Escrow services are available in Panama to handle real estate title transfers along with boats, airplanes, vehicles, and other valuable properties.
The Definition of an Escrow
Just like in Canada and in the U.S., Panama escrow services offer a neutral third party to hold funds or assets under a contract whereby the other parties fulfill certain duties and obligations before the Panama escrow company completes the transaction. Normally, the Panama Escrow Company holds a purchaser’s funds until the seller transfers the title into the buyer’s name and has the title deed recorded with Panama’s Public Registry. Written “escrow instructions” spells out under what circumstances the funds are released to the seller.
Panama lawyers and law firms often provide escrow services. There are only a few actual Panama escrow companies. Panama Title & Escrow (PT&E) located in Panama City is one of them (www.panamatitle.com). PT&E offers these services:
1. Provide the seller with the assurance that the buyer has the funds to pay for the transaction, since the escrow company can confirm that the funds are in the escrow account.
2. Assuring the buyer that a proper title search of the property was completed, the buy/sell contract was properly executed, and the buyer’s interests are protected under the legalities of the transaction.
3. Provide the buyer with the assurance that the various parties involved in the transaction are paid according to the buy/sell contract avoiding any post purchase claims.
Basically, a Panama escrow company holds a purchaser’s funds and disburses them at the Closing (when the title is transferred). Besides giving funds to the seller, real estate commissions are paid, along with attorney’s fees, existing mortgages, unpaid utility bills, and other required fees and payments. Having a neutral third party hold the buyer’s funds and paying off all outstanding bills at Closing protects both the buyer and the seller.
Panama Escrow Agent’s Duties
Panama escrow companies are not regulated by the government. No fiduciary duty requirements for Panama escrow agents exist. This is why the written contract when hiring a Panama escrow agent is important to specify the duties and responsibilities the escrow agent must fulfill. Since escrow services are fairly new in Panama many Panamanians are not familiar with how they function. Do not let a seller insist on a direct payment for transferring the title because the seller might get paid before completing the title transfer and never transfer the title.
Here are the types of real estate transactions and the role of the Panama escrow company:
Purchasing Property There are two types of real estate purchases: Titled and Rights of Possession (ROP). Titled properties provide ownership of the property with a recorded deed. Rights of Possession only provide the right to use government owned properties. Transferring the rights of the seller will differ under these two types of properties.
Title Transfer When both parties sign the Buy-Sell Contract (also called a Public Deed of Title Transfer) and register it with the government’s Public Registry, ownership transfers to the buyer.
Potential Problem A potential problem occurs when the seller demands full payment prior to registering the Buy-Sell Contract. How does one ensure the seller gets paid when the buyer receives full title?
Solution Using a Panama escrow company will protect both parties. The seller is assured by the escrow company that full payment will be made because the Panama escrow agent is holding the buyer’s money. An option exists when using a Panama bank mortgage by having the bank prepare a “Promise to Pay Letter” which guarantees full payment when the title transfer is registered with the Public Registry.
Rights of Possession (ROP) ROP’s do not have a public deed of title. The Certificate of Rights of Possession is not recorded with the Public Registry. The Panama escrow agent pays the seller once the Certificate is signed along with the Buy-Sell Contract. The Certificate must be protected by the purchaser as it is the only document proving transfer of possession rights to the buyer.
Title Insurance Panama escrow companies often act as agents for title insurance companies which can offer peace of mind by insuring the title against fraud, forgeries, encroachments, boundary disputes, and claims by outsiders that they own the property. A Panama title insurance policy usually costs around 1% of the sales price.
Panama Escrow Fees
Lawyer’s fees can vary when providing Panama escrow services. Panama escrow companies generally charge a fee based on the sales price ranging from a half percent (0.5%) up to one percent (1%).
In Conclusion Using a law firm as an escrow agent or a Panama escrow company can protect your investment. Sellers will be comfortable knowing they will be paid and buyers know they will receive transfer of titl
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