risks, anonymous corporate ownership complexities, escrow fraud, and the dangers of remote property purchases.

Adverse possession represents a significant but poorly understood risk, particularly with ROP land. Neighbors or local individuals may seize ROP properties through continuous occupation, sometimes leveraging corruption to force sales at below-market prices. This legal mechanism allows squatters to claim ownership rights after extended occupation, especially when the original buyer doesn't maintain a physical presence on the property.

Anonymous corporate ownership structures in Panama obscure true property ownership, making due diligence extremely difficult. Properties held through anonymous corporations may have hidden liens, debts, or legal issues that only surface after purchase. This ownership structure, while legal, creates transparency problems that can trap unsuspecting buyers.

Escrow fraud through fake escrow services has become increasingly sophisticated, with fraudsters creating legitimate-appearing companies that drain buyer deposits without transferring property ownership. These fake services often target foreigners who assume escrow protection exists similar to their home countries.

Remote property purchases carry 30-100% investment risk due to misrepresented locations, conditions, or ownership status. Properties marketed online or through international channels may not match their descriptions, may be located in undesirable areas, or may not legally exist as described.

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Why do problems typically happen when foreigners buy property here—are they due to unclear laws, bad actors, or lack of enforcement?

Property problems in Panama result from a combination of unclear laws regarding ROP land, bad actors exploiting system weaknesses, and inconsistent legal enforcement that delays justice.

Unclear laws primarily affect ROP land regulations, where the distinction between usage rights and ownership isn't well-defined or communicated to foreign buyers. The legal framework governing ROP transfers, inheritance, and disputes contains ambiguities that create opportunities for exploitation. Many foreigners don't understand that ROP land cannot be owned outright, leading to purchases based on false assumptions about property rights.

Bad actors include unlicensed real estate agents, corrupt local officials, and fraudulent developers who deliberately exploit foreign buyers' unfamiliarity with local practices. Approximately 40% of fraud cases involve collusion between lawyers and agents who work together to deceive clients. These actors target foreigners because they typically have more available capital and less knowledge of local warning signs.

Lax enforcement encourages fraudulent behavior because perpetrators know that legal consequences are delayed and often ineffective. The judicial system's 2-7 year dispute resolution timeline incentivizes scammers, as victims may abandon legal proceedings due to time and cost constraints. Corruption in rural areas further weakens enforcement, particularly in regions where tourism creates high-value property markets.

The combination of these factors creates an environment where sophisticated fraud can flourish, making expert legal guidance essential for foreign buyers.

What are the worst-case scenarios if something goes wrong with a real estate purchase in Panama?

The worst-case scenarios include complete investment loss, lengthy legal battles lasting 2-7 years, property seizure by authorities, and forced sales through adverse possession or corruption.

Complete investment loss occurs most commonly with ROP land disputes or title fraud, where buyers discover they have no legal claim to properties they believed they owned. In ROP cases, buyers may lose 100% of their investment because they purchased usage rights that can be revoked or disputed by other claimants. Title fraud can result in total loss when buyers purchase properties from sellers who had no legal right to sell.

Lengthy legal battles can cost $10,000-$50,000 in attorney fees over 2-7 years without guaranteed resolution. These disputes often involve multiple parties, complex documentation issues, and procedural delays that extend far beyond initial expectations. Legal costs can exceed the property's value, forcing buyers to abandon legitimate claims.

Property seizure by authorities occurs when buyers unknowingly violate zoning restrictions, border regulations, or environmental protections. Properties within restricted zones may be confiscated without compensation, particularly if buyers weren't properly informed of limitations during purchase.

Forced sales through adverse possession or corruption represent emerging threats where local actors use legal mechanisms or corrupt officials to pressure foreign owners into selling below market value. This scenario particularly affects absentee owners who cannot maintain constant property oversight.

Is the property title system in Panama secure and transparent, or is title fraud a concern?

Panama's Public Registry system is transitioning to blockchain technology for enhanced transparency, but title fraud remains a high-risk concern for foreign buyers as of mid-2025.

The traditional registry system has vulnerabilities that fraudsters exploit to create legitimate-appearing documentation for properties they don't own or to manipulate existing records. Daily incidents of title fraud target foreign buyers who rely on local intermediaries and may not thoroughly verify documentation through independent legal counsel.

Blockchain implementation in the Public Registry represents a significant improvement in security and transparency, making it more difficult to forge or alter property records. However, the transition is incomplete, and many older properties still operate under the previous system where fraud risks remain elevated.

Title fraud techniques include creating convincing forgeries of ownership documents, manipulating registry records, and selling properties with unclear or disputed ownership. Fraudsters specifically target foreigners because they often lack familiarity with proper verification procedures and may rush through due diligence processes.

The registry system's improvement is ongoing, but buyers must still implement thorough verification procedures including independent legal counsel, physical property inspection, and comprehensive title searches to protect against fraud.

Are property disputes common, and if so, how are they usually resolved in practice?

Property disputes are common in tourist zones like Bocas del Toro and typically involve overlapping ownership claims, seller bad faith, or boundary disagreements that require lengthy court intervention for resolution.

Disputes frequently arise from overlapping claims on the same property, particularly with ROP land where multiple family members or claimants may attempt to sell to different buyers. Seller bad faith involves deliberate misrepresentation of property conditions, ownership status, or legal restrictions that only become apparent after purchase completion.

Court intervention is typically required for dispute resolution because out-of-court settlements are rare due to developer intransigence and the complexity of property law. The judicial process averages 3+ years for resolution, during which properties may remain in legal limbo with unclear ownership status.

Corruption in some regions, particularly rural areas with high tourism value, can influence dispute outcomes in favor of local parties over foreign buyers. This creates additional uncertainty for international investors who may face biased proceedings despite having legitimate legal claims.

Alternative dispute resolution mechanisms exist but are underutilized due to power imbalances between foreign buyers and local sellers or developers. Most disputes ultimately require formal legal proceedings with significant time and cost investments.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Panama versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

What professionals should a foreign buyer absolutely hire to avoid problems—such as lawyers, notaries, or inspectors?

Foreign buyers must hire a real estate attorney, licensed agent, property inspector, and escrow service to navigate Panama's complex property market safely.

Are there known real estate scams or recurring developer issues that buyers should be aware of?

Common scams include phantom developments, title fraud, developer breaches, and ROP land scams that specifically target foreign buyers with significant capital.

Phantom developments involve fake construction projects that accept deposits for nonexistent buildings or developments. Scammers create convincing marketing materials, websites, and even physical sales offices to promote projects that will never be built. They target foreign buyers through international marketing channels and may collect substantial deposits before disappearing.

Title fraud schemes involve selling properties with forged ownership documents or selling properties the scammer doesn't legally own. These operations can be sophisticated, involving fake notary services, counterfeit government documents, and collusion with corrupt officials to appear legitimate.

Developer breaches include bankruptcy during construction, construction delays without valid reasons, contract violations, and hidden fees not disclosed during initial negotiations. Some developers intentionally under-capitalize projects, knowing they will likely fail but collecting buyer deposits before bankruptcy protection.

ROP scams involve multiple family members or claimants selling the same government land to different buyers, creating complex ownership disputes. Since ROP land cannot be legally owned, these sales are fundamentally fraudulent, but victims may not discover the problem until attempting to develop or resell the property.

It's something we develop in our Panama property pack.

What steps can buyers take to prevent the most common and costly mistakes before signing anything?

Buyers must avoid ROP land, conduct thorough due diligence, use licensed professionals, implement secure escrow payments, and maintain local presence throughout the transaction process.

1. Avoid ROP land completely: Insist on titled property registered in the Public Registry with clear ownership documentation. Verify that the property has a legal title deed (título de propiedad) rather than just usage rights. Request to see original registry documents and confirm their authenticity through independent verification.
2. Conduct comprehensive due diligence: Verify titles, liens, and zoning restrictions through independent attorneys rather than relying on seller-provided information. Physically inspect properties to assess actual location, condition, and neighborhood characteristics. Research the property's history, previous sales, and any outstanding legal issues.
3. Use only licensed professionals: Confirm agent licenses through the Ministry of Commerce database and hire independent attorneys who don't have business relationships with sellers or developers. Verify all professional credentials and avoid recommendations from parties with financial interests in the transaction.
4. Implement secure escrow payments: Never transfer funds directly to sellers or through unverified escrow services. Use established escrow companies with verifiable track records and physical offices. Avoid wire transfers to personal accounts or offshore banking arrangements.
5. Maintain local presence: Visit properties multiple times during different periods to assess actual conditions, neighborhood dynamics, and accessibility. Avoid remote purchases based solely on online marketing or virtual tours. Establish relationships with local contacts who can monitor properties during extended absences.

Has the real estate market and legal environment in Panama been improving or getting riskier in recent years?

Panama's legal environment is improving through blockchain registry implementation and regulatory reforms, but rising fraud sophistication and market oversupply have increased certain risks as we reach mid-2025.

Legal reforms implemented since 2023 include blockchain technology integration in the Public Registry system, enhanced transparency requirements for real estate transactions, and stronger penalties for fraudulent practices. These improvements make it more difficult to forge documents or manipulate property records, providing better protection for legitimate buyers.

However, fraud has become more sophisticated as scammers adapt to new security measures and develop more convincing schemes to target foreign buyers. The increasing value of Panama real estate has attracted more criminal activity, with larger sums at stake making fraud more lucrative for perpetrators.

Market conditions show both positive and concerning trends. Economic growth of 4-4.5% GDP and major infrastructure projects like Metro Line 4 enhance market stability and long-term property values. However, oversupply in luxury segments, particularly in Panama City and beach communities, has created pressure on developers that may lead to more aggressive sales tactics or financial instability.

The overall trend favors buyers who exercise proper due diligence, as legal protections continue improving while risks become more clearly defined and preventable through expert guidance.

It's something we develop in our Panama property pack.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. TheLatinvestor - Risks Property Panama
2. Property Portal Panama - Avoiding Fraud
3. Taxes for Expats - Buying Property Guide
4. Pallas Life - Property Laws Panama
5. LinkedIn - 10 Risks Buying Property Panama
6. Panama Equity - Developer Protection
7. Choose Panama - Buying Tips
8. Kraemer Law - Due Diligence Panama